Realizing the Reliability and Resource Adequacy Benefits ... · The Resource Planner’s Problem...
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Realizing the Reliability and Resource Adequacy Benefits of Energy Efficiency in Power Planning Tom Eckman Manager, Conservation Resources Northwest Power and Conservation Council IEA-NRCan-CEA-CGA Roundtable on Multiple Benefits of Energy Efficiency for Energy Providers and Consumers, October 15-16 , 2013 Ottawa, Canada
Transcript of Realizing the Reliability and Resource Adequacy Benefits ... · The Resource Planner’s Problem...
Realizing the Reliability and Resource Adequacy Benefits of Energy Efficiency in Power Planning
Tom Eckman Manager, Conservation Resources
Northwest Power and Conservation Council
IEA-NRCan-CEA-CGA Roundtable on Multiple Benefits of Energy Efficiency for Energy Providers and Consumers,
October 15-16 , 2013 Ottawa, Canada
The Resource Planner’s Problem
Don’t have too many resources
Don’t have too few resources
Have “just the right amount” of resources
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As A Plan’s Resource Mix Changes
So Does It’s Cost and Risk
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Market Purchases
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Increasing Reserve Margin
Exposure to Market Volatility
Exposure to Load Volatility
Incr
easi
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ost
slide 4
Decreasing Firm Contracts/Resources
Increases Market Risk…
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Exposure to Load Volatility
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Increasing Firm Contracts/Resources
Increases Load Volatility Risk
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Resources Loads
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Increasing Reserve Margin
Exposure to Market Volatility
Exposure to Load Volatility
Incr
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slide 6
Energy Efficiency Is an Inexpensive Source of
Reserve Margin Which Reduces Market Exposure Risk & May Moderate
Wholesale Price Swings
Efficiency’s value stems
from “being
there” when a
shortage hits (high prices)
Higher levels of
efficiency (lower demands)
provide price
moderation
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Cumulative Efficiency - w/o Risk Premium
Cumulative Efficiency - w/ Risk Premium
Wholesale Market Price w/o Risk Premium ($/MWH)
Wholesale Market Price w/ Risk Premium ($/MWH)
slide 7
Why Is EE A Lower Risk Resource Option?
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Capacity (MW-year)
Coal
Energy Efficiency
Natural Gas
Renewable Resources
Nuclear
Generic coal, gas and nuclear units
are shown at typical project sizes -
more units could be built at
comparable cost.
Reason 1: EE is the Lowest Cost and Lowest Cost Risk Resource
Why Is EE A Lower Cost Way of Providing Reserves? Reason 2: EE Has A Non-Linear Supply Curve
EE Supply Curve Exhibits “Diminishing Returns” Acquiring EE At A Premium over Short Term Market Prices
– Builds more EE when market prices are low – Does not overbuild EE when market prices are high
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Energy Efficiency “Supply Curve”
Why Is EE A Lower Cost Way of Providing Reserves? Reason 3: EE Has Value Even In Low Market Price
Conditions
$Net Benefit per $Expense
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Ratio ($Net Benefit\$Expense)
Fre
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SCCT discretionary conservation lost opportunity conservation
Benefits/Cost = 1.0
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A Bit More Explanation . . .
Operate under circumstances of relatively lower electricity market prices and volatility – This is a direct consequence of having the additional
resources that give us protection against uncertainty (i.e., “we are never short”)
Do not pay for themselves! – If we want to reduce risk, we have to pay the
insurance premium of extra capacity that may not be used frequently enough to cover its costs.
SCCT and Energy Efficiency Resources Serving As Reserves:
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Take Home
The quality of reserves provided by EE is superior to conventional resources, because: – EE has value under low market prices – EE is not subject to forced outages – EE is not subject to fuel price risk – EE is not subject to carbon control risk
Implication - For low-risk plans, the cost-effectiveness limit for energy efficiency resources is higher than long-term view of the average wholesale market price for electricity
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Leveliz
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(2006$/M
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Achievable Potential (GWH/yr)
Setting A Cost-Effectiveness Limit Above Short-Term
Market Prices, Acquires More Efficiency (Increases
Reserves) and Reduces Both System Cost and Risk
Long-Term Equilibrium Market Price
“Risk Premium” + Long-Term Equilibrium Market Price Sets Cost-Effectiveness Limit for Energy Efficiency
