Effects of utility demand-side management programs on uncertainty

Electric utilities face a variety of uncertainties that complicate their long-term resource planning. These uncertainties include future economic and load growths, fuel prices, environmental and economic regulations, performance of existing power plants, cost and availability of purchased power, and the costs and performance of new demand and supply resources. As utilities increasingly turn to demand-side management (DSM) programs to provide resources, it becomes more important to analyze the interactions between these programs and the uncertainties facing utilities. This paper uses a dynamic planning model to quantify the uncertainty effects of supply-only vs DSM + supply resource portfolios. The analysis considers four sets of uncertainties: economic growth, fuel prices, the costs to build new power plants, and the costs to operate DSM programs. The two types of portfolios are tested against these four sets of uncertainties for the period 1990 to 2010. Sensitivity, scenario, and worst-case analysis methods are used. The sensitivity analyses show that the DSM + supply resource portfolio is less sensitive to unanticipated changes in economic growth, fuel prices, and power-plant construction costs than is the supply-only portfolio. The supply-only resource mix is better only with respect to uncertainties about the costs of DSM programs. The base-case analysis shows that including DSM programs in the utility's resource portfolio reduces the net present value of revenue requirements (NPV-RR) by 490 million dollars. The scenario-analysis results show an additional 30 million dollars (6%) in benefits associated with reduction in these uncertainties. In the worst-case analysis, the DSM + supply portfolio again reduces the cost penalty associated with guessing wrong for both cases, when the utility plans for high needs and learns it has low needs and vice versa. 20 refs