Managing Expected Load Growth: Adopting A New 'Lens' for Resource Planning Methodologies

In an era of oversubscribed interconnection queues, gridlocked transmission, and increasingly complex load modelling, the electric industry will have to adopt a new lens to meet the ever-growing demand of a grid increasingly fueled by clean energy. At the Ascend Summit 2023, Ascend Analytics CEO and Co-Founder Dr. Gary Dorris and fellow keynote panelists Mark Gabriel, CEO of United Power, Alice Jackson, Senior Vice President at Xcel Energy, and Eric Blank, Chair of the Colorado Public Utilities Commission, offered differing views and pathways forward on how to meet demand and address the challenges of centralized procurement across the country.

Key Takeaways

• Officials and decision makers at all levels recognize the critical need for bringing new generation and transmission capacity online, but face significant challenges related to cost.
• The expansion of centralized markets offers a partial solution for finding economically optimal ways to address generation and transmission needs.
• Existing protocols and planning methodologies do not provide an adequate means of meeting what could be a moving peak demand target.
• A more granular approach to resource planning will provide critical insights into resource value.

Expected Load Growth: 'Perhaps More Than We Ever Conceived'

Expectations of load growth differed among stakeholders but fell broadly within two to three times today’s levels by 2050 nationwide. Dr Dorris stated that the 2:1 ratio of expected load growth to economic growth is the highest observed since the 1960’s, and said it represented, “Much more than we’re used to, and perhaps more than we ever conceived.” Mr. Gabriel explained how United, a cooperative based on the front range of the Colorado Rockies, expects its load to more than double during the coming decade, owing to an expanding industrial load and increased electrification. Ms. Jackson echoed Mr. Gabriel’s sentiment, noting Xcel experience with increasing energy and capacity needs across its eight-state footprint.

Adding a different dimension to the discussion, Mr. Blank contextualized the scale of the investment needed to meet Colorado’s net zero target; he explained that, during the past 80 years, Colorado invested $11billion in its grid, net of depreciation. To meet its net zero target over the next 25 years, Colorado will need to invest $25 billion.

Bringing New Generation Online: Transmission As The Last Resort

Officials and decision makers at all levels, from FERC down to small cooperatives, recognize the critical need for bringing new generation and transmission capacity online. While developers have heeded the call for new capacity, as evidenced by surging interconnection queue volumes, the demand for interconnection far outstrips the available supply. Ms. Jackson noted one example that highlighted the severity of oversubscribed queues: a 2023 Request for Proposal in SPP only allowed resources that entered the interconnection queue in 2016 to bid in.

The challenge in bringing new resources and transmission online boils down to costs. Mr. Blank noted how the Open Access Transmission Tariff model worked well for decades; however, decision makers now lack an approach to allocate these rights under conditions of scarcity. As a result, developers have been left with highly uncertain transmission upgrade costs that can sink projects. He explained how FERC’s focus on speculative queue projects is misplaced, stating, “All projects are viable, but there needs to be an auction of bidding mechanism that can help throttle applications and bring capacity online where it’s needed most." Ms. Jackson noted the inadequacy of current models in valuing the incremental cost of transmission, highlighting how industry-standard production cost models exclude these incremental costs.

The expansion of centralized markets, notably through CAISO’s Extended-Day-Ahead Market (EDAM) and SPP’s Markets+, offers a partial solution for regulators in addressing these needs, while presenting new opportunities for smaller entities. For Mr. Blank, tasked with helping Colorado move to a more centralized market solution by 2030, Markets+ day-ahead real-time markets offers the ability to realize savings for consumers without having to relinquish full control over transmission. Mr. Blank noted how under Colorado’s current procurement approach, the state can bring new transmission online in less than five years. For Mr. Gabriel, Markets+ could not come fast enough, both from a savings perspective and a procurement perspective. He cited FERC Order2222, which would allow United Power to bid into a centralized market as a Distribution System Operator (DSO) and allow them to buy and sell power across the US, as of particular interest. Mr. Blank sees transmission expansion as the last resort, especially when considering the evolution of the downstream portion of the grid.

Getting More Granular with Energy Resource Planning

In discussing these challenges, the panel also recognized that existing protocols and planning methodologies do not provide an adequate means for meeting what could be a moving peak demand target under both a centralized and decentralized option. Ms. Jackson quipped that, “Every feeder is a fingerprint,” adding that changing dynamics at the edge of the grid make load predictions very difficult. Mr. Gabriel of United spoke to this risk, saying that if one of their major industrial producers elects to construct its own distributed generation system, it could pull a major industrial load off their distribution grid and jeopardize major capital investments in generation and transmission.

According to Dr. Dorris, the scope of solutions for addressing these challenges derives from the lens through which we view them, conceptualized in what he called “model-limited choice.” At the centralized level, Dr. Dorris explained how conventional resource planning methodologies would undervalue storage considering only its hourly attributes. Moving to the sub-hourly level, storage can deliver more value than a gas asset, and does not even make mention of its environmental attributes in avoided emissions. Mr. Blank reinforced this idea, stating that existing resource procurement planning was rendered inadequate after Winter Storm Uri in 2021, which demonstrated the folly of planning around a handful of hours each year.

Mr. Gabriel’s prefers a more flexible, responsive, and decentralized solution to meeting grid and procurement needs. In explaining how United Power has 195 days to procure generation capacity before leaving Tri-State Generation (its current generation provider), Mr. Gabriel discussed using a “hyper localized” approach that consists of bringing distributed storage, solar, and DER (Distributed Energy Resource) programs online to help alleviate the problem. He anticipates that storage will help meet at least 10-15% of his customers’ peak load.

Regardless of the solution, in the era of over-subscribed interconnection queues, gridlocked transmission, and increasingly complex load modelling, the electric industry will have to adopt anew lens to meet the ever-growing demand of a grid increasingly fueled by clean energy.