Managing Risk with Renewable Resources
Steve Bernow, Michael Brower, Maxim Duckworth, P. SpinneyThe question of uncertainty and risk in electric utility resource planning has received considerable attention in recent years. One approach to managing risk is for a utility company to invest in diverse power sources such as wind power plants. The authors of this report test this hypothesis by conducting an in-depth analysis of the risk implications of a decision to build a 1600 MW wind power plant instead of a 400 MW gas-fired combined cycle plant. The uncertain inputs included fuel prices, environmental regulations, wind plant output, conventional plant availability, and load growth. This paper examines two different market scenarios: traditional regulation and an unregulated wholesale market characterized either by a power pool or fixed-price contracts of varying duration.