Future Electric U,lity Regulaon Series Report #6: Future ... · electric utility regulation and business models and achieving a reliable, ... Lavin’s recent work includes studies

Future Electric Utility Regulation Advisory

Group Meeting

March27,2014

FutureElectricU,lityRegula,onSeriesReport#6:TheFutureofElectricityResourcePlanning

September29,2016

Fredrich(Fritz)Kahrl,EnergyandEnvironmentalEconomics(E3)AndrewMills,LawrenceBerkeleyNaPonalLaboratory

LukeLavin,E3ArneOlson,E3NancyRyan,E3

LisaSchwartz,BerkeleyLab,ProjectManagerandTechnicalEditor

Agenda

•  Abouttheseriesandwebinarhousekeepingitems–LisaSchwartz,LBNL(5min.)

•  Presenta,on(40min.)–FritzKahrl,E3-leadauthor,andAndrewMills,LBNL-authorofdistributedgenera,onsec,onsofreport

•  Q&A(15min.)

2EnergyAnalysisandEnvironmentalImpactsDivision

Future Electric Utility Regulation Series •  A new series of reports from Lawrence Berkeley National Laboratory taps

leading thinkers to grapple with complex regulatory issues for electricity •  Unique point-counterpoint approach highlights different views on the future of

electric utility regulation and business models and achieving a reliable, affordable and flexible power system

•  Primary funder: DOE Office of Electricity Delivery and Energy Reliability -Electricity Policy Technical Assistance Program

•  Reports published to date: 1. Distributed Energy Resources (DERs), Industry Structure and Regulatory Responses 2. Distribution Systems in a High DER Future: Planning, Market Design, Operation and

Oversight 3. Performance-Based Regulation in a High DER Future 4. Distribution System Pricing With DERs 5. Recovery of Utility Fixed Costs: Utility, Consumer, Environmental and Economist

Perspectives 6. The Future of Electricity Resource Planning – Today’s topic

•  Additional reports forthcoming: feur.lbl.gov•  Expert advisory group (next slide) provides

guidance and review

EnergyAnalysisandEnvironmentalImpactsDivision 3

AdvisoryGroup

4

•  Commissioner Lorraine Akiba, Hawaii Public Utilities Commission •  Janice Beecher, Institute of Public Utilities, Michigan State University •  Doug Benevento, Xcel Energy •  Ashley Brown, Harvard Electricity Policy Group •  Paula Carmody, Maryland Office of People’s Counsel •  Ralph Cavanagh, Natural Resources Defense Council •  Steve Corneli, consultant •  Tim Duff, Duke Energy •  Commissioner Mike Florio, California Public Utilities Commission •  Peter Fox-Penner, Boston University Questrom School of Business •  Scott Hempling, attorney •  Val Jensen, Commonwealth Edison •  Steve Kihm, Seventhwave •  Commissioner Nancy Lange, Minnesota Public Utilities Commission •  Kris Mayes, Arizona State University College of Law/Utility of the Future Center •  Jay Morrison, National Rural Electric Cooperative Association •  Allen Mosher, American Public Power Association •  Sonny Popowsky, Former consumer advocate of Pennsylvania •  Karl Rábago, Pace Energy & Climate Center, Pace University School of Law •  Rich Sedano, Regulatory Assistance Project •  Chair Audrey Zibelman, New York State Public Service Commission •  Peter Zschokke, National Grid

EnergyAnalysisandEnvironmentalImpactsDivision

Webinar Housekeeping Items


•  We’re recording the webinar and will post it on our web site. •  Because of the large number of participants, everyone is in

listen mode only. •  Please use the chat box to send us your questions and

comments any time during the webinar.

•  Report authors will present for about 40 minutes.

•  Moderated Q&A will follow, with the report authors responding to questions typed in the chat box.

•  The report and webinar slides are posted at feur.lbl.gov

AbouttheAuthors

•  Dr.FredrichKahrlisadirectorattheconsul,ngfirmEnergyandEnvironmentalEconomics,Inc.(E3),whereheleadsthefirm’sresearcheffortsandcoordinatesinterna,onalwork.Kahrlhasworkedonelectricityplanning,markets,andregula,oninavarietyofstateandna,onalcontexts.HereceivedM.S.andPh.D.degreesinenergyandresourcesfromtheUniversityofCalifornia,Berkeley,andaB.A.inphilosophyfromtheCollegeofWilliam&Mary.

•  Dr.AndrewD.MillsisaResearchScien,stintheElectricityMarketsandPolicyGroupatLawrenceBerkeleyNa,onalLaboratory.Heconductsresearchandpolicyanalysisonrenewableresourcesandtransmission,includingpowersystemopera,onsandvalua,onofwindandsolar.Millshaspublishedhisresearchinleadingacademicjournalsandwasacontribu,ngauthortotheInterna,onalPanelonClimateChange’sFibhAssessmentReportandSpecialReportonRenewableEnergySourcesandClimateChangeMi,ga,on.Previously,MillsworkedwithAllCellTechnologies,abaderytechnologystart-upcompany.HehasaPh.D.andM.S.inEnergyandResourcesfromUniversityofCalifornia,Berkeley,andaB.S.inMechanicalEngineeringfromtheIllinoisIns,tuteofTechnology.

•  LukeLavinisanassociateatE3,workingprimarilyinthedistributedenergyresourcesandresourceplanninggroups.Lavin’srecentworkincludesstudiesvaluingenergystorage,distributedsolarPV,andotherdistributedenergyresources,aswellasworkontheCaliforniaPublicU,li,esCommission’simplementa,onofa50percentrenewableporfoliostandard.HeholdsaB.A.inPhysicsandAnthropologyfromAmherstCollege.

•  Dr.NancyE.RyanisapartneratE3,wheresheleadsitsworkontransporta,onelectrifica,onandworksacrossthefirmonpolicyandstrategyprojectsforadiversearrayofpublic-andprivate-sectorclients.Previously,RyanservedontheCaliforniaPublicU,li,esCommission,whereshealsoheldaseriesofhighlevelposi,ons,includingCommissioner.SheholdsaPh.D.ineconomicsfromtheUniversityofCalifornia,Berkeley,andaB.A.ineconomicsfromYaleUniversity.

•  ArneOlsonisapartneratE3,whereheleadsthecompany’sresourceplanninggroup.Olsonhasworkedextensivelywithregulatorsandu,li,esonresourceplanninginanumberofstates,includingCalifornia,Colorado,Oregon,Idaho,WashingtonandWyoming.HeearnedB.S.degreesinMathema,calSciencesandSta,s,csfromtheUniversityofWashington,andanM.S.degreeinInterna,onalEnergyManagementandPolicyfromtheUniversityofPennsylvaniaandtheÉcoleNa,onaleSupérieureduPétroleetdesMoteursoftheIns,tutFrançaisduPétrole.



Please use the chat box to send us your questions and comments any time during the webinar. We’ll address as many questions as we can following the presentation. The report and webinar slides are posted at feur.lbl.gov

Overview

•  Background•  ParadigmShib•  EmergingIssuesandEvolvingPrac,ces•  SummaryandConsidera,onsforRegulators


KeyQues,ons

•  Howiselectricityresourceplanningchanging?

•  Howmightitevolveoverthenextdecade?

•  Whatdoesthisimplyforstateandfederalregulators?


Approach

•  Reportexaminesemergingissuesandevolvingprac,cesinfivekeyareas:1) Central-scalegenera,on2) Distributedgenera,on3) Demand-sideresources4) Transmission5) Uncertaintyandrisk

•  Basedonanalysis,reportdis,llskeyconsidera,onsforregulators


Scope

•  U.S.electricitysectoriscomplex,varietyofplanningcontexts:–  Ver,callyintegratedu,li,es(RTO/ISOornon-RTO/ISOregions)

–  Restructuredu,li,eswithlimitedretailcompe,,on– Municipalu,li,es(RTO/ISOornon-RTO/ISOregions)–  Electriccoopera,ves–  Compe,,veretailproviders–  Federalpowermarketers–  Andmore…

•  Planningfunc,onsobendividedamongu,li,es,stateagencies,RTOs/ISOs

•  Reportseekstomaintainbroadperspec,veandrelevance


Scope

•  Analysisbasedonreviewof10resourceplans:–  6formalintegratedresourceplans(IRPs)

–  3long-termresourceplans

–  1defaultserviceplan

– Otherstateagency,RTO/ISOplanningdocuments


UPlity RTO/ISORegion StatesServed PlanType PlanYear

ConsolidatedEdisonCompanyofNewYork(CECONY)

NewYorkIndependentSystemOperator(NYISO)

NewYork Long-rangeresourceplan

2012

DukeEnergyCarolinas(DEC)

None NorthCarolina,SouthCarolina

IRP 2014

FloridaPowerandLight(FPL)

None Florida Long-rangeresourceplan

2015

GeorgiaPowerCompany(GPC)

None Georgia IRP 2013

HawaiianElectricCompanies

None Hawaii IRP 2013

PacifiCorp None California,Idaho,Oregon,Utah,Washington,Wyoming

IRP 2015

PECOEnergyCompany(PECO)

Pennsylvania-NewJersey-MarylandInterconnec,on(PJM)

Pennsylvania Defaultserviceplan 2015

SouthernCaliforniaEdison(SCE)

CaliforniaIndependentSystemOperator(CAISO)

California Long-rangeresourceplan

2011

TennesseeValleyAuthority(TVA)

None Tennessee,Alabama,Mississippi,Kentucky,Georgia,NorthCarolina,Virginia

IRP 2015

NorthernStatesPowerCompany(NSP)

Midcon,nentIndependentSystemOperator(MISO)

Michigan,Minnesota,NorthDakota,SouthDakota,Wisconsin

IRP 2015

RoleofResourcePlanning

•  Electricityinfrastructureobenhaslonglead,mesandlife,mes

•  Keygoalofresourceplanningistoencourageprudentdecisionsthathavelong-termimplica,ons

•  Planningprocessesprovidecommonreferencepointonpossiblefutures


0 1 2 3 4 5 6 7 8 9 10

EnergyefficiencyCT

SolarPVCCGT

OnshorewindSolarthermal

PulverizedcoalGeothermal

BiomassHydropower

OffshorewindNuclearpowerTransmission

LeadTime(Years)

0 10 20 30 40 50 60 70 80 90 100

EnergyefficiencyGeothermal

OnshorewindOffshorewindSolarthermal

SolarPVCCGT

CTBiomass

PulverizedcoalNuclearpowerHydropowerTransmission

PhysicalLife,me(Years)

Lead time

Lifetime

PlanningTensions

•  Statevs.federal– Numberofrecentfederalrulesandregula,onsraiseques,onsaboutstatevs.federaljurisdic,on:o Hughesvs.Taleno FERCOrder1000

(subjectofforthcomingLBNLreport)

•  Planningvs.markets– Primarilyanissuewhereu,li,esplaymorelimitedroleinprocurement(i.e.,withcompe,,veretail)


Overview

•  Background•  ParadigmShi^•  EmergingIssuesandEvolvingPrac,ces•  SummaryandConsidera,onsforRegulators


PlanningParadigmShib

•  Sixkeyfactorsdrivingmajorchangesinelectricityindustry

•  Changeshavesignificantimplica,onsforresourceplanning,gradualparadigmshib


ResourcePlanningParadigmShib

Environmentalandenergypolicies

Naturalgasrelianceand

priceuncertainty

Decliningrenewabletechnology

costs

Flatordecliningload

growth

Changingconsumerpreferences

ICTimprove-mentsanddeployment

See “Additional Slides”

Overview

•  Background•  ParadigmShib•  EmergingIssuesandEvolvingPracPces

– Central-ScaleGeneraPon– DistributedGeneraPon– Demand-SideResources– Transmission– UncertaintyandRisk

•  SummaryandConsidera,onsforRegulators


Central-ScaleGenera,on:EmergingIssues

•  Greatestchangesinplanningprac,cesforcentral-scalegenera,onrelatetowindandsolar

•  Differentcharacteris,csthanotherresources:–  Physical(variable,uncertain)

–  Economic(highfixedcost,verylowvariablecost)

•  Requiresplanninginnova,ons

•  See“Addi,onalSlides”


LowerPenetraPons

Understanding

flexibilityofexis,ngsystem,value

proposi,onofRE

HigherPenetraPons

Makinglargerchangesinopera,ons,

investmentstoaccommodateRE

EmergingBestPracPces•  Trea,ngwindandsolargenera,onin

investmentmodelsas“selectable”resources

•  Includingmoredetailedopera,onalcharacteris,csininvestment/procurement(expansion)models

•  Usingreliability-basedapproaches(e.g.,ELCC)todeterminecapacitycreditofwindandsolargenera,on

•  Coordina,ngplanningacrossu,li,esandbalancingareas

Forexamples,seeDEC,NSP,PacifiCorp,TVAIRPs

Central-ScaleGenera,on:EvolvingPrac,ces

•  Keyareas:– Howu,li,eschooseamountandcomposi,onofrenewableresources

– Howu,li,es/RTOsassessopera,onalimpacts,incorporateintoplanning

– Howu,li,es/RTOsassesscapacitycreditsandvaluesforrenewableenergy


DistributedGenera,on:EmergingIssues

•  DGcanhavesignificantimpactonsystemopera,ons,needforand,mingofinvestmentsinconven,onalgenera,onandT&Dinfrastructure

•  U,li,eshavelimiteddirectcontroloveradop,on

•  Thatsaid,u,li,es:–  DohavesomeabilitytotargetDGadop,on

–  CanplanforDGuncertainty


0

20

40

60

80

100

120

200120022003200420052006200720082009201020112012201320142015

InstalledCa

pacityofC

ustomerso

nNEM

Tariff

(MW)

MECO

HELCO

HECO

Figure shows net energy metering installations in MECO, HELCO, HECO from 2001 to 2015 In five years customers in MECO, HELCO, HECO install 246, 54, and 58 MW, respectively, of NEM DG (22%, 29%, 30% of 2013 system peak)

DistributedGenera,on:EvolvingPrac,ces

•  Keyareas:– Howu,li,es/RTOsaremodelingDGadop,onanditsimpactonbulksystemplanningvariables

– Howu,li,esarevaluingDGinresourceplans

– Howu,li,esandregulatorsarecomprehensivelyassessingDGimpacts,beyondtradi,onalresourceplanning


EmergingBestPracPces•  Genera,ngDGforecastsusingmodelsofcustomeradop,onbehaviorinresourceplanningprocess

•  Assessingloca,onalvalueofDG,incorpora,ngdistribu,ondeferralvaluesinDGevalua,on

•  Makinguseof“triggers”and“signposts”torevisitplansifadop,onissignificantlydifferentthanan,cipated

Forexamples,seeCECONY,NSP,PacifiCorp,TVAplans;SCEDRPs

Demand-sideResources:EmergingIssues

•  Valueofdemand-sideresources(DERs)—EE,DR,storage—willlikelyincreaseovernextdecade–  Drivenbypublicpolicygoals

•  Newopportuni,es:–  NewkindsofDERresources(EVs,distributedstorage),newIT,newbusinessmodels

•  However,DERplanningobennotwellintegratedintosupplyplanning,notincludedinriskanalysis


EmergingDemand-

sideResources

EVs

Storage

EE

Demand-sideResources:EvolvingPrac,ces

•  Keyareas:– HowDERplanningisintegratedintoresourcevalua,onandselec,on,includingriskanalysis

– HowretailratesandratedesignimpactsareincorporatedintoDERmodeling,loadforecasts


EmergingBestPracPces•  Trea,ngDERsasselectable

resourcesinbulkexpansionmodels•  Incorpora,ngloca,onalbenefitsof

DERsinresourceevalua,ons•  Integra,ngevalua,onacrossDERs

(includingDG)•  Bederunderstandingpoten,alof

priceresponsiveloads(e.g.,EVs,DG+storage),pilo,ngretailratedesignstoprovideresourcebenefits

Forexamples,seeCECONY’sIDSMtool,PacifiCorpandTVAplans,SCEDRP

Transmission:EmergingIssues

•  Transmissionprovidesanumberofresourcebenefits–  Lowercostsforcapacity,energy,andancillaryservices,increasedflexibility

•  Valueoftransmissionwillalsolikelyincreaseovernextdecade–  Publicpolicygoals


•  Transmissionplanninggenerallynotwellintegratedwithresourceplanning–  Differentques,onsforRTOandnon-RTOjurisdic,ons

EmergingBestPracPces•  Evalua,ngmul,plebenefitsoftransmission(notjustreliabilityorconges,on)

•  Incorpora,ngvalueofreducedwindandsolarcurtailment

•  Coordina,nginputsinresourceandtransmissionplans

•  Undertaking,andpoten,allyins,tu,onalizing,non-wiresalterna,vesanalysis

Transmission:EvolvingPrac,ces

•  Keyareas:– Howthecapacity,energy,andflexibilitybenefitsoftransmissionarevaluedinmarketsandplanningtools

– Howalterna,vestotransmissionareconsideredintransmissionvalua,onandselec,on


UncertaintyandRisk:EmergingIssues

•  Electricityindustryhasalwaysfaceduncertaintyandmanagedrisk

•  Currentlevelsofuncertaintyakintoprevioustransi,onperiods– Driversofuncertaintyobeninterrelated

•  Regulatorsandu,li,esshouldbeproac,velymanagingrisks


EnvironmentalregulaPons

Renewabletechnologycosts

andpolicy

Distributedenergy

resources

LoadgrowthNuclearregulatoryissues

Naturalgasrelianceand

prices

TransmissionsiPngandpermibng

UncertaintyandRisk:EvolvingPrac,ces

•  Keyareas:– Howu,li,esareincorpora,ngriskintoresourcevalua,onandselec,on

– Howmetricsareinterpretedandincorporatedintopreferredplan


EmergingBestPracPces•  Usingquan,ta,veriskanalysisandrisk-adjustedmetricsindevelopmentofpreferredresourceporfolio

•  Developingclearcriteriaforhowrisk-adjustedmetricswillbeusedinevalua,ngdifferentpoten,alresourceporfolios

Forexamples,seeNSP,PacifiCorp,TVAIRPs

RiskAnalysis

•  Increasedcompu,ngpowerallowsscreeningofporfoliosbasedonaveragecostandcostvariance–  Systema,csensi,vityanalysisonresourceporfolios

•  Selec,onofpreferredporfolios,llrequiressignificantjudgement


PVRR Mean

PVR

R V

aria

nce

Lower cost Higher risk

Higher cost Lower risk

High cost High risk

Low cost Low risk

Which of these portfolios is preferred?

Overview

•  Background•  ParadigmShib•  EmergingIssuesandEvolvingPrac,ces•  SummaryandConsideraPonsforRegulators


Summary

•  Electricityindustryischanging,resourceplanningmustevolvetokeeppace– Evolu,onneedstobeinform,func,on,andmethods

•  Planninginnova,onsandbestprac,cesareemerging,regulatorscanencourageandsupporttheiruse

•  Withbederdata,newmethods,andmorecompu,ngpower,importantnottolosesightoftheroleofjudgementinplanning


10Considera,onsforRegulators

1)  Moreintegratedapproachestoresourceevalua,onandacquisi,onØ  Valueofintegratedplanningincreasesduringtransi,on

periods2)  Morecomprehensiveconsidera,onofinvestment

driversØ  Shibingfromreliabilitytoreliability,environment,risk

management3)  Moreaccuraterepresenta,onofsolarandwind

genera,oninresourceplanningmodelsØ  Focusonuncertaintyandopera,onaldetail,requires

industry-wideeffort



4)  Greateraden,oninresourceplanningtocustomerbehavior,retailratedesignsandthedistribu,onsystemØ  Newopportuni,esforreducingu,litycostsand

risks,butalsonewsourcesofuncertaintyandrisk

5)  Riskanalysisanduseofrisk-adjustedmetricsØ  Aden,ontomethodsandhowanalysisandmetrics

areusedinporfolioselec,on



6)  BalancingprecisionandtransparencyinplanningmodelsØ  Intui,oniss,llcri,cal,s,llneedback-of-the-envelope

analysisandsimpleranaly,caltools7)  Coherencebetweenplanningandlong-term

policiesandregula,onsØ  Foru,li,es,understandingcostsandnon-compliance

risks,emphasisontransi,on8)  Deeperexper,seatstateregulatorycommissions

andenergyagenciesØ  Agenciesdealingwithmorecomplextechnicalissues,

buildingexper,semayrequirehigh-levelpolicysupport



9)  Exploringnewopportuni,esforinforma,onsharingandcollabora,onØ  Diversityofinputsandprac,ces,someconvergence

wouldbebeneficial

10) Regionalcoordina,oninresourceplanningØ  Valueofcoordina,onandcoopera,onincreasesin

transi,onperiods


Ques,ons?

?


Please use the chat box to send us your questions and comments. The report and webinar slides are posted at feur.lbl.gov

ForMoreInforma,onontheSeries

36

LisaSchwartzElectricityMarketsandPolicyGroup

LawrenceBerkeleyNa,onalLaboratory(510)486-6315

[email protected]

EnergyAnalysisandEnvironmentalImpactsDivision

AddiPonalSlides


EnvironmentalPolicies

•  Airquality–  MercuryandAirToxicsStandards

–  RegionalHazeRule–  Cross-StateAirPollu,onRule

•  Waterquality–  CoalCombus,onResidualsRule

–  CleanWaterIntakeStructures•  Climatechange

–  CarbonPollu,onStandardsforNew,ModifiedandReconstructedPowerPlants

–  CleanPowerPlan


Retrofit or retire? If retire, replace with what?

NaturalGasPrices

•  Naturalgaspricescurrentlyathistoriclows

•  Industrybecomingincreasinglyreliantonnaturalgasgenera,on

•  Howshouldnaturalgaspricesbeincorporatedinresourceplans?


AEO 2015

AEO 2016

Figures show EIA 2015 and 2016 AEO Henry Hub gas price forecasts

RenewableEnergyTechnologyCosts

•  Technologycosts($/kW)forsolarhavefallendrama,cally,windcostshavealsocomedown

•  Willthesetrendscon,nue?

•  Atwhatpointdowechangehowwethinkaboutthemasaresource?


Figure shows solar PPA prices from 2006 to 2015, based on LBNL sample, from Tracking the Sun

LoadGrowth

•  Industryhasseensteadydeclineinsalessince1970s,butnowpoten,allynega,ve

•  Howdoflat/decliningsalesaffectresourcedecisions?


-5%

0%

5%

10%

15%

20%

1950

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1980

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1984

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1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

Annu

alGrowthinElectricity

Sales(%

)

Annual DecadalAverage

Figures shows U.S. electricity industry annual sales growth and decadal averages; data are from EIA

Ques,onsforHigherRenewablePenetra,ons

•  Higherpenetra,onsofsolarandwindchangescopeofrelevantresourceplanningques,ons


Is there flexibility in neighboring systems to

absorb additional imports?

Is there more flexibility in current

system (e.g., in scheduling,

reserves)

Are there cost-effective investments that will reduce curtailment?

Figure is from E3’s Western Interconnection Flexibility Assessment, https://www.wecc.biz/Administrative/Flexibility%20Study%20-%20E3.pdf

Future Electric U,lity Regulaon Series Report #6: Future ... · electric utility regulation and business models and achieving a reliable, ... Lavin’s recent work includes studies

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