Integrated Resource Planning: An overview

1. Integrated Resource Planning: An overview Mark Howells & Bruno Merven Energy Research Centre University of Cape Town

2. Outline • Introduction • Aims of resource planning • The National Integrated Resource Plan • NIRP outputs • NIRP methodology • Future planning

3. Electricity is hard to store Introduction • Why electricity as a source of energy? • Electricity - a driver of our economy • The Electricity Supply Industry (ESI) is very capital intensive – economies of scale

4. Aims of Resource Planning • Meet electricity demand reliably at the cheapest cost • Be consistent with environmental, social and economic policies • Meeting increasing demand: • Expanding generating capacity • Reducing load via demand side management

5. The NIRP • National Energy Regulator initiative the driven by the Energy Policy White Paper for SA • NIRP 1 in March 2002 • NIRP 2 in September 2004 • Advisory board: NER, DME, ESKOM, ERC, IPP, … • Project team: NER, ESKOM, ERC

6. NIRP 2 outputs:1. Capacity Plans

7. Capacity Plans

8. NIRP 2 Outputs:2. Sensitivity to possible scenarios

9. Cost and Reliability

10. Methodology The Energy System • Demand and projections • Current generation capacity • New generation capacity options • Demand Side Management options • Identify constraints – define scenarios • Include all this into the computer model • Run optimization Primary energy e.g. Coal Electricity generation Grid Demand process e.g. Electric Heater Final Energy e.g. Heat

11. 1. Establish current demand and projections

12. 2. Establish current generation capacity3. Identify suitable new generation capacity options • Be technologically feasible • Be economically viable • Be socially, politically and environmentally acceptable • Have suitable production pattern • Have site availability – close to demand • Under some level of suitable control

13. 3. Identify Demand Side Management options

14. Existing Capacity 4. Program the Computer Model Useful energy per sector Transmission and Distribution Normal Demand Technology New Capacity Options Heat Light … Coal Coal PP Primary Energy Efficient Demand Technology Nuclear PP Coal Gas Nuclear … • Specified: • Capital costs per MW • Fuel costs (as specified by mining/importing) • Operation costs per MWh • Lifetime (years) • Operating conditions: Peaking, base load • Constraints: Technical e.g. Capacity, availability • Constraints: Policy e.g. share of renewables, Emissions Gas PP Wind PP

15. Model outputs after optimization • Capacity and activity of selected processes (including timing + choice of investments) i.e. The Plan • Total Costs • Marginal cost of electricity • Total emissions

16. Weaknesses of this approach • Deterministic approach, uncertainty: • handled in reserve margin • discount rates and scenario based constraints • Suitable for finding a robust plan but not necessarily a flexible plan • Technology diversity must be forced onto the system as a constraint • Bottom up approaches tend to be bulky • Difficult to asses impact of plan on overall economy

17. Possible alleys to be explored in the future • To account for flexibility: • Decision analysis type approaches • Stochastic programming • Link to general equilibrium models