1st Edition
Electric Utility Resource Planning Economics, Reliability, and Decision-Making
Most people—including many legislators, regulators, and other decision makers in the electric utility industry—have misconceptions about how electric utilities really "work" and plan for the future. This lack of understanding can lead to poorly informed decisions and policies that directly affect the choices utilities must make.
Using easy-to-understand text and examples, Electric Utility Resource Planning: Economics, Reliability, and Decision-Making clarifies how utilities operate their systems and prepare for the future. This explanation will show readers that both expected and counterintuitive results can occur (i.e., conservation might result in higher air emissions, or lowering costs could lead to higher electric rates).
Taking readers step by step through this process, the book (in the following order):
- "Creates" a hypothetical utility
- Explains how and why a utility operates its system of generating units
- Discusses the planning methods that a utility would (or should) use
- Guides readers through each stage of a planning analysis for the hypothetical utility, examining various resource options (conservation, new power plants, and solar)
In addition, the author introduces four Fundamental Principles of Resource Planning that should guide utilities. He also offers opinions on how certain trends in utility regulation and legislation can hinder utility planners’ efforts to identify and select the best resources for the utility’s customers.
With this book, author Dr. Steven Sim applies his experience and insights from more than two decades of resource planning for Florida Power and Light (FPL). As one of the largest utilities in the United States, FPL has faced a multitude of resource planning challenges, and Dr. Sim has performed and supervised thousands of analyses designed to meet these obstacles. He has also served as an FPL witness in regulatory hearings on a wide variety of topics, ranging from the economic implications of nuclear, conservation, coal, gas, and other resource options, to the non-economic impacts (air emissions, fuel usage, system reliability, etc.) they present.
Introduction
Why Write This Book?
Who Is This Book Written For?
An Overview of the Book
Are We Keeping It Simple?
A Few Words Regarding Assumptions Used in the Book
A Couple of Disclaimers
How Does an Electric Utility Actually "Work"?
Two "Types" of Electric Utilities
Whose Perspective Will Be Taken?
What Aspects of an Electric Utility Will We Focus On?
Types of Generating Units a Utility May Have
How Does a Utility Decide Which Generating Units to Use?
Let’s Create a Hypothetical Utility System
Now Let’s Operate Our Hypothetical Utility System
So What Have We Learned and Where Do We Go Next?
Overview of Utility Resource Planning
One More Assumption Regarding Our Hypothetical Utility System
Three Questions Utility Resource Planning Must Always Answer
Reliability Analysis: When Does a Utility Need to Add New Resources and What Is the Magnitude of Those Needed Resources?
Resource Option Evaluation and Selection: What Is the Best Resource Option to Select for a Given Utility?
Reliability Analyses for Our Utility System
When Does Our Utility System Need New Resources?
What Is the Magnitude of the New Resources Needed by Our Utility System?
What Have We Learned and What Is Next?
Resource Option Analyses for Our Utility System: Supply Options
Types of Supply Options Under Consideration
Preliminary Economic Screening Evaluation of the Supply Options
Creating the Competing "Supply Only" Resource Plans
Final (or System) Economic Evaluation of Supply Options
Resource Option Analyses for Our Utility System: DSM Options
Types of DSM Resource Options Under Consideration
Preliminary Economic Screening Evaluation of DSM Options: Understanding the Cost-Effectiveness Screening Tests
Preliminary Economic Screening Analyses of DSM Options: Results
Creating the Competing "With DSM" Resource Plans
Final (or System) Economic Analysis of DSM Options
Final Resource Option Analyses for Our Utility System
Economic Comparison of the Resource Plans
Non-Economic Analyses of the Resource Plans
Summary of Results from the Resource Option Analyses for Our Utility System
Are We Done Yet? Other Factors That Can (and Will) Complicate Resource Planning Analyses
Constraints on Solutions: Six Examples
Examples of "Absolute" Constraints
Examples of Legislative/Regulatory-Imposed Constraints
Examples of Utility-Imposed Constraints
What Are the Impacts of Addressing These Constraints?
Final Thoughts (Including Some Opinions)
A Summary of the Key Points We Have Learned About Utility Systems in General
A Summary of the Key Lessons We Have Learned Regarding Utility Resource Planning
A Few Opinions on Various Topics
What Lies Ahead for Electric Utilities and Utility Resource Planning?
Appendix A: Fundamental Principles of Electric Utility Resource Planning
Appendix B: Glossary of Terms
Appendix C: Mini-Lesson #1— Concepts of Revenue Requirements, Present Valuing of Costs and Discount Rates, Cumulative Present Value of Revenue Requirements, and Levelized Costs
Appendix D: Mini-Lesson #2— Further Discussion of the Limitations of a Screening Curve Analytic Approach
Appendix E: Mini-Lesson #3— Further Discussion of the RIM and TRC Preliminary Cost-Effectiveness Screening Tests for DSM
Appendix F: Mini-Lesson #4— How Can a Resource Option Result in Lower Costs, but Increase Electric Rates?
Appendix G: Mini-Lesson #5— How Can a Resource Option That Produces Emissions Lower a Utility’s Total System Emissions? ("The Taxi Cab Example")
Biography
Dr. Steven Sim has worked in the field of energy analysis since the mid-1970s. After graduating from the University of Miami, Florida, with bachelor’s and master’s degrees in mathematics in 1973 and 1975, respectively, he earned a doctorate in environmental science and engineering from the University of California at Los Angeles (UCLA) in 1979, with an emphasis on energy. That year, Dr. Sim joined Florida Power & Light Company (FPL), a subsidiary of NextEra Energy, Inc. and one of the largest electric utilities in the United States. Since then, he has conducted, supervised, and/or collaborated on thousands of analyses designed to examine how FPL can best serve its customers given changing circumstances, laws, and regulations.
