The article estimates the economic loss caused by electricity supply interruption for Georgian economy. To do so, the Value of Lost Load (VoLL) is used, which is an internationally accepted economic indicator that estimates the average cost of 1 kilowatt-hour (kWh) of unsupplied electricity. Since electricity is an intermediate commodity, the effect of supply interruption varies for categories of consumers. Therefore, it is necessary to estimate this loss by sectors. Although the data needed to estimate VoLL according to the methodology proposed for European Union is not available in Georgia, we use another methodology for which the reliable data is available.

With the data collected by the National Statistics Office of Georgia (Geostat), the production function approach is used to estimate VoLL for different sectors, divided according to the NACE Rev.2 classification. According to 2019 data, 1 kWh of undelivered electricity, on average, causes an overall loss of 3.6 GEL for different sectors of the economy. These values range from 0.32 GEL/kWh (basic metals, mining, and quarrying) to 23.19 GEL/kWh (construction sector). The median value for 14 estimated sectors is 3.65 GEL. As for households, 1 kWh of unsupplied electricity costs 5.24 GEL, which is quite high compared to other sectors.

Electricity supply interruptions harm industrial, commercial, and household sectors. In case of any capacity shortages, the transmission system operator is obliged to efficiently redistribute resources to minimize the overall loss to the economy. The results of our calculation shall be used for optimization of load shedding and system restoration procedures by transmission system operator and should be used for calculation of single VoLL for reliability standard derivation.

Keywords: Value of lost load, VoLL, unsupplied electricity, demand restraint, energy intensity.

JEL Codes: Q40, Q43, Q47, Q4.