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Power System Planning and Investment

Power System Planning and Investment. Richard Sedano and Richard Cowart NEDRI March 26, 2003. Demand Side Solutions Have Value. But there are barriers Solving Structural Barriers to Demand Response: Involves addressing planning and investment practices

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Power System Planning and Investment

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  1. Power SystemPlanning and Investment Richard Sedano and Richard Cowart NEDRI March 26, 2003 Website: http://www.raponline.org

  2. Demand Side Solutions Have Value • But there are barriers • Solving Structural Barriers to Demand Response: • Involves addressing planning and investment practices • Also removes some barriers affecting energy efficiency and distributed generation

  3. Priorities and Realities • Electric Market is Regional • Public Policy Involved, Just a Matter of When • Potential to improve investment decisions or slow them down • Resource Parity Assures Least Cost • Principles apply throughout power system

  4. Objectives • Market oriented decisions with competitive forces at work • Cost causation has merit • Socialization granted only after passing a test • Cost recover mechanisms comparable for all resource solutions

  5. Demand Resources in Grid Planning and Investment • Demand resources have a role in three areas: • Regional System Planning • Regional Grid Investment Policy • Distribution Utility Planning

  6. (A) Symptoms of Regional Electric Market Problems • Lack of timely transmission line proposals • Generation construction that causes congestion • Lack of connection between electricity investment decisions and environmental implications • Lack of consideration of customer resources to solve grid problems • Lack of co-ordination of investment plans by monopoly and competitive companies

  7. System Planning Recommendations • Regional cooperation by states • Continuing regional planning process • Driven by system needs • All solutions available

  8. Multi-StateCoordination • Recommendation 1: Increase coordination among the states and between states and the ISO • Efficiency to regulatory decision-making • Certainty to the marketplace • Guide ISO toward more efficient planning • Avoid duplication of effort • Support authority, independence of states How far will States Go?

  9. Regional Power System Planning Process • Recommendation 2: Conduct a continuing regional power system planning process to identify system needs and alternative strategies to meet them. • Cyclical • Transparent • System needs treated over time • Maximum planning horizon • Maintain responsiveness to emergent conditions • Improve public confidence

  10. Regional Power System Planning Process • Formal Role for State Governments if states want it • Focus on areas of interest • Involve more stakeholders • Attract all solutions

  11. ComprehensiveSolution Set • Recommendation 3: The outcome of a regional power system planning process should be an evaluation on an even-handed basis of a wide range of feasible solutions to emerging problems, including investments in generation, transmission, and demand-side options. • Regardless of the planning process, all reasonable solutions should be considered and evaluated similarly • Candidate solutions come from competitive and regulated entities • State regulation would have to support solutions coming from regulated entities • Implementing a solution affects the economics of the others

  12. System Investment Recommendations • Market oriented investments preferred • State authority remains • Cost causation is appropriate • Socialization is appropriate for some reliability-oriented investments • Efficient Reliability Standard should apply • Resource parity • Least cost standard • Cost recovery comparability

  13. (B) Grid Investment Policies • Recommendation 4: Leave investment and siting decisions in the hands of market participants and state regulators wherever possible, assigning cost responsibility to those who create the need for system upgrades, and those who benefit from them. • After grid problems and potential solutions are identified in the system planning process, these results should be posted publicly so that market participants can consider what actions they might take within the existing market structure to meet emerging needs. Wherever possible, RSAC should permit market-based and state-based responses to emerge. • Public, regional intervention to promote or pay for grid solutions should be taken only where it is evident that adequate resolution is not forthcoming in the market, or that the investment in question is one that, as a matter of equity, ought to be undertaken by grid managers with cost recovery imposed through tariffs.

  14. (5) Efficient Reliability Test • Recommendation 5: • ISO-New England, NEPOOL, and FERC should apply an Efficient Reliability test, based on principles of least-cost analysis and resource parity, when considering proposals to socialize the costs of system improvements through wholesale rules and transmission tariffs.

  15. (5a)Two principles • Resource parity: Energy efficiency, load management, demand-side bidding, and distributed resources – in addition to traditional generation and transmission resources -- are all potentially cost-effective means of meeting reliability needs identified by system operators and power pool managers. NEDRI recommends that when socialized cost recovery is sought, that demand-side resources be treated comparably to supply-side and wires options both in analysis and in access to funding. • Least-cost standard: A principal criterion for selecting a solution that is qualified to receive socialized support should be whether it is the lowest-cost, reasonably available solution to an unmet system need, considered on a total cost basis.

  16. (5b) Screening proposals to socialize grid costs • NEDRI recommends that NEPOOL, ISO-New England, and FERC adopt the following standard as a means of screening proposals to socialize grid enhancements: • Before “socializing” the costs of a proposed reliability-enhancing investment through tariff, uplift, or other cost-sharing requirement, ISO-NE (and FERC) should require the applicant to demonstrate: • (1) That the relevant market is fully open to demand-side as well as supply-side resources; • (2) That the proposed investment is the lowest cost, reasonably-available means to correct a remaining market failure; and • (3) That benefits from the investment will be widespread, and thus appropriate for support through broad-based funding.

  17. (6) Comparable cost recovery opportunities • Recommendation 6: Ensure comparable cost recovery opportunities for transmission and non-transmission resource solutions • Whether a grid problem is resolved through a transmission or non-transmission solution, or a combination of them, the solution should qualify for cost recovery through transmission tariffs or wholesale uplift charges on the same basis.

  18. (C) Distribution System Planning and Demand Resources • Recommendation 7: Distribution companies can and should apply recommendations 1-6 • Distribution needs distinct from regional system needs • Many circuits, shorter horizons • Practices focus on traditional solutions • Demand opportunities significant • All resource planning focus requires a new perspective

  19. Distribution needs distinct from regional system needs • Localized • Distinct performance of individual circuits • Timing driven by specific events or customers • Shorter time horizons

  20. Redefinition of Distribution Planning • Focus on wire solutions to address growth-related challenges • Challenge to distribution planners • A distinct source of value from customer resources: avoided distribution costs • Construction • Losses, voltage support • Full menu of customer resources

  21. Distributed Utility Planning • Focus on circuits • Factor in cost of incremental customer resources (societal test) • Regulatory Policy matters • Expect DUP to consider customer resources • Pricing • Break link between net income and sales • Staffing • Pilot

  22. Transmission Siting Advice Regional Resource Adequacy Congestion Monitoring Market Power Monitoring Gas Supply Co-ordination Environmental Issue Integration Technical Potential Assessments Innovative Solutions Advice Public Benefits Co-ordination Possible Roles of the Multi-State Entity

  23. RTEP Process Flow with observations Need longer horizon Opportunity to engage more “rings” of interested people Meetings throughout region are good Public Policy input is inconsistent, not reliable Unequal treatment for cost recovery among resources is too large a barrier to get best choices Non-transmission alternatives not permitted to compete (planning, cost recovery) here; unclear how any distributed resource options are considered Declaration of appropriate projects lacks weight Queueing remains a problem No effect on state decision-making on pricing, metering, siting, distributed resources

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