Utilities required to meet renewable portfolio standards must find a balance between the often conflicting demands of regulatory compliance, minimising costs to customers, increasing standards of reliability and maximising profits.
Utilities are under growing pressure from environmental regulation and public opinion to reduce their dependence on fossil fuels and help meet carbon emissions reduction targets. The strongest pressure often comes from state-level environmental regulation in the form of renewable portfolio standards, that generally require an ever-increasing percentage of future sales or generating capacity to come from renewable sources. As a result, utilities across the US must increase investment in their generation portfolios or negotiate additional renewable-energy contracts against a backdrop of financial and rate pressures.
When developing an efficient generation strategy, how can utilities maximise their chances of achieving a greater penetration of renewable energy, at lower cost but with larger profits? By identifying the needs and expectations of all stakeholders.
PA helps utilities achieve their green ambitions by providing comprehensive, long-term generation planning. In one recent engagement with Hawaiian Electric Company, PA analysed a broad range of renewable options and developed an approach that has universal applications for utilities facing similar challenges. During that engagement – one which developed a path for the utility towards a 100% renewable future – a long-term reduction of around 20% in the price of electricity was forecast and thought to be achievable at an estimated level of carbon intensity 60% lower than the current average for the US power industry.
PA’s approach identified three key steps that utilities must undertake to develop a truly comprehensive renewable resource strategy:
1. Agreeing on what’s truly important
Utilities must identify the key issues that are relevant to all stakeholders when planning for future generation. Identifying the concerns of wider stakeholders and facilitating the sharing of information among them will enable utilities and regulators to balance the competing priorities that influence resource strategy. With heightened public awareness of energy issues and increased expectations to reduce costs, taking a comprehensive view of key issues is essential in drafting a strategy that could achieve broader acceptance. This will help facilitate the development of metrics that will allow for the often competing demands of economics, reliability, environmental legislation and public acceptance to be isolated and options to be quantified against each.
2. Understanding the renewable opportunity
A ‘business as usual’ case serves as an essential control, allowing for the quantification of the relative costs and benefits of renewable options. Such a baseline must be representative of a utility’s existing generation portfolio over the next 20 or more years and demonstrative of a future in which higher renewable penetration is not actively sought. This will allow for evaluation of renewable resource options on an individual basis, contrasted against the baseline scenario. The results help identify the impacts and challenges associated with each renewable generation option and determine, through the use of production simulations and application of the metrics identified, how they perform against the things that are ‘truly important’.
3. Building a renewable energy case
Once the performance of individual renewable resource options is better understood, a renewable energy case should be developed to integrate the best options available and determine the portfolio impact of integrating multiple resources. By combining the strongest elements of the individual resource scenarios, a multi-dimensional strategy can be publicly communicated that sets out a comprehensive vision for the future that meets or exceeds environmental planning and policy goals, provides investment opportunities for the utility, and potentially reduces rates for customers.
To find out how our green business expertise can help your utility make the most from renewable energy, contact us now.