A utility investment plan is like a camel
How rethinking resource planning can help regulators avoid breaking the camel’s back.
Camels can carry an impressive 440 pounds, but even these powerful desert creatures have their limits. Despite their power, the proverbial last straw can break the camel’s back.
Utility plans have more to do with camels than most regulators realize. They carry a lot of weight—over the next three years, utilities serving at least 40 percent of total U.S. electricity sales and more than 90 million customers will file Integrated Resource Plans (IRPs). Energy companies typically recommend in their plans a portfolio of resources that they believe can meet the needs of the grid for the next 10-30 years in a way that is affordable, reliable and safe. Even when utilities and regulators are not bound by the final recommended portfolio, if conducted effectively, the IRP provides critical direction for the resource mix, a deeper understanding of the needs and aspirations of the households and communities the utility serves, and strategies for response to future opportunities and risks.
Today, resource planning is required to carry even more straw. IRPs are seen as an important place to integrate a growing set of policy goals ensuring that utilities can deliver carbon reduction, energy equity and economic development, in addition to reliability, affordability and safety.
But how much can we accumulate before the process breaks? Now is a critical time for regulators and utilities to consider how to modernize planning processes in a way that avoids breaking the camel’s back. The new RMI report, Rethinking resource planningoffers an overview of the state of planning today, highlights where leaders have implemented changes to continuously improve their processes, and challenges regulators and utilities to push the boundaries even further.
Planning for tomorrow’s network with yesterday’s plans
Electrical system planning has never been more complicated. Energy companies are simultaneously dealing with unprecedented weather events, retiring aging, high-emissions resources, and considering a wider range of resource options, including creative demand response solutions—while trying to ensure that electricity is reliable, affordable, and safe. In addition to these factors, many utilities and regulators are updating their processes to meet new goals such as energy equity, local economic development and emissions reductions.
To remain a powerful tool for making timely decisions in the face of this complexity, IRPs must maintain and continue to improve three main qualities:
- Trusted — The IRP should be transparent and well-vetted, involving stakeholders.
- Comprehensive — The IRP must accurately represent the costs, capabilities, system impacts, and resource values that may be available within the planning time horizon, and must consider transmission and distribution system actions as portfolio options.
- Aligned — It must be clear how the plan evaluates options for addressing traditional planning requirements such as reliability, affordability, and safety, as well as state and federal policies and client priorities such as reducing emissions and advancing environmental justice.
Learn from the leaders today
Utilities and regulators can learn from approaches that have been tested in other countries. A drawing of more than 50 examples documented in Rethinking resource planning, regulators, utilities, and stakeholders can quickly make changes that improve these three qualities of IRP. For example:
Trustee: In New Mexico, utilities must publish specific cost data in their resource plan, adding transparency needed to evaluate the plan. In Washington, utilities are required to document how they included input data or provide an explanation for why they did not include input data, giving stakeholders visibility into how their input data was used.
Comprehensive: In Indiana, utilities have updated their approaches to modeling demand-side resources in a way that is more consistent and comparable to supply-side resources. In Oregon, planning guidelines suggest that transmission should be considered as a resource option in utility planning.
Aligned: In California, utilities identify the disadvantaged communities they serve in their long-term plans to assess air quality and access to utility programs in those communities. In Colorado, utilities, in partnership with the state energy office, developed an approach to estimate emissions from each portfolio for planning and assessing compliance with the state’s greenhouse gas reduction goals.
Complex navigation without breaking the camel’s back
Implementing a number of these incremental changes to ensure that IRPs are reliable, comprehensive and consistent is fraught with risk, despite significant potential progress. Resource planning is intensive today – plans can take more than a year to develop and often require significant data, complex modelling, engagement of external stakeholders and coordination between multiple departments. Stacking upgrades can break the camel’s back.
Rethinking resource planning offers a structured set of questions for regulators to consider as they implement changes to improve planning without disrupting the process:
- Purpose: What are the goals for the electricity system in the context of broader policy goals, and how should plans be evaluated against those goals?
- Scope: What should be included in IRPs and what can be included in separate but coordinated processes?
- Roley: Who should be involved in the development of the IRP?
- Tools: How can we use analytical tools and engagement processes to best support planning outcomes?
Careful changes in these four areas can help IRPs thrive under the weight of new expectations. Rethinking resource planning is an invitation to regulators and utilities to use these questions, learn from the leaders, and share their results—all without breaking the camel’s back.