USING THE NEW ENGLAND ELECTRIC SYSTEM LEAST COST PLANNING MODEL FOR PLANNING AND EVALUATING CONSERVATION AND LOAD MANAGEMENT PROGRAMS

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USING THE NEW ENGLAND ELECTRIC SYSTEM LEAST COST PLANNING MODEL FOR PLANNING AND EVALUATING CONSERVATION AND LOAD MANAGEMENT PROGRAMS Elizabeth Hicks New England Power Service Company In 1985, the New England Electric System (NEES) developed a least cast planning model to support its balanced planning efforts. This PC based model is used by NEES to evaluate demand and supply options on an equal basis. The model is used to develop NEES's long range plan to meet its forecasted load growth. This paper will: 1) present an overview of NEES, ) briefly describe the NEES least cast planning model, ) describe the balanced process at NEES, 4) illustrate how the model is used in planning for new demand side programs, and 5) demonstrate how the model is used to evaluate existing demand side programs. OVERVIEW OF THE NEW ENGLAND ELECTRIC SYSTEM NEES has a holding company structure. It has retail companies serving about one-third of Massachusetts, almost three-quarters of Rhode Island, and a few towns in New Hampshire. The system has a peak demand of over 9 HW, 19 billion kwh in annual sales, and 1. million customers. The distribution of sales is: residential (8%), commercial (5%) and industrial (6%). Growth in sales has been over 5% on average for the past 4 years. OVERVIEW OF THE LEAST COST MODEL The NEES least cost model is easy to use and is us ed throughout the company. Major inputs to the model include economic assumptions, a long term forecast of energy and demand, marginal costs of energy and capacity, as weil as specific project information. The types of projects included in the model are conservation, load management, unit life extension, utility generation, and alternative energy contracts. Project specific information includes the costs in each year of the project, annual HW benefits of the project, escalators and other economic assumptions, and load duration curve impacts. The model computes the revenue requirements for each project on an annual and net present worth basis. The benefit of each project, whether supply or demand side, is computed identically --- a kwh is valued at the marginal energy cost and a kwat the value of deferring the construction of a gas turbine for one year. 8.97

The user can select the dispatch interval used in the model as weil as how to value the differences between summer and winter capacity. Af ter this is selected the model calculates the costs and benefits of each project. The user can rank the project uuder a number of different criteria including total cost/benefit, $/mw, mwhs, or a combination ranking. The users of the model use these rankings as weil as judgement and scenario analysis to develop a least cost plan. The model has major outputs: a production costing run, revenue requirements by project, and contribution by type of capacity to a given plan. BALANCED PLANNING AT NEES Balanced planning at NEES is an approach to evaluating the portfolio of options available to NEES to economically and reliably serve future customer requirements. Projects of all types including supply side options such as new generation and alternative energy are compared to demand side options on a consistent economic basis. This process has four phases. The first phase is the program analysis phase. In this phase an interdisciplinary group of personnel at NEES work together. The group includes representatives from demand planning, economic planning, power supply, engineering, and alternate energy. This group is responsible for developing the individual projects and developing an initial plan. This group uses the least cost model to screen individual and groups of projects. The next phase in the planning process is to use the initial least cost plan in a series of scenario analysis. This phase began by identifying the variables that influence planning at NEES. The variables identified included: load growth, fuel prices, regulatory conditions at a FERC level and at a state level, and local economic conditions. From this range of variables a number of plausible scenarios are developed. In NEES' most recent long range plan, 15 scenarios were developed in all. These scenarios were examined in detail and it was determined that several of the scenarios had similar outcomes. Thus the number of scenarios was narrowed to six. The scenarios for the most recent plan are: Base Case (.4 % annual growth before demand programs) High Growth (continued high economic growth in the region) Capacity Constraints/Slow Economy (the economy slows, some planned capacity is lost) C&LM takes off (accelerated demand-side activity) Oil interruption (high fuel prices leading to high electric prices) Industrial Bypass (deregulation of the electric utility industry) The range in load growth for these 6 scenarios is presented in Figure 1. The related capacity requirements range from 4 MW to 1 MW.

The third phase of the NEES planning process is probability analysis. The purpose of this phase is to quantify uncertainties that affect plans and provides an estimate of how certain a given supply plan will actually meet future needs. In this phase, the most uncertain assumptions of possible supply plans are identified by the group working on probability analysis. The most uncertain assumptions are: load growth, alternative energy development, success of demand side programs, availability of purchased power and utility generation. Experienced NEES personnel assign probabilities to each of these variables. The resuit is a plan that meets the Company's capability responsibility over the next ten years. The final phase in the balanced planning process is to examine the financial impact of the plan. The cost impact on the customers as weil as the financial impact on the shareholders is examined. The results of all phases of the plan are then used by the planning team to create a final, balanced, least cost plan for NEES. The resultant plan contains a balanced mix of resources. This is presented graphically in Figure. The mix includes demand-side programs, alternate energy, purchased power, unit life extensions, and utility generation. Unit life extension if expected to contribute over 6 HW of needed capacity the year 7. Conservation and load management is expected to supply about 5 percent of incremental needs by 7. PLANNING NEW DEMAND-SIDE PROGRAMS Previous sections of this paper have briefly described the NEES least cost model and the balanced planning process at NEES. The remaining sections of this paper will describe in more detail the planning and evaluation of demand-side programs at NEES. Ideas for new demand-side programs at NEES come from a variety of sources. Results of pilot programs, research on new technologies, end use data, regulatory input, and results of programs at other utilities are used as inputs into this process. Teams of employees are formed from a number of organizational functions to develop ideas for new programs. The teams develop possible program designs and try to identify program barriers. Program concepts that look promising are developed further and are ultimately included in the balanced planning process. Before a demand-side program is included in the least cost model, a number of assumptions about the program must be developed. Information is required on the demand and energy impacts, expected market participation, life of the program impacts, and expected program costs. There are uncertainties associated with each of these assumptions, particularly expected market penetration. Some technologies, such as lighting replacement, have reasonably certain engineering savings associated with their implementation. For example, the associated savings of replacing a 4 watt fluorescent tube with a watt tube is a savings of 8 watt. In the case of a water heater wrap, where the 8.99.' '. "

usage depends on the number of people in the household, income and a whole host of socioeconomic variables as weil as the efficiency of the water heater, the estimate of savings is more difficult. Sensitivity analysis of each of the assumptions is done by the program planners. Usually assumptions are varied by 1-4 percent to evaluate how sensitive the cost effectiveness of the program is to the assumptions. A consensus on the assumptions is developed by the program planners. These consensus assumptions are then used in the program analysis phase where demand-side programs are compared to supply options. EVALUATING DEMAND-SIDE PROGRAMS There is a lot of uncertainty associated with demand-side programs. For this reason, demand-side programs are systematically evaluated at NEES. Not only are the energy and demand impacts quantified, but market penetration and customer acceptance are also assessed. Quite of ten, the results from the evaluation of a demnad-side program are significantly different that those us ed in the planning process. The results of the evaluation are then fedback into the next round of demand-side planning. Recent examples include a refrigerator rebate program (actual savings were 8 kwh/year, initial savings estimates were kwh) () and a lighting rebate (actual savings were 6% of total customer usage, initial savings estimates were 14 % of usage). Once actual costs and energy and peak savings are calculated, the same least cost model is used to to calculate a cost/benefit ratio. Actual program results are compared to each other and the other resource options. The long range plans are adjusted to these changes if necessary. CONCLUSIONS The NEES balanced planning process is one that compares supply and demand side options on a consistent basis to meet long term capacity needs. The process is one that considers a wide range of scenarios. The resuit is a long range capacity plan that is both flexible and meets NEES's capacity needs. A critical piece of this planning process is the design of new demand side programs. An in-house PC model is used to assist in the design of new demand side programs. This model is also used to evaluate demand side programs. REFERENCES (1) LowelI, J. and Others, Balanced Planning Guideline Report, New England Power Service Company, December, 1986 () New England Electric System, Evaluation Report on Massachusetts Electric Company's Enterprise Plan, Executive Summary, March, 1988. 8.1

FIGURE 1 Required Capacity 1 High Growth HICKS. 9 8 Base Case 7... Capacity Constraints! 6 Slow Economy " c ;s: ro C&LM Takes Off ~ 5 Oil Interruption.c I- 4 Industrial Bypass --- 1 1988 6 FIGURE Recommended Plan - Estimated Mix... " C ro ::J.c ---- 1 9 8 7 6 5 4 1 1988 1991 1994 1997 6 8.11 Contribution in 7 89 MW 1% 975 MW 4% 1 MW 5% 61 MW