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Risk-Constrained Least-Cost Planning

Risk-Constrained Least-Cost Planning. Michael Schilmoeller Northwest Power and Conservation Council for the NARUC 119th Annual Convention November 12, 2007. Overview. Planning Principles. Selection of Resource Plans. Selection of Resource Plans. Planning Principles.

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Risk-Constrained Least-Cost Planning

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  1. Risk-Constrained Least-Cost Planning Michael Schilmoeller Northwest Power and Conservation Council for the NARUC 119th Annual Convention November 12, 2007

  2. Overview • Planning Principles • Selection of Resource Plans • Selection of Resource Plans 2 Planning Principles

  3. Different Kind of Risk Modeling • Imperfect foresight and use of decision criteria for capacity additions • Adaptive plans that respond to futures • Primarily options to construction power plants or to take other action • May include policies for particular resources • “Scenario analysis on steroids” • 750 futures, strategic uncertainty • Frequency that corresponds to likelihood 3 Planning Principles

  4. Council Use of Terms • Futures – circumstances over which the decision maker has no control that will affect the outcome of decisions • Plans – actions and policies over which the decision maker has control that will affect the outcome of decisions 4 Planning Principles

  5. Sources of Uncertainty • Load requirements • Gas price • Hydrogeneration • Electricity price • Forced outage rates • Aluminum price • CO2 tax • Production tax credits • Green tag value (Renewable Energy Credit) 5 Planning Principles

  6. Additions in Megawatts Beginning of year 2008 2010 2012 2014 2016 2018 2020 CCCT 0.00 0.00 0.00 0.00 0.00 610.00 1,220.00 SCCT 0.00 0.00 0.00 0.00 0.00 100.00 800.00 Coal 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Demand Response 500.00 750.00 1,000.00 1,250.00 1,500.00 1,750.00 2,000.00 Wind_Capacity 0.00 100.00 1,500.00 2,400.00 4,400.00 5,000.00 5,000.00 IGCC 0.00 0.00 425.00 425.00 425.00 425.00 425.00 Conservation cost- effectiveness premium over market 10.00 5.00 avg New Conservation 443 746 1071 1416 1774 2020 2198 Most Elements of the Resource Plan Are Options To Construct 6 Planning Principles

  7. Spinner Graphs • A given plan, across all futures • Illustrates “scenario analysis on steroids” • Link to Excel Spinner Graph Model 7 Planning Principles

  8. Overview • Selection of Resource Plans • Planning Principles • Planning Principles 8 Selection of Resource Plans

  9. Power Cost (NPV 2004 $M)-> Cost for Future 2 Cost for Future 1 10000 12500 15000 17500 20000 22500 25000 27500 30000 32500 Distribution of Cost for a Plan Number of Observations 9 Selection of Resource Plans

  10. Avg Cost 10000 12500 15000 17500 20000 22500 25000 27500 30000 32500 Risk and Expected Cost Associated With A Plan Risk = average of costs> 90% threshold Likelihood (Probability) Power Cost (NPV 2004 $M)-> 10 Selection of Resource Plans

  11. Feasibility Space Increasing Risk Increasing Cost 11 Selection of Resource Plans

  12. Space of feasible solutions Efficient Frontier Feasibility Space Increasing Risk Increasing Cost 12 Selection of Resource Plans

  13. A C B D Efficient Frontier 13 Selection of Resource Plans

  14. Review • Imperfect foresight and use of decision criteria for capacity additions • Adaptive plans that respond to futures • Likelihood analysis that captures strategic uncertainty 14

  15. End 15

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