A Decision Analysis Approach to Energy System Expansion Planning

Abstract

Capacity expansion decisions are critically important to both publicand private-sector energy suppliers as well as regional and national energy planning agencies. Simplistically stated, planning for the expansion of an energy supply system involves determining when and where new energy production facilities of various types and sizes should be deployed to meet projected demands. As with most energy-related decision problems, several factors complicate capacity expansion planning. These factors include the involvement of multiple decisionmakers and interest groups, uncertainties about technology costs and demand projections, varying degrees of risk associated with alternative energy technologies, the need to consider costs and effects over long time horizons, and the difficulty of quantifying key impacts and concerns. Traditionally, most capacity expansion decisions in the United States have been made on the basis of a single objective, such as the minimization of total discounted system cost.1 However, as a result of landmark legislation like the National Environmental Policy Act and more-stringent regulations at both the state and national levels, decision- and policymakers must now consider multiple objectives, including not only technical and economic considerations, but also environmental factors, including human health and safety. This article describes a decision analysis framework for treating multipleobjective capacity expansion problems. The focus is on an illustrative case study in which the framework was used to analyze long-range strategies for the development of supplemental gas supply systems for Wisconsin. Capacity expansion strategies developed by minimizing total discounted system cost