In resource planning, utilities work to balance flexibility, reliability

Published on November 15, 2018 by Jaclyn Brandt

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Long-term resource planning for electric utilities to meet customer electricity demand in the future has always been a complex process, and renewables are adding to the challenges.

Industry experts addressed the issue of long-term resource planning for utilities and grid operators on Wednesday at the Power & Renewables Summit in Austin, which was sponsored by GTM Events, a Wood Mackenzie company.

Utilities submit Integrated Resource Plans (IRP) to regulators that factor in multiple possibilities, including resource options, markets, and stakeholder input — and each utility has numerous goals for their plans, including different objectives within various territories or states.

“The IRP is intended to say, knowing what I know today, what resources would I select over the long-term to meet my reliability and affordability requirements, along with some other things like energy efficiency targets and renewable portfolio standard (RPS) goals?'” said Jeffrey Burke, director of resource planning with Arizona Public Service (APS).

Resource planning is not just about estimating what may be best for a utility and ratepayers. According to Jonathan Adelman, area vice president for strategic resource and business planning with Xcel Energy, various factors come into play depending on the state involved.

“At its core it relies upon inputs, it relies upon economic modeling but clearly the process historically and much more so today has a lot of inputs from other areas that really drive our decision process,” he said. In general, resource planning is consistent across all states, but “from that point on it really differs.”

For example, in Xcel’s upper Midwest network, the utility runs a joint system across Minnesota, Wisconsin, North Dakota, South Dakota and parts of Michigan.

“[In] Minnesota and North Dakota we make resource decisions collectively,” Adelman explained. “The Minnesota resource planning process is driven inclusive of the value of carbon. Carbon value is specifically prohibited in the state of North Dakota. Brokering long-term planning decisions in very divergent states is definitely a delicate process and requires management of the process.”

Incorporating renewables into the mix adds another challenge, and utilities, operators, and energy companies all have different opinions on how that should be done.

According to Eran Mahrer, vice president of markets, origination and government affairs at First Solar, those additions will become increasingly more important to the utility mix in the future.

The so-called “duck curve” that utilities consider, which shows the difference in electricity demand and the amount of available solar energy throughout the day, creates a problem for resource planning.

He explained that “once you commit a thermal asset, it has to run at some percentage of its total, typically somewhere between 40 to 50 percent. So I run an asset in the theory that load may show up. And that has a fuel cost and a variable cost for the regulation that you provide.”

Even in solar there is a duck curve, and Mahrer said the goal of utilities is to create as much “headroom and footroom” as possible in resources available, but the resource is always less understood the further you are from the time that resource is served. Renewables will add some flexibility to the mix.

“Resource planning comes from a window where load forecasts are normalized, weather predictions are normalized, and then projected out for years in advance,” Mahrer said. “What is absolutely critical to remember here is we talk a lot about the resources that serve load and the need for those resources to be flexible. I don’t want it to be lost on anyone that when you begin forecasting load years forward you lose the variability in that load itself. Load is no less variable in many instances than the generation, particularly the renewable generation that serves it. Those two dimensions really drive an increased need for flexibility.”

To First Solar, renewable energy is a perfect addition to the resource supplies because it helps utilities add a range of flexible resources to their portfolio.

“When we were building coal assets, you had very little operating flexibility — nuclear [is] very similar,” Mahrer said. “You added gas because it was increasingly more flexible when compared to coal. Today, you have solar, wind, and battery storage that are flexible across their full nameplate with virtually no variable cost. Those are your most flexible resources, best suited to serve even those shoulder months.”

Utilities and renewable energy companies are not the only ones dealing with how to best utilize renewables and other newer forms of generation.

Melissa Seymour, executive director of external relations at Midcontinent Independent System Operator (MISO), said it has been working within state regulations and utility “preferences” to align its energy sources to fit.

“In an organized market, currently what we are trying to do is harness some of the flexibility that is needed to have solar, wind, storage, whatever it is on the system,” she said. “And we are looking at market attributes to figure out what we need in the future. So we are doing it on the market side and the transmission planning side. But it is different depending on what utility you are working with and what they see their future plan to be.”

Xcel Energy understands the need for different resources is constantly changing, and builds its plan around the idea that the inputs changing is not only a risk but a certainty, Adelman said.

Economic events, like the recession of 2008, affected resource planning among utilities, and now the inputs are changing as well. Adelman said that the capacity and pricing of wind and solar are evolving, but resource planning by utilities is also evolving because stakeholders have more opinions as well — which can be difficult when planning 40 or 50 years in the future.

Electric utilities are doing what they can to plan their resources in a changing market with evolving technologies, panelists said.

“At the cornerstone of our industry is still reliability, and reliability and revolution probably don’t go together really well,” said Adelman. “The desire to progress more quickly is clearly universal so I think that does support an evolution of how the rules work and how the process works. That needs to be tempered with the ultimate core responsibility that the ISOs and utilities share of reliability.”