Exploring the relationship between planning and procurement in Western U.S. electric utilities

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Integrated resource planning (IRP) is an important regulatory process used in many U.S. states to formulate and evaluate least-cost and risk-assessed portfolios to meet future load requirements for electric utilities. In principle, effective implementation of IRP seeks to assure regulators and the public that utility investment decisions, given uncertainty, are as cost-effective as possible. However, to date, there is no empirical assessment on the effectiveness of IRP implementation. In this analysis, we compare planning, procurement processes and actual decisions for a sample of twelve load serving entities (LSEs) across the Western U. S. from 2003-2014. The 2008/2009 recession provides a unique “stress test” to the planning process and offers an excellent opportunity to trace how procurement decisions responded to this largely unforeseen event. In aggregate, there is a general alignment between planned and procured supply-side capacity.  However, there are significant differences in the choice of supply-side resources and type of ownership for individual LSEs. We develop case studies for three LSEs and find that subsequent plans differ significantly due to changes in the planning environment and that procurement decisions in some cases are impacted by factors that are not accounted for in the planning process. Our results reveal that a limited amount of information produced during the long-term planning process (e.g., forecasts, methods, and least cost/risk portfolios) are ultimately used during the procurement process, and that the latter process relies extensively on the most recent information available for decision making. These findings suggest that states' IRP rules and regulations mandating long-term planning horizons with the same analytical complexity throughout the planning period may not create useful information for the procurement process. The social value of a long-term planning process that departs from procurement and the balance between transparency and complexity of the planning and procurement processes is an open question.

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A journal article published in 2019 in Energy can be found here.


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