Integrated resource planning and the environment: A guide to the use of multi-criteria decision methods

Abstract

This report is intended as a guide to the use of multi-criteria decision-making methods (MCDM) for incorporating environmental factors in electric utility integrated resource planning (IRP). Application of MCDM is emerging as an alternative and complementary method to explicit economic valuation for weighting environmental effects. We provide a step-by-step guide to the elements that are common to all MCDM applications. The report discusses how environmental attributes should be selected and defined; how options should be selected (and how risk and uncertainty should be accounted for); how environmental impacts should be quantified (with particular attention to the problems of location); how screening should be conducted; the construction and analysis of trade-off curves; dominance analysis, which seeks to identify clearly superior options, and reject clearly inferior options; scaling of impacts, in which we translate social, economic and environmental impacts into value functions; the determination of weights, with particular emphasis on ensuring that the weights reflect the trade-offs that decision-makers are actually willing to make; the amalgamation of attributes into overall plan rankings; and the resolution of differences among methods, and between individuals. There are many MCDM methods available for accomplishing these steps. They can differ in their appropriateness, ease of use, validity, and results. This report also includes an extensive review of past applications, in which we use the step-by-step guide to examine how these applications satisfied the criteria of appropriateness, ease of use, and validity. Case material is drawn from a wide field of utility applications, ranging from project-level environmental impact statements to capacity bidding programs, and from the results of two case studies conducted as part of this research.