Berkeley Lab finds little connection between capacity planning and procurement decisions in Western U.S. electric utilities

June 22, 2017

We are pleased to announce the release of a new Berkeley Lab report, entitled "Exploring the relationship between planning and procurement in Western U.S. electric utilities."

Integrated resource planning (IRP) is an important regulatory process that, in principle, seeks to assure regulators, shareholders, and the public that utility investment decisions are least-cost and risk-assessed. However, to date, there have been no assessments of the effectiveness of IRP implementation. In this analysis, we compare planning and procurement decisions that occurred between 2003 and 2014 for a sample of utilities across the Western U.S.

Key findings from the report include:

  • In aggregate, planned and procured capacity levels were similar for the 12 load serving entities (LSEs) considered in this analysis.
  • However, the aggregate mix of procured resources exhibited greater reliance on natural gas-fired generation and less on coal-fired generation than originally planned. We find that the substitution from coal to natural gas-fired combined-cycle combustion turbines (CCCTs) was possibly driven by an anticipated reduction in natural gas prices starting around 2007.
  • In addition, we find that three times more wind capacity was procured compared to what was originally planned.
  • Examining planning and procurement by resource and by individual LSE, however, reveals a much wider variation that is not apparent from the aggregate analysis. Differences in levels of procurement were largely related to load growth, particularly from industrial customers, but also influenced by regional economic activity. Differences in resource mix largely arise from regulatory decisions related to renewable portfolio standards and demand side management targets, but also from relative fuel price differentials.
  • Most information produced in the planning phase is generally disconnected from the procurement phase.
  • Efforts to make IRP more complex as a response to technological and regulatory changes may not be warranted without assessing the overall value of long-term planning.

The report can be downloaded here or from https://emp.lbl.gov/publications.

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