Benjamin F. Hobbs Theodore K. and Kay W. Schad Professor of Environmental Management Whiting School of Engineering, JHU Founding Director, E 2 SHI Chair, CAISO Market Surveillance Committee Workshop on Economic Approaches to Understanding and Addressing Resilience in the Bulk Power System RfF 30 May 2018
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Benjamin F. HobbsTheodore K. and Kay W. Schad Professor of Environmental Management
Whiting School of Engineering, JHUFounding Director, E2SHI
Chair, CAISO Market Surveillance Committee
Workshop on Economic Approaches to Understanding and Addressing Resilience in the Bulk Power System
RfF 30 May 2018
I. Traditional resource adequacy (independent or correlated forced outages)
III. Long, wide-area network outages
II. Extreme supply outages, multiple stressors
General principles
Three classes of disruptionsMainly markets Primarily Planning
When rely on markets?
◦ When solutions not obvious, require private information
◦ Actions by many (price-taking) parties needed
◦ Responsibility/property rights can be assigned & traded
◦ When events are (relatively) frequent, not severe
When regulation/central planning?
◦ Solutions obvious
◦ Actions by few or 1 party needed
◦ Public good, markets likely to be suspended in event
◦ Events rare, potentially catastrophic
Assume: ◦ Generator outages are random ..
..and (conditionally) independent of each other & of load
Can be extended to: ◦ Correlated outages, e.g.: 100 MW unit, 0.1 FOR, 0 correlation ELCC = 92 MW
Not spot markets alone. For extreme events: ◦ Probability estimates unreliable◦ Insurance unavailable or costly
“...three particular phenomena of climate related risks that will require a change in our thinking about risk management: global micro-correlations, fat tails, and tail dependence.
“(Their) consideration …will be particularly important for natural disaster insurance, as they call into question traditional methods of securitization and diversification” (Kousky & Cooke, RFF-DP-09-03-REV.pdf, 2009)
How to prepare against the unimagined risk?◦ Inherently stable systems: diverse sources more redundancy, island-able