1FOR POWER SYSTEM REGULATORSINSIGHTS ON PLANNINGFOR POWER SYSTEM REGULATORSINSIGHTS ON PLANNING FOR POWER SYSTEM REGULATORS2018INSIGHTS ON PLANNING FOR POWER SYSTEM REGULATORS IRENA 2018IRENA HEADQUARTERSP.O. Box 236, Abu DhabiUnited Arab Emirateswww.irena.orgCopyright IRENA 2018 Unless otherwise stated, material in this publication may be freely used, shared, copied, reproduced, printed and/or stored, provided that appropriate acknowledgement is given of IRENA as the source and copyright holder. Material in this publication that is attributed to third parties may be subject to separate terms of use and restrictions, and appropriate permissions from these third parties may need to be secured before any use of such material.ISBN 978-92-9260-071-6 Citation IRENA 2018, IRENA 2018, Insights on planning for power system regulators, International Renewable Energy Agency, Abu Dhabi.ACKNOWLEDGEMENTSThis report benefited greatly from interviews with global experts in power system planning and finance. IRENA wishes to thank Mirlan Aldayarov World Bank, Phil Baker PEB Energy Consulting and Regulatory Assistance Project, Antonella Battaglini Renewables Grid Initiative, Tom Eckman Northwest Power and Conservation Council, retired, Liezl Harmse African Development Bank - AfDB, Sarah Hofmann Vermont Public Service Board, Fritz Kahrl Energy and Environmental Economics – E3, Kevin Leask German development bank –KfW, Carl Linvill Regulatory Assistance Project, Liz Muguti African Development Bank – AfDB for generously giving their time to this project, and Lars Dittmar Technische Universitaet Berlin – Berlin Technical University for conducting some of the interviews. IRENA colleagues Asami Miketa, Paul Komor, and Alvaro Lopez-Pena all gave valuable comments. Neil MacDonald IRENA provided extraordinary support in the publication of this report. Sakari Oksanen erly IRENA also gave an interview and provided insights. Contributing authors Dennis Volk IRENA, John Shenot Regulatory Assistance Project and Dominic Milazi Council for Scientific and Industrial Research – South Africa For further ination or to provide feedback publicationsirena.orgDISCLAIMERThis publication and the material herein are provided “as is”. All reasonable precautions have been taken by IRENA to verify the reliability of the material in this publication. However, neither IRENA nor any of its officials, agents, data or other third-party content providers provides a warranty of any kind, either expressed or implied, and they accept no responsibility or liability for any consequence of use of the publication or material herein. The ination contained herein does not necessarily represent the views of the Members of IRENA. The mention of specific companies or certain projects or products does not imply that they are endorsed or recommended by IRENA in preference to others of a similar nature that are not mentioned. The designations employed and the presentation of material herein do not imply the expression of any opinion on the part of IRENA concerning the legal status of any region, country, territory, city or area or of its authorities, or concerning the delimitation of frontiers or boundaries..Photographs are from Shutterstock unless otherwise indicated.About IRENA The International Renewable Energy Agency IRENA is an intergovernmental organisation that supports countries in their transition to a sustainable energy future and serves as the principal plat for international co-operation, a centre of excellence, and a repository of policy, technology, resource and financial knowledge on renewable energy. IRENA promotes the widespread adoption and sustainable use of all s of renewable energy, including bioenergy, geothermal, hydropower, ocean, solar and wind energy, in the pursuit of sustainable development, energy access, energy security and low-carbon economic growth and prosperity. www.irena.org 3cutive summary ...................................................9From planning to implementation ...................................................11Introduction ........................................................ 121.1 Background and context .......................................................131.2 Objectives ...................................................................141.3 Key concepts and terms .......................................................141.4 ology ................................................................15Overview of planning processes .......................................162.1 The benefits of planning .......................................................162.2 Processes for integrated resource planning IRP ................................172.3 Relevance of IRP with different market structures ................................192.4 Institutional capacity for planning ..............................................212.5 Regional planning aspects ....................................................21Insights for regulatory oversight .......................................223.1 Roles and responsibilities for regulators .........................................223.2 Legal foundations for effective planning and regulatory oversight .................233.3 Ensuring transparency and appropriate stakeholder involvement ..................253.4 Regulatory review of proposed/draft plans .....................................263.5 Status/treatment of the final plan ..............................................273.6 Capacity building for regulators ...............................................273.7 Avoiding “regulatory capture” and political interference ..........................283.8 Regional considerations for legal foundations and regulatory oversight .............293.9 Legal foundations for regional planning. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 303.10 Effective regional regulatory oversight .........................................31123CONTENTS4INSIGHTS ON PLANNINGBest practices for integrated resource plans ............................334.1 Overarching principles ........................................................334.2 Insights on specific planning elements ..........................................35Planning entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35Planning objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36Coverage and geographical scale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37Time horizon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38Updating frequency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38Stakeholders and public engagement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40Open access Data, s and models used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42Load forecasts, scenario development, and establishing need . . . . . . . . . . . . . . . . . . . . . .44Resources included . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46Resource characteristics and assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47Option and resource portfolio identification and selection . . . . . . . . . . . . . . . . . . . . . . . . . .48Planning with uncertainty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49 Insights on plan implementation .......................................525.1 Institutional linkages ..........................................................525.2 Market linkages ..............................................................535.3 Stakeholder and government engagement ......................................545.4 Regulatory linkages ..........................................................545.5 Action plans embedding linkages in the plan ...................................545645FOR POWER SYSTEM REGULATORS67Insights for regional power system planning ............................576.1 Overarching principles ........................................................586.2 Overview of the planning process ..............................................596.3 Insights on specific planning elements ......................................... 60Planning entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60Planning objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61Coverage and geographical scale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63Time horizon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64Updating frequency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64Stakeholders and public engagement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64Open access Data, s, and models used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64Load forecasts, scenario development, and establishing need . . . . . . . . . . . . . . . . . . . . . .65Resources included . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66Resource characteristics and assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67Option and resource portfolio identification and selection . . . . . . . . . . . . . . . . . . . . . . . . . .67Planning with uncertainty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68Cost allocation and recovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68Scaling up renewables ................................................70Glossary ............................................................74References ..........................................................76Experts interviewed for this report .....................................786INSIGHTS ON PLANNINGFigure 1 Key elements of IRP ..................... 10Figure 2 Key actions to empower regulators .........11Figure 3 Key elements to enable power system development and use .....................14Figure 4 States across the US with IRP or similar processes ......................18Figure 5 The process behind integrated resource plans ..........................34Figure 6 Global range of electricity generation costs for wind and solar projects ...........39Figure 7 PJM peak load forecasts excluding territory expansions ......................41Figure 8 Technical achievable conservation potential in 2035 by levelised cost. . . . . . . . . 45Figure 9 ENTSO-E’s process for developing the Ten-Year Network Development Plan ......60Figure 10 Renewable energy development zones REDZ and power corridors for South Africa .........................73Box 1 What is IRP .................................9Box 2 Examples of IRP in different jurisdictions .......19Box 3 Approaches to infrastructure expansion Regulated resource investments and competitive wholesale markets ...........20Box 4 Legislative background to power system planning Examples from two US jurisdictions ...........24Box 5 Resource adequacy as planning objective .....36Box 6 Stakeholder and public engagement in IRP development The US Pacific Northwest ....................42Box 7 Featured examples of regional power system planning ......................58Box 8 Transmission reliability criteria The North American example ................62Box 9 REZ initiatives ..............................72FIGURES AND BOXES“ Plans are worthless, but planning is everything”U.S. President DWIGHT D. EISENHOWER, 19577FOR POWER SYSTEM REGULATORSACER Agency for the Cooperation of Energy Regulators EUAfDB African Development BankANEEL Agncia Nacional de Energia Eltrica / National Electric Energy Agency BrazilCCEE Electric Energy Commercialisation Chamber BrazilEC European CommissionEGAT Electricity Generating Authority of ThailandENTSO-E European Network of Transmission System Operators for ElectricityEPE Empresa de Pesquisa Energtica/Energy Research Office BrazilEskom Electricity Supply Commission South AfricaEU European UnionFERC Federal Energy Regulatory Commission USIPP Independent Power ProducerIRENA International Renewable Energy AgencyIRP Integrated Resource Planning or Integrated Resource PlanISO Independent System OperatorISO-NE Independent System Operator of New England USMOU Memorandum of UnderstandingNERC North American Electric Reliability CorporationNERSA National Energy Regulator of South AfricaNPCC Northeast Power Coordinating CouncilNWPCC Northwest Power and Conservation Council USPPA Power Purchase AgreementPREC Puerto Rico Energy CommissionPREPA Puerto Rico Electric Power Authority Puerto RicoPV Photovoltaics or photovoltaic generation of electricityPVRR Net Present Value of Revenue RequirementsREDZ Renewable Energy Development ZoneREZ Renewable Energy ZoneRFI Request for InationRFP Request for ProposalsSADC Southern African Development CommunitySAPP Southern African Power PoolSCADA Supervisory Control and Data AcquisitionTSO Transmission System OperatorTVA Tennessee Valley AuthorityUMTDI Upper Midwest Transmission Development Initiative USABBREVIATIONS8INSIGHTS ON PLANNING9FOR POWER SYSTEM REGULATORSThe share of world electricity production taken by renewable power generation is expected to grow significantly by 2030, rising from today’s share of 23 to levels between 30 and 45 IRENA, 2016a. This technological change requires a recalibration in the way power systems are planned, in order to maximise the role of renewables in an affordable and secure manner.Ongoing work by the International Renewable Energy Agency IRENA looks at the application of long-term modelling and planning tools in various jurisdictions. A previous report IRENA, 2017 examined long-term modelling and tools to expand variable renewable power in emerging economies. The present report complements that earlier work. It considers proven processes and regulatory p