Risk-Constrained Least-Cost Planning

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Risk-Constrained Least-Cost Planning

• Michael Schilmoeller
• Northwest Power and Conservation Council
• for the
• NARUC 119th Annual Convention
• November 12, 2007

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Overview

• Planning Principles

• Selection of Resource Plans

• Selection of Resource Plans

Planning Principles
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Different Kind of Risk Modeling

• Imperfect foresight and use of decision criteria
  for capacity additions
• Adaptive plans that respond to futures
• Primarily options to construction power plants or
  to take other action
• May include policies for particular resources
• Scenario analysis on steroids
• 750 futures, strategic uncertainty
• Frequency that corresponds to likelihood

Planning Principles
4
Council Use of Terms

• Futures circumstances over which the decision
  maker has no control that will affect the outcome
  of decisions
• Plans actions and policies over which the
  decision maker has control that will affect the
  outcome of decisions

Planning Principles
5
Sources of Uncertainty

• Load requirements
• Gas price
• Hydrogeneration
• Electricity price
• Forced outage rates
• Aluminum price
• CO2 tax
• Production tax credits
• Green tag value (Renewable Energy Credit)

Planning Principles
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Most Elements of the Resource Plan Are Options To
Construct
Planning Principles
7
Spinner Graphs

• A given plan, across all futures
• Illustrates scenario analysis on steroids
• Link to Excel Spinner Graph Model

Planning Principles
8
Overview

• Planning Principles

• Planning Principles

• Selection of Resource Plans

Selection of Resource Plans
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Distribution of Cost for a Plan
Number of Observations
Selection of Resource Plans
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Risk and Expected Cost Associated With A Plan
Risk average of costsgt 90 threshold
Likelihood (Probability)
Power Cost (NPV 2004 M)-gt
Selection of Resource Plans
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Feasibility Space
Increasing Risk
Increasing Cost
Selection of Resource Plans
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Feasibility Space
Increasing Risk
Increasing Cost
Selection of Resource Plans
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Efficient Frontier
Selection of Resource Plans
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Review

• Imperfect foresight and use of decision criteria
  for capacity additions
• Adaptive plans that respond to futures
• Likelihood analysis that captures strategic
  uncertainty

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End