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Reconsidering Resource Adequacy, Part 1

Has the one-day-in-10-years criterion outlived its usefulness?

Fortnightly Magazine - April 2010

1-3) . For PJM, peak loads in excess of 92.4 percent of the highest peak (11,000 MW lower) occurred only seven times during 2005 through 2008. 10

Peaks occurred with similar rarity in the ISO New England and California ISO systems, and with few exceptions the 10th highest peak in any year was typically 10 percent or more below the highest peak of the year. To put these differences in perspective, 7 percent of peak load equals five or six years of forecast growth in peak load based on 2009 projections. 11

Models used to determine the required reserve margins to satisfy the 1-in-10 criterion provide further support for the conclusion that only a level of capacity far short of the 1-in-10 level would risk frequent outages. This can be seen in the relationship between the installed reserve margin and the LOLE for the PJM system, according to data provided in PJM’s most recent reserve margin analysis 12 and a probabilistic model developed by the author that approximates the assumptions, structure and results of PJM’s analysis ( see Figure 4).

This model estimates that if the installed reserve margin is approximately 8 percent, far below the target of 15.3 percent, the outage frequency is one per year. Only with an installed reserve margin of less than zero ( i.e., total installed capacity is roughly equal to the forecast median annual net peak load) would the LOLE rise to approximately 10 events per year. (That it takes such an extremely low reserve margin to anticipate 10 outages per year reflects the fact that daily peak loads close to the median annual peak level are rare, and, in addition, there is some help available from neighboring systems not reflected in the reserve margin.) PJM’s model, which exhibits similar sensitivity to the reserve margin, likely would calculate a similar LOLE corresponding to lower reserve margins.

To risk frequent outages, installed capacity would have to be far below the level that satisfies the 1-in-10 target; it isn’t necessary to aim for 1-in-10 to ensure a very small risk of outages on many hot days due to capacity shortages. However, on much smaller systems the relationship would be different, and the anticipated LOLE would rise faster with lower levels of capacity .

 

EDITOR’S NOTE: This article is the first of two excerpts from the author’s paper, “One Day in 10 Years: Resource Adequacy for the Smart Grid,” of which an earlier draft was delivered to the 28th Annual Eastern Conference of Rutgers University’s Center for Research in Regulated Industries. The full paper will be published on Fortnightly.com in May 2010. The second excerpt , explaining how resource adequacy should be adapted for the smart grid, is in Fortnightly’s May 2010 issue.–MTB

 

Endnotes:

1. See, for instance, Telson, Michael E., “The economics of alternative levels of reliability for electric power generation systems,” Bell Journal of Economics Vol. 6 No. 2 (Autumn 1975) p. 679; Cramton, Peter and Steven Stoft, “The Convergence of Market Designs for Adequate Generating Capacity,” April 25, 2006, p. 32; Joskow,