Planning for low-cost renewable energy

Abstract

Renewable energy is increasingly cost-competitive with conventional generation technologies. Traditional approaches to utility resource planning and resource investment and procurement (“acquisition”) will, however, prevent utilities from taking fuller advantage of low-cost renewable resources. This paper describes three areas where enhancements in utility resource planning can more accurately reflect the benefits and costs of renewable generation: (1) how operational uncertainties associated with wind and solar generation are characterized in planning models; (2) how reliability services provided by wind and solar generation are valued in planning models; and (3) alignment between cost assumptions used in planning and market conditions. The paper also describes three areas where enhancements in utility resource acquisition can better align decision-making with market outcomes: (1) reducing the time between planning-procurement cycles; (2) shifting from a needs-based to an opportunity-based approach to planning and acquisition; and (3) ensuring comparability among different technology and ownership options. Nascent efforts to resolve challenges in these six areas illustrate the need for utilities and state regulators to expand and upgrade their analytical capabilities.