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Bruno C., et al. (2014), Benefit analysis. Assessing the cost of blackouts in case of attack. Evaluation based on Italian and Polish case studies. in “Ceris Technical Reports - Special ESSENCE series on security standards for critical

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This report provides an economic quantification of the benefits of implementing security standards, expressed in terms of avoided costs of blackouts. The evaluation considers specifically the blackouts described in the Italian and Polish trials,
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  Rapporto tecnico N. 52   Ottobre  201  4 Consiglio Nazionale delle Ricerche   ISTITUTO DI RICERCA SULL’IMPRESA E LO SVILUPPO Benefit analysis. Assessing the cost of blackouts in case of attack. Evaluation based on Italian and Polish case studies. Clementina Bruno, Graziano Abrate, Hanna Bartoszewicz-Burczy, Andrés Cortes, Antonio Diu, Enrique Doheijo, Fabrizio Erbetta, Greta Falavigna, Ugo Finardi, Giovanni Fraquelli, Luca Guidi, Azahara Lorite-Espejo, Valentina Moiso, Daniela Pestonesi, Elena Ragazzi, Tadeusz Wlodarczyk      Rapporto Tecnico, Anno 9  , n. 52 ; Ottobre 2014  Istituto di Ricerche sull’ Impresa e Lo Sviluppo RAPPORTO TECNICO CNR-CERIS Anno 9 , N° 52 ; Ottobre 2014  Direttore Responsabile Secondo Rolfo  Direzione e Redazione CNR-Ceris Istituto di Ricerca sull’Impresa  e lo Sviluppo Via Real Collegio, 30 10024 Moncalieri (Torino), Italy Tel. +39 011 6824.911 Fax +39 011 6824.966 segreteria@ceris.cnr.it www.ceris.cnr.it   Sede di Roma Via dei Taurini, 19 00185 Roma, Italy Tel. 06 49937810 Fax 06 49937884   Sede di Milano Via Bassini, 15 20121 Milano, Italy tel. 02 23699501 Fax 02 23699530 Segreteria di redazione   Enrico Viarisio e.viarisio@ceris.cnr.it Copyright © Ottobre 2014  by CNR - Ceris All rights reserved. Parts of this paper may be reproduced with the permission of the author(s) and quoting the source. Tutti i diritti riservati. Parti di questo rapporto possono essere riprodotte previa autorizzazione citando la fonte .     Rapporto Tecnico, Anno 9  , n. 51 ;  Agosto 2014  ESSENCE  E merging S ecurity S tandards to the  E U power  N  etwork controls and other C  ritical  E quipment  A project financed under the programme "Prevention, preparedness and consequence management of terrorism and other security-related risks" HOME/2011/CIPS/AG The Essence project is a study to evaluate costs and benefits of the implementation of security standards to critical electric infrastructure, based on two case studies. Networked computers reside at the heart of critical infrastructures, these are vulnerable to cyber attacks that can inhibit their operation, corrupt valuable data, and expose private information. Such attacks might affect large portions of the European power system, make repair difficult and cause huge societal impact, so that pressure to ensure cyber security of control and communication systems is now very strong worldwide. To that aim, several frameworks have been developed or are under development at present, both in the form of guidelines and proper standards, but it is difficult to evaluate costs and benefits of their adoption, although experimentation so far has shown that they may be huge. In this scenario the key objectives of ESSENCE include: 1.Developing a common understanding of industrial needs and requirements regarding the security of control systems and the related standardisation efforts;2.Identifying power system vulnerabilities induced by control systems, and estimating the likely socio-economic impact of failures due to faults and attacks exploiting those vulnerabilities;3.Evaluating emerging frameworks for ensuring industrial control systems security, and establishing thecosts of their adoption on an objective basis;4.Recommending a pathway towards adoption of one or more of the above frameworks to the Europeanpower system infrastructure, having specific regard to EU transnational infrastructures as defined by theDirective 2008/114/EC. The results of the study will be published in a series of technical reports, hosted in the “Ceris Technical reports series”. The published titles are:  1.Considerations on the implementation of SCADA standards on critical infrastructures of power grids2.Attack scenarios. Threats, vulnerabilities, and attack scenarios along with their selection criteria   Rapporto Tecnico, Anno 9, n.52; Ottobre 2014 Benefit analysis. Assessing the cost of blackouts in case of attack. Evaluation based on Italian and Polish case studies. Clementina Bruno*, Graziano Abrate, Hanna Bartoszewicz-Burczy, Andrés Cortes, Antonio Diu, Enrique Doheijo, Fabrizio Erbetta, Greta Falavigna, Ugo Finardi, Giovanni Fraquelli, Luca Guidi, Azahara Lorite-Espejo, Valentina Moiso, Daniela Pestonesi, Elena Ragazzi, Tadeusz Wlodarczyk * Corresponding author: Clementina Bruno Dipartimento di Studi pe r l’Economia e l’Impresa  Università del Piemonte Orientale 28100 NOVARA  –   ITALY Mail: clementina.bruno@eco.unipmn.it  A BSTRACT : This report provides an economic quantification of the benefits of implementing security standards, expressed in terms of avoided costs of blackouts. The evaluation considers specifically the blackouts described in the Italian and Polish trials, employing a mixed methodology relying on the “production function” approach for the non -household sector, while an econometric method based on survey data (stated preferences) is used for household consumers. With reference to non-households, a separate evaluation is carried on for the electricity industry. The results show that the costs of blackout are substantial, either for household and non-household consumers, and largely exceed the damage suffered by the utilities due to lost sales. Finally, since for non-households only losses in production are considered, we provide, in a separate section, three case studies demonstrating that some industries can suffer relevant additional blackout costs. Keywords: Cost of blackouts, production function, choice experiment, willingness-to-accept JEL code: D12; D61; L94   Rapporto Tecnico, Anno 9, n.52; Ottobre 2014 6 SUMMARY Benefit analysis. Assessing the cost of blackouts in case of attack. ................................................................. 5   Evaluation based on Italian and Polish case studies. ......................................................................................... 5   1.Introduction: benefits analysis as avoided costs of blackouts ................................................................... 72.Evaluating the cost of blackouts: literature review .................................................................................... 92.1   Methodologies overview ................................................................................................................... 9   2.2   Studies employing the “Production function” method  .................................................................... 10   2.3   Survey-based studies ....................................................................................................................... 11   2.4   Studies based on market behavior analysis and case-studies .......................................................... 14   3.Empirical application ............................................................................................................................... 183.1   Choice of methodology. .................................................................................................................. 18   3.2   Non- household consumers: “production function” approach  .......................................................... 18   3.2.1   Application to the Italian trial .................................................................................................. 20   3.2.1.1   Global damage to the productive system ............................................................................. 20   3.2.1.2   Damage to the electricity sector .......................................................................................... 23   3.2.2   Application to the Polish trial .................................................................................................. 25   3.2.2.1   Global damage to the productive system ............................................................................. 25   3.2.2.2   Damage to the electricity sector .......................................................................................... 27   3.3   Household consumers: survey-based methodology ......................................................................... 29   3.3.1   Willingness to pay vs Willingness to accept ........................................................................... 29   3.3.2   The questionnaire .................................................................................................................... 30   3.3.3   Data .......................................................................................................................................... 31   3.3.4   Model ....................................................................................................................................... 34   4.The cost of blackout for individual firms: case studies ........................................................................... 394.1   Isolpack SpA ................................................................................................................................... 39   4.2   Cement producer ............................................................................................................................. 42   4.3   Milk producer .................................................................................................................................. 44   5.Conclusions ............................................................................................................................................. 45References ....................................................................................................................................................... 47  
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