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ABOUT THE BOOK

In 2012, using easy-to-understand text and examples, the first edition of this book explained how electric utilities “work,” and how they plan (or should plan) for the future, by:

• "Creating" a hypothetical electric utility
• Explaining how (and why) this utility will operate its system of generating units
• Guiding readers through a planning analysis for the utility, examining various resource options (solar, new gas-fueled generation, and conservation)
• Introducing four Fundamental Principles of Resource Planning that should guide utilities as they plan for the future

The first edition material, with significant updates, now appears as Part I of the second edition of this book. Part II of this book then presents six all-new chapters that address the challenges (and opportunities) of moving toward a zero-carbon future. Using the same hypothetical utility, with its new goal to utilize solar and batteries to serve 100% of its customers’ energy with zero carbon emissions by a future “target”year, Part II of this book addresses many subjects, including:

• The enormous amount of MW of new solar and batteries the utility will need to add
• Why certain characteristics of new solar and battery additions change as increasing amounts of these resources are added
• In the years prior to achieving its zero-carbon goal, how the hourly operation of the utility’s existing fossil-fueled generators, plus the new solar, will change (and why the stability of the transmission grid will be challenged)

With this second edition, author Dr. Steven Sim again applies the experience and insights he gained from more than 30 years of resource planning for Florida Power & Light (FPL). As one of the largest electric utilities in the United States, FPL has faced a multitude of resource planning challenges, including how to get to zero carbon. During this time period, Dr. Sim performed and directed thousands of analyses designed to address these challenges. He also served as an expert witness in dozens of regulatory hearings, addressing both the economics of resource options and the non-economic impacts (air emissions, system reliability, fuel usage, etc.) associated with these options.

TABLE OF CONTENTS

Acknowledgements

Author

Part I: The Fundamentals of Electric Utility Resource Planning

1. Introduction

Why Write This Book?

Who Is This Book Written For?

An Overview of the Book’s 1st Edition (i.e., Part I of This Book)

An Overview of the Book’s 2nd Edition (i.e., Part II of This Book)

Are We Keeping It Simple?

A Few Words Regarding Assumptions Used in This Book

A Couple of Disclaimers

2. 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

Utility System Operation on the Summer Peak Day

Utility System Operation over the Course of a Year

So What Have We Learned and Where Do We Go Next?

　

3. 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?

Reserve Margin Perspective (Simple to Calculate)

Probabilistic Perspective (Not So Simple to Calculate)

Which Reliability Perspective is More Important?

Resource Option Evaluation and Selection: What Is the Best Resource

Option to Select for a Given Utility?

Two Basic Types of Resource Options: Supply and Demand Side

Management Options

Integrated Resource Planning (IRP)

Economic Evaluations

Preliminary Economic Screening Evaluation of Supply Options

Preliminary Economic Screening Evaluation of DSM Options

Final (or System) Economic Evaluations

Non-Economic Evaluations

Non-Economic Consideration Example (i): The Length of Time

It Takes Before a Resource Plan Becomes the Economic Choice

Non-Economic Consideration Example (ii): The Utility System’s

Fuel Usage Due to a Resource Plan

Non-Economic Consideration Example (iii): The Utility System’s

Air Emissions Due to a Resource Plan

 

4. 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?

 

5. Resource Option Analyses for Our Utility System: Supply Options

Types of Supply Options Under Consideration

Capital Costs: Rows (1) through (3)

Other Fixed Costs: Rows (4) through (7)

Operating Costs: Rows (8) through (16)

Preliminary Economic Screening Evaluation of the Supply Options

Creating the Competing "Supply Only" Resource Plans

Final (or System) Economic Evaluation of Supply Options

Overview

Total Cost Perspective (CPVRR) for the Supply Only Resource Plans

Electric Rate Perspective (Levelized System Average Electric Rate)

for the Supply Only Resource Plans

 

6. 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 Analyses of DSM Options

Overview

Results for the With DSM Resource Plan 1

Results for the With DSM Resource Plan 2

 

7. Final Resource Option Analyses for Our Utility System

Economic Comparison of the Resource Plans

Non-Economic Analyses of the Resource Plans

"Cross Over" Time to Being the Most Economic Resource Plan

System Fuel Use

System Air Emissions

Summary of Results from the Resource Option Analyses for Our Utility System

 

8. Are We Done Yet? Other Factors Than Can (and Will) Complicate

Resource Planning AnalysesConstraints on Solutions: Six Examples

Examples of "Absolute" Constraints

1. Siting/Geographic Constraints
2. Potential Tightening of Environmental Regulations

Examples of Legislative/Regulatory-Imposed Constraints

3. "Standards"/(Quotas) for Specific Types of Resource Options
4. Prohibition of Specific Resource Options

Examples of Utility-Imposed Constraints

5. System Reliability Constraints

The Voluntary Nature of DSM Options

6. Load Shape Constraint

What Are the Impacts of Addressing These Constraints?

Part II: Moving Towards Zero Carbon

1. An Overview of Part II

Introduction

A Different Approach is Taken in Part II

How Part II is Structured

2. Moving Towards Zero Carbon: How Many MW of New Resources Will Be Needed?

Introduction

The 1st Estimation Approach

The 2nd Estimation Approach

How Accurate Do We Believe the 2nd Estimation Approach Is?

A "What If" Analysis: How Many Additional New Resource MW Would be Needed if Our

Utility’s Nuclear Capability Was Not Available?

Summary: Key Takeaways Regarding the Magnitude of New Resource MW Needed to

Reach a Zero-Carbon Goal

3. Moving Towards Zero Carbon: Resource Planning Considerations for Solar (PV) Resources

Introduction

PV Installed Costs ($/kW): 2009 – 2022

Tax Credits for PV from the 2022 Inflation Reduction Act (IRA)

Impacts of PTC Over the 25-Year Analysis Period

What Do We Conclude From This Discussion of the 2022 IRA’s PTC Impact on Solar Resource Options?

A More Complete Look at the Firm Capacity Value Aspect of Solar

Firm Capacity Value of PV at Our Utility’s Winter Peak Hour

Summer Firm Capacity Values as Increasing Amounts of PV are Added in the Future

How Serious are the Challenges that Utility Resource Planners Will Face From These

Two PV Firm Capacity Value Characteristics?

System Reliability Analysis During the Transition Period

Summary: Key Takeaways for Resource Planning Regarding PV Resources

4. Moving Towards Zero Carbon: Resource Planning Considerations for Battery Storage Resources

Introduction

A Representative Projection of Battery Storage Installed Costs ($/kW): 2023 - 2030

Tax Credits from the 2022 Inflation Reduction Act (IRA)

A Graphical Look at the Firm Capacity Value Aspect of Battery Storage

A Better Method to Determine the Needed Duration of Battery Storage Options

The Relationship Between the Needed Duration of Battery Storage Options and the Cost

of Batteries

A Brief Look at Battery-and-PV Combinations in Regard to System Reliability

Summary: Key Takeaways for Resource Planning Regarding Battery Storage Resources

5. Moving Towards Zero Carbon: Ramifications for System Operations and Transmission Planning

Introduction

Solar Curtailment

Operation of Existing Conventional Generation with Ever-Increasing Amounts of PV

Invertor-Based Resources (IBRs) and System Stability

Summary: Key Takeaways Regarding System Operations, Transmission Planning, and Resource Planning

6. Final Thoughts (Including Some Opinions)

A Quick Look Back

Summary of the Key Points We Have Learned About Utility Systems in General

Summary of the Key Lessons We Have Learned Regarding Utility Resource Planning

Summary of the Key Lessons We Have Learned Regarding Moving Towards Zero Carbon

A Few Opinions on Various Topics

What Lies Ahead for Electric Utilities and Utility Resource Planning?

Closing Thoughts

Appendix A: Four 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 (CPVRR), 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?

Index