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Getting IRP Right

Quantifying uncertainty in the planning process.
Fortnightly Magazine - April 2006

be considered. What would be the effect of phase-out of “dirty” coal, to be substituted by “clean” coal gasification technology? These types of policy questions are legitimate in IRP studies and provide policy makers with the answers they need to make important decisions.

Step Six: Strategy Evaluation.

This is the final analytical step, wherein the results of the previous efforts are loaded as input to a planning model and the numbers are “crunched” to produce results. In simple terms, a typical model would optimize meeting the forecasted load subject to all sorts of constraints ( e.g., generation capacity, reliability, system stability, transmission congestion, etc.) while minimizing costs, emissions, risks, and/or other parameters.

Typically, software tools appropriate for such analysis are employed. 7 Multiple iterations are necessary to determine how alternative resource portfolios fare on important attributes such as capital investment costs, net present value of revenue requirements, cost of power supplied to end-use customers, emissions, and other criteria. Many portfolios would be eliminated during this process as impractical, overly costly, or otherwise not feasible. The initial results tend to provide interesting insights about what options and portfolios are robust and practical, and those that are not.

Step Seven: Strategy Insights and Implementation.

The last step in typical resource planning exercise is to make sense out of the multitude of model runs, various strategies examined, various scenarios considered, risk and sensitivity analysis, and the myriad of results that are generated. This final step generally leads to:

• A broad awareness of the interdependencies of input assumptions, data, and results on the one hand and the intricacies and complexities of a large interconnected network;

• A better appreciation of which resource options make sense and which strategies are robust in the sense that they perform reasonably well under a number of scenarios; and

• The painful but necessary tradeoffs that must ultimately be made.

If done properly and transparently, with meaningful participation and input by competent stakeholders, the process can lead to strategies that have broad public support and backing. The process, assuming that it is well-documented, also provides an element of insurance against subsequent “Monday-morning quarterbacks” who would inevitably claim that “you should have known better” and “how could you not see x or y coming?”

The risk of a particular strategy can be portrayed as the “revenue requirement at risk” (also called “cost at risk”) (see Figure 1, p. 16). The relative risk of various strategies can be portrayed in a tradeoff diagram, as in Figure 2 (see p. 18).

On the issue of tradeoffs, participants typically gain a better appreciation of what must be given up to gain something else, as they realize that they cannot have it all. For example, advocates of renewable energy technologies, which reduce vulnerability to fuel price increases, learn the potential impact of higher levels of renewable technology investment in retail electricity prices. Those who are in favor of reducing the reliance on coal can see the cost impacts.

Regardless of the ultimate aim and audience for the IRP effort, many useful insights usually are