Resource Adequacy

RA: Why and Who

Motivations to Assess Resource Adequacy

Resource adequacy studies explore risks at a point in the future. They are conducted by system planners and other stakeholders to inform decisions that influence supply resource availability and demand and in response to changes in the forecasted conditions that affect both. Given the impact these risks have on the reliability of the power system, resource adequacy is sometimes described as a pillar of reliability. They have also been used in traditional utility planning for decades to ensure investment in new resources, including transmission, would result in sufficient generation and transmission to serve demand over some defined future period. Utility planners continue to incorporate resource adequacy assessments to obtain planning reserve margins as a key input into long-range planning models and to assess resultant portfolios to ensure future reliability. 

Decisions that influence supply resource available and demand can occur at a range of lead times. This impacts the logical constraints and inputs into studies, the types of studies, and the decisions made because of resource adequacy studies. Examples of studies include:

  • Resource Investment: System adequacy assessment is needed to identify the need for generation investment for the future power system to meet minimum performance standards and to assess the outcome of investment planning decisions.

  • Resource Retirement: In advance of resources retiring or mothballing, adequacy studies are used to inform the system planner of the system risk associated with the unavailability of the resource.

  • Resource Outages: As part of the planned outage scheduling process resource adequacy studies support the decision to approve, deny or postpone an outage, based on the risk to the system during that period.

  • Economic Forecast Changes: Although certain developed economies can show some level of decoupling between economic indicators, such as the gross domestic product, and electricity consumption, changes in the economy remain nonetheless strongly correlated to energy and electricity consumption across the globe [1] . Accounting for a range of electricity demand trajectories, fully or partly arising from changes in the economy, is common in RA assessments. Although not directly in the RA scope, it should be noted that economic changes not only impact demand, but also the capacity to finance generation and interconnection construction and upgrades.

  • Capacity Markets: In systems with capacity markets or capacity remuneration mechanisms, resource adequacy studies are run to establish the requirement for capacity and individual resource type contributions.

  • Climate and Weather Changes: Changes in the weather have direct impacts on demand and generation, whether daily or seasonal or across multi-year periods. Although a range of possible weather events has always been considered in resource adequacy assessments, accounting climate change has not been present in past RA assessments. Adequacy studies are updated based on continuously evolving forecasts or in advance of extreme weather events.

  • Market, Policy, and Technology Changes: Market, policy, and technology cost changes may result in new generation, or load behavior, prompting the need for RA studies to re-assess future risk, based on differing assumed build outs. For instance, the large-scale rollout of flexible demand programs may encourage increased consideration of demand-side resources. Multiple market decisions can impact generator investment and operations on the supply side, including CO2 emission prices, energy trading structures, capacity markets, and ancillary service markets. Such structural changes can be analyzed with RA assessment, amongst others.

  • Inter-regional Changes: The interaction between two neighboring and interconnected power systems evolves over time. Neighboring systems with non-coincident peak net demand conditions may potentially support each other in times of stress. RA studies can be triggered when the network topology between each area changes, the market or scheduling processes to access capacity outside of each area are updated, or even when the adequacy risk profile or neighboring regions changes.

The diagram below describes the time frames applicable to these resource adequacy studies. 

RA Timelines

Who is responsible for assessing resource adequacy?

Resource adequacy assessments are conducted by many electricity companies for different purposes.

The broadest resource adequacy assessments assess multiple geographic areas and are used to understand trends and potential vulnerabilities. In North America, these studies are conducted by NERC, as required by section 39.11(b) of FERC’s regulations which states “The Electric Reliability Organization shall conduct assessments of the adequacy of the Bulk‐Power System in North America and report its findings to the Commission, the Secretary of Energy, each Regional Entity, and each Regional Advisory Body annually or more frequently if so ordered by the Commission.” This annual assessment, titled Long-Term Reliability Assessment, is developed in partnership with the regional entities and other assessment areas. In Europe, ENTSO-e is in charge of conducting the Pan-European Resource Adequacy Assessment.

Adequacy requirements and standards in America, however, is the jurisdiction of individual states. They normally originate in laws, regulations, or license agreements. State public utility commissions and other regulators may hold RA proceedings and approve requirements, standards, and the actions necessary to secure adequacy.

In turn, a variety of entities conduct adequacy assessments to assess adequacy, procure capacity and for contracting. In regions with centralized wholesale markets, they may be conducted by independent system operators (ISOs), transmission system operators (TSOs), regional security coordinators (in Europe), or regulators, irrespective of who may be responsible for ensuring adequacy. In other regions, utilities are directly responsible for assessing and ensuring adequate supply, using methods and criteria subject to approval by regulatory and other authorities. In the structured-market areas, there are three primary classifications of methods by which capacity is secured: 1) centralized capacity markets (e.g. PJM), 2) decentralized or regional capacity procurement (e.g. California) and 3) no explicit capacity markets (“Energy Only” markets such as in Texas).

Modern Resource Adequacy Assessment Methods for Long-Range Electric Power Systems Planning discusses the various responsible parties in the US, as seen in the following graphic.  

Parties responsible for assessing resource adequacy

The purpose of this site is to bring together information to help those trying to assess resource adequacy. It draws on a wide range of work that EPRI and the industry has conducted in response to the challenges arising as power systems evolve. We welcome your feedback and suggestions to make this website increasingly useful to support you and your decisions.

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