System Analysis Advisory Committee FAQ Questions Michael Schilmoeller Friday, January 25, 2013

Market vs. Region: A boundary on the analysis needs to be drawn somewhere. Is the model optimizing for the region or for a broader market? Open system model: A key principle is that RPM is an open-system model, in which the electricity price is decoupled and other outcomes are not forced to be completely consistent. Review Panel’s List 2

Decoupling by Price: The mathematical formulation gives the appearance of power going to the market, which is disconcerting to some. RPM seems to be using independent power producer (IPP) logic to solve a utility problem. Accounting for IPP Capacity: What is the appropriate accounting for IPPs that are not committed to regional loads? Review Panel’s List 3

Strategic risk mitigation. The methodology by which RPM seeks plans that reduce strategic risk for the region need to be better understood. Optimizer: The optimizer’s role may be unclear. Optioning: Optioning is hard to understand. Review Panel’s List 4

Game changers: A short history of game changers to justify considering cases outside of the mainstream could be added. User control: How does the user have control over the results? Review Panel’s List 5

Basic Model Concepts and Algorithms –What problem is the RPM trying to solve? –Is the RPM an hourly model? –Isn’t the RPM really a model for IPPs? Doesn’t the RPM just value all resources in the market? –Is the RPM a “market fundamentals” model? –Can the RPM produce cost estimates? Staff List 6

Risk –What is the notion of and metric for risk in RPM simulations? –Why do we still plan for risk? Aren’t the choices simple? –If I have a firm contract in place with a reliable counterparty, where is the risk? Staff List 7

Resource Options –The Council tried the idea of options for building power plants was tried in the 1980s, and the region decided it wasn’t a good idea. Why are we still talking about siting options? –Why do power plants have construction optioning while conservation does not? –What would the plan look like if there were no optioning in the model? Staff List 8

Capacity Expansion and Resource Strategies –How does the RPM arrive at resource strategies? –If resource strategies are the result of trial and error, why does the RPM simulate decisions to build within futures? –How do we use the efficient frontier? How do we interpret the cost and risk that appear on the axes? Staff List 9

Capacity Expansion and Resource Strategies –Under some futures, the model’s choice to build plants turns out to be a bad one. Does this mean there is something wrong with the model? –Some stakeholders have compared the RPM resource strategy selection to game theory. Is this a valid comparison? Staff List 10

Conservation –Is the cost-effectiveness premium for energy efficiency input or output? –What is the difference between a cost- effectiveness premium and a risk premium? Staff List 11

Model Validation –How do you validate a risk model when the future is unknown? The Role of the Council –How does the model support the Council’s work? Staff List 12