Robust resource adequacy planning in the face of coal retirements

Roger Lueken, Jay Apt and Fallaw Sowell

Energy Policy, 2016, vol. 88, issue C, 371-388

Abstract: We investigate the resource adequacy requirements of the PJM Interconnection, and the sensitivity of capacity procurement decisions to the choice of reliability metric used to measure resource adequacy. Assuming that plants fail independently, we find that PJM's 2010 reserve margin of 20.5% was sufficient to achieve the stated reliability standard of one loss of load event per ten years, with 0.012 expected loss of load events per year. PJM could reduce reserve margins to 13% and still achieve adequate levels of reliability as measured by the 2.4 Loss of Load Hours metric and the 0.001% Unserved Energy metric, which are used by other U.S. and international systems. A reserve margin of 13–15% would minimize long-run system costs. Reducing reserve margins from 20.5% to 13% in 2010 would have reduced PJM's capacity procurement by 11GW, the same amount of coal capacity that PJM has identified as at high risk of retirement. We also investigate the risk posed by correlated failures among generators, a risk traditionally not modeled by system planners. We illustrate that three types of correlated failures may increase outage risks: natural gas supply disruptions, reduced reliability among generators during winter months, and the simultaneous shutdown of multiple nuclear generators for regulatory reasons.

Keywords: Resource adequacy; Capacity planning; Risk; Statistical modeling; Market design (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:88:y:2016:i:c:p:371-388

DOI: 10.1016/j.enpol.2015.10.025

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