The impact of planning reserve margins in long-term planning models of the electricity sector

Abstract

The planning reserve margin is the predominant metric used in long-term planning models to ensure the resource adequacy of projected power systems. Considerable work has been done to estimate the contribution of variable renewable energy resources, such as wind and solar, to the planning reserve margin, but little work has been done to assess what planning reserve margin should be used in planning models. Typically, U.S.-based models use the North American Electric Reliability Corporation (NERC)-recommended reserve margin levels. However, historical reserve margins have often exceeded the NERC-recommended levels, suggesting that the use of NERC-recommended levels in planning models may negatively bias projected future capacity investments relative to real-world trends. Using the Regional Energy Deployment System capacity expansion model, we show that setting the planning reserve margin to observed levels in lieu of the NERC-recommended levels leads to substantial differences in near-term capacity additions. Scenarios using alternative specifications for the reserve margin resulted in increased national solar builds of 20–100 GW. Given that the magnitude on results from altering the reserve margin level is similar to or greater than many policies frequently analyzed with planning models, careful consideration of the reserve margin level is crucial for developing accurate power sector projections.