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For Immediate Release: March 14, 2013
Contact: Robert J. Thormeyer, 202-898-9382, rthormeyer@naruc.org

EISPC Receives Report Suggesting Recommendations for Assessing Resource Adequacy

[Editor's Note: This is NOT a NARUC report. We are releasing it on behalf of the Eastern Interconnection States Planning Council.]

WASHINGTON--A new white paper on the economics of resource adequacy in the Eastern Interconnection suggests a number of recommendations for better assessing generation sufficiency within the Interconnection.

The report, authored by Astrape Consulting of Birmingham, Ala., was produced for the Eastern Interconnection States Planning Council (EISPC) and funded by the U.S. Department of Energy. EISPC consists of the State-level government agencies responsible for siting transmission across the 39 States, including the District of Columbia and the City of New Orleans, within the Eastern Interconnection electricity system.

Resource adequacy is a term for ensuring each utility and region has enough generation resources to keep the lights on during extreme hot or cold weather. If a region or utility does not have enough generation for peak demand, as an example, they may be forced to utilize rolling blackouts to keep the electricity system from crashing.

This white paper provides a number of informative conclusions to assist regulators in reviewing the reasonableness of resource adequacy plans. It examines the economics of resource adequacy assessments including the trade-off between the cost of additional capacity and the economic benefit provided by those resources. It also attempts to quantify this trade-off for a defined base case and a number of sensitivities.

According to Astrape, different regions within the massive interconnection measure and assess resource adequacy in varying ways. Although the regions use similar metrics, most also utilize different tools and assumptions, the report said. These differences, Astrape concluded, “make the comparisons of reliability [across the interconnection] difficult.”

Still, as a whole, the Eastern Interconnection plans to a robust level of reliability, Astrape writes. Most regions anticipate utilizing load-shedding only about once every 10 years. But this estimate of frequency is still likely too high, Astrape notes. “While distribution related outages occur several hours per year for most customers, most regions in the Eastern Interconnection have not experienced generation-deficiency caused firm load shed events in decades.”

The paper explores whether such high levels of resource adequacy are justified economically. Astrape asks, is resource adequacy “solely about having enough capacity to meet firm load obligations? Or are there other economic benefits that should be considered when setting target reserve margins?”

The white paper suggests that economic “resource adequacy assessments should take a comprehensive approach to calculating the trade-off between the cost of additional capacity and the economic benefit provided by those resources.”

In the white paper, Astrape provided recommendations for additional work that could be useful, such as various ways that resource adequacy planning can be used to produce substantial economic benefits for consumers. Such recommendations are under consideration by EISPC. It should be noted that the resource adequacy work is interrelated with other studies being conducted by and for EISPC and if EISPC decides to request DOE authorization for more expansive work regarding resource adequacy, such work will also be considered in the context of interrelated efforts.

EISPC President David Boyd of Minnesota said the report provides an important overview of the situation and strong recommendations for moving ahead. “On behalf of EISPC, I want to thank Astrape for their careful, well-thought out and comprehensive white paper. Resource adequacy is a top priority for State regulators and other government officials. This report will help us address some of the most critical concerns.”

Some highlights of the white paper include:

  • A discussion of how the mechanism under which energy costs are ultimately passed on to customers can vary quite a bit from region to region depending on market structure and other factors, and how this should be considered in resource adequacy planning;
  • Reviews of various resource adequacy assessments in the Eastern Interconnection and how there is wide variation in the way capacity is counted, what level of benefit will be received from emergency operating procedures, and what assumptions and tools are used;
  • A comparison of varying metrics used for reliability throughout the Eastern Interconnection;
  • An explanation of different factors that can affect the optimum economic reserve margin;
  • A discussion of how risk analysis shows that a range of reserve margins slightly above the economic optimal reserve margin can avoid a number of potentially high cost scenarios for little additional cost; and,
  • An explanation about how different capacity resources can provide different value, and how demand response, energy storage, and hydro also have very different load carrying capability, as well as economic capacity value, that should be taken into account..

Click here for the report

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NARUC is a non-profit organization founded in 1889 whose members include the governmental agencies that are engaged in the regulation of utilities and carriers in the fifty States, the District of Columbia, Puerto Rico and the Virgin Islands. NARUC's member agencies regulate telecommunications, energy, and water utilities. NARUC represents the interests of State public utility commissions before the three branches of the Federal government.

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