Valuation of Power Blackout Insurance for the Australian Energy Market

The eastern states of Australia are supplied with electricity from the National Electricity Market, which is a grid that stores electricity generated by a variety of means. Electrical power blackouts occur when there is a disruption to supply to the grid from a power generator or when consumer demand exceeds supply plus any reserves. Employing data from the Australian Energy Market Operator (AEMO), a valuation method is proposed for power blackout insurance, which could be used by large-scale industrial users which seek compensation or by the AEMO when asking such users to power down during hours of peak demand.