Economic Adequacy Target

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EconomicAdequacyTarget

• Resource Adequacy ForumSteering
  CommitteeSeptember 27, 2007

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Outline

• Proposed economic risk measure
• Options for determining the appropriate level of
  economic risk for the region
• Steering Committee decision

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Proposed EconomicRisk Measure

• Objective choose a parameter that indicates the
  regions exposure to high cost years
• Process
• Simulate the power systems operation over many
  different future conditions
• Calculate the total cost for each future
• Plot a histogram of all costs
• Risk Measure the average cost for the top 10
  percent highest cost futures (TVar90)

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Councils MethodAverage Cost and Economic Risk
for a Resource Plan
TVar90
Risk average of costsgt 90 threshold
Likelihood (Probability)
Power Cost (/kWh)-gt
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Options for Selecting an Appropriate Risk Level

• Calculate the average cost (over all futures) and
  the risk for many different resource plans
• Plot the cost and risk for each plan to create a
  feasibility space
• Viable plans lie along the efficient frontier
• The appropriate risk level depends on the choice
  of resource plan along the efficient frontier

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Efficient Frontier
Minimizes Cost
Increasing Risk
Minimizes Economic Risk
Increasing Cost
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(No Transcript)
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Options Along the Efficient Frontier(Illustrative
)Note 1 The LR balances are based on firm
resources only.Note 2 The implied NRF LR
balance target is zero but it should use
available resource generation instead of expected
generation.
Efficient Frontier
Physical Target LOLP 5Firm Bal - 1,500 MWa
Physical LimitLOLP 5LR Bal -1500 MWa
Implied NRF/20 lt LOLP lt 5LR Bal 0 MWa
Council PlanLOLP 0LR Bal 1500 MWa
Current StatusLR Bal 200 MWa/1
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Determining an Economic Target

• Select the desired point along the efficient
  frontier
• Derive the implied LOLP from the corresponding
  resource plan
• Use that LOLP to set the energy and capacity
  economic targets (same method that is used to set
  the physical targets)

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Technical Committee Recommendations

• The Technical Committee recommends using the
  TVar90 parameter for economic risk.
• The committee does not have a recommendation for
  a target point along the efficient frontier

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Steering Committee Options

• Use the Councils process to choose a target
  point
• Use the 5th plan to set the current target
• Engage in the Councils pubic process to develop
  a new target for the 6th plan
• Develop a separate method to choose a target
  point
• Use a modified NRF/White Book calculation
• Come up with a new method

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Options Pros and Cons