Acknowledgments ................................................. x
Author ......................................................... xi
1 Introduction ................................................. 1
Why Write This Book? ......................................... 1
Who Is This Book Written For? ................................ 3
An Overview of the Book ...................................... 4
Are We Keeping It Simple? .................................... 6
A Few Words Regarding Assumptions Used in the Book ........... 7
A Couple of Disclaimers ...................................... 8
2 How Does an Electric Utility Actually "Work"? ............... 11
Two "Types" of Electric Utilities ........................... 11
Whose Perspective Will Be Taken? ............................ 13
What Aspects of an Electric Utility Will We Focus On? ....... 13
Types of Generating Units a Utility May Have ................ 14
How Does a Utility Decide Which Generating Units to Use? .... 16
Let's Create a Hypothetical Utility System .................. 21
Now Let's Operate Our Hypothetical Utility System ........... 26
Utility System Operation on the Summer Peak Day .......... 26
Utility System Operation over the Course of a Year ....... 30
So What Have We Learned and Where Do We Go Next? ............ 34
3 Overview of Utility Resource Planning ....................... 37
One More Assumption Regarding Our Hypothetical Utility
System ...................................................... 37
Three Questions Utility Resource Planning Must Always
Answer ...................................................... 38
Reliability Analysis: When Does a Utility Need to Add New
Resources and What Is the Magnitude of Those Needed
Resources? .................................................. 39
Reserve Margin Perspective (Simple to Calculate) ......... 40
Probabilistic Perspective (Not So Simple to Calculate) ... 41
Which Reliability Perspective Is More Important? ......... 44
Resource Option Evaluation and Selection: What Is the Best
Resource Option to Select for a Given Utility? .............. 46
Two Basic Types of Resource Options: Supply and Demand
Side Management Options .................................. 47
Integrated Resource Planning (IRP) ....................... 50
Economic Evaluations ..................................... 52
Preliminary Economic Screening Evaluation of Supply
Options ............................................... 53
Preliminary Economic Screening Evaluation of DSM
Options ............................................... 56
Final (or System) Economic Evaluations ................ 60
Non-Economic Evaluations ................................. 64
Non-Economic Consideration Example (i): The Length
of Time It Takes before a Resource Plan Becomes
the Economic Choice ................................... 65
Non-Economic Consideration Example (ii): The Utility
System's Fuel Usage Due to a Resource Plan ............ 69
Non-Economic Consideration Example (iii): The
Utility System's Air Emissions Due to a Resource
Plan .................................................. 69
4 Reliability Analyses for Our Utility System ................. 71
When Does Our Utility System Need New Resources? ............ 72
What Is the Magnitude of the New Resources Needed by Our
Utility System? ............................................. 74
What Have We Learned and What Is Next? ...................... 78
5 Resource Option Analyses for Our Utility System: Supply
Options ..................................................... 81
Types of Supply Options under Consideration ................. 81
Capital Costs: Rows (1) through (3) ...................... 81
Other Fixed Costs: Rows (4) through (7) .................. 84
Operating Costs: Rows (8) through (15) ................... 86
Preliminary Economic Screening Evaluation of the Supply
Options ..................................................... 90
Creating the Competing "Supply Only" Resource Plans ......... 96
Final (or System) Economic Evaluation of Supply Options .... 109
Overview ................................................ 109
Total Cost Perspective (CPVRR) for the Supply Only
Resource Plans .......................................... 116
Electric Rate Perspective (Levelized System Average
Electric Rate) for the Supply Only Resource Plans ....... 125
6 Resource Option Analyses for Our Utility System: DSM
Options .................................................... 133
Types of DSM Resource Options Under Consideration .......... 133
Preliminary Economic Screening Evaluation of DSM Options:
Understanding the Cost-Effectiveness Screening Tests ....... 143
Preliminary Economic Screening Analyses of DSM Options:
Results .................................................... 148
Creating the Competing "With DSM" Resource Plans ........... 149
Final (or System) Economic Analysis of DSM Options ......... 151
Overview ................................................ 151
Results for the With DSM Resource Plan 1 ................ 156
Results for the With DSM Resource Plan 2 ................ 163
7 Final Resource Option Analyses for Our Utility System ...... 169
Economic Comparison of the Resou rce, Plans ................ 169
Non-Economic Analyses of the Resource Plans ................ 172
"Cross Over" Time to Being the Most Economic Resource
Plan .................................................... 172
System Fuel Use ......................................... 177
System Air Emissions .................................... 178
Summary of Results from the Resource Option Analyses
for Our Utility System ..................................... 182
8 Are We Done Yet? Other Factors That Can (and Will)
Complicate Resource Planning Analyses ...................... 185
Constraints on Solutions: Six Examples ..................... 185
Examples of "Absolute" Constraints ......................... 186
Siting/Geographic Constraints ........................... 186
Potential Tightening of Environmental Regulations ....... 188
Examples of Legislative/Regulatory-Imposed Constraints ..... 191
"Standards"/(Quotas) for Specific Types of Resource
Options ................................................. 191
Prohibition of Specific Resource Options ................ 196
Examples of Utility-Imposed Constraints .................... 197
System Reliability Constraints .......................... 197
The Voluntary Nature of DSM Options .................. 198
Intermittent Nature of Renewable Energy Resource
Options .............................................. 201
Load Shape Constraint ................................... 204
What Are the Impacts of Addressing These Constraints? ...... 212
9 Final Thoughts (Including Some Opinions) ................... 215
Summary of the Key Points We Have Learned about Utility
Systems in General ......................................... 215
Summary of the Key Lessons We Have Learned Regarding
Utility Resource Planning .................................. 216
A Few Opinions on Various Topics ........................... 218
What Lies Ahead for Electric Utilities and Utility
Resource Planning? ......................................... 232
Appendix A: Fundamental Principles of Electric Utility
Resource Planning .......................................... 235
Appendix B: Glossary of Terms ................................. 239
Appendix C: Mini-Lesson N1 - Concepts of Revenue
Requirements, Present Valuing of Costs and Discount
Rates, Cumulative Present Value of Revenue Requirements,
and Levelized Costs ........................................ 247
Appendix D: Mini-Lesson N2 - Further Discussion of the
Limitations of a Screening Curve Analytic Approach ......... 255
Appendix E: Mini-Lesson N3 - Further Discussion of the RIM
and TRC Preliminary Cost-Effectiveness Screening Tests
for DSM .................................................... 269
Appendix F: Mini-Lesson N4 - How Can a Resource Option
Result in Lower Costs, but Increase Electric Rates? ........ 277
Appendix G: Mini-Lesson N5 - How Can a Resource Option That
Produces Emissions Lower a Utility's Total System
Emissions? ("The Taxi Cab Example") ........................ 281
Index ......................................................... 293
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