Risk sensitivity of failure rate and maintenance expenditure: application of VaR metrics in risk management

Abstract

Risk analysis is becoming actually an important part of asset management of power systems. The paper presents the simple but reliable method for risk management of power system carried out for an urban 10 kV network located in Germany. The basis of the method is the indication of risks by Value at Risk index according to Loss Distribution Approach developed by the insurance and financial industry. The Loss Distribution Approach is based on estimation of the frequency and severity distribution of failure events over a one year time horizon. Especially the proposed approach combines the probability and severity of risk contingencies based on reliability indices of the system assets. The indices are finally applied for sensitivity analysis of two particular risk factors, failure rate and maintenance expenditure.