PacifiCorp 2007 Integrated Resource Plan (May 30, 2007)

PacifiCorp – 2007 IRPChapter 2 – IRP Components, Planning Principles,Objectives, and ApproachA key analytical objective for this IRP was to treat all resource options on a comparable basiswhen developing alternative portfolios. To that end, PacifiCorp added a resource expansion optimizationtool (the Capacity Expansion Module, or CEM) into its portfolio modeling framework.This model performs automated economic screening of resources and determines the optimalresource expansion plan based on planning scenarios. This tool enabled thermal generation,renewable generation, market purchases, demand-side management, and transmission to competeagainst each other on the basis of their impact on Present Value of Revenue Requirements(PVRR), the key measure of a portfolio’s performance.Important caveats associated with the CEM are that it does not capture stochastic risks in its optimizationalgorithm, and that it is designed as a high-level screening tool. In contrast to thePlanning and Risk Module (PaR)—PacifiCorp’s detailed production costing and market simulationmodel, the CEM cannot incorporate stochastic variables in its solution algorithm and is insteadmeant to address high-level system operational details. (For example, unlike the PaR, itdoes not capture hourly chronological commitment constraints). Consequently, a modeling objectivefor this IRP was to exploit the complementary but different capabilities of the CEM andPaR. Chapter 6 describes the roles that each of these models played throughout PacifiCorp’s resourceportfolio analysis.An additional analytical and modeling objective for this IRP was to enhance uncertainty and riskanalysis. PacifiCorp accomplished this objective by making the following data and modelingmethodology changes, which are detailed later in this report.● Incorporated stochastic simulation of candidate portfolios at various CO 2 adder levels, incontrast to running deterministic simulations with CO 2 adder levels independently as wasdone for the 2004 IRP.● Introduced stochastic analysis of front office transactions (market purchases), which includescomparing stochastic risk measures of a portfolio with front office transaction resourcesagainst a portfolio in which these resources are replaced with an asset-based coal plant.● Development of low and high capital cost estimates for supply-side resources in recognitionof increased construction cost volatility trends.● Extensive expansion of the number of input sensitivity studies relative to the 2004 IRP, including36 studies using the CEM and 27 stochastic studies using PaR.● Incorporated probability-weighted forward gas price curves into the IRP models; the curvesare based on a weighted average of PIRA Energy’s low, medium, and high gas price cases.A final analytical objective for this IRP was to determine an appropriate level of reliance onmarket purchases given their flexibility benefits and risks. As opposed to the 2004 IRP, wheremarket purchases were treated as a fixed resource, for this IRP they were handled as a competingresource option with associated prices modeled as stochastic variables to capture price risk.15