1. Translating Portfolio Analysis to a Cost Effectiveness Frontier
Ken Corum, NW Power and Conservation Council

2. Cost Effectiveness of DR
“Compare cost of DR to cost avoided by DR”
Comprehensive evaluation of avoided cost
entire power system
over time
uncertainty
For practical guidance, a simple rule approximating comprehensive method 2

3. Council’s Portfolio Model
Uncertainties translated into 750 futures (20 years)
Resources include:
natural gas
conventional & advanced coal
wind
conservation
demand response
portfolios tested against futures
Uncertainties include electricity and gas prices, weather, precipitation (important since hydrolectric power system’s output depends on total precipitation). 3

4. Council’s Portfolio Model
Each portfolio => 750 NPVs of costs
distribution w/ average cost, risk
Model simulates the development and operation of a resource portfolio through a standard set of 750 futures. Resources in each portfolio are sited and licensed, but model simulates build or hold decisions for each resource. 4

5. Light blue points are “efficient frontier” since they have no other points that are lower in both cost and risk (lower and to left). 5

6. 6 Three efficient frontiers based on 3 levels of DR
At risk = $37B, savings = $346M w/ full DR, $213M w/ 500MW
At risk = $36.5B, savings = 324M, $176M
At risk = $36.2B, savings = $421M, $143M 6

7. 7

8. Work in Progress More variety in DR programs Limits on DR calls
Can we capture potential benefits of DR in ancillary services? 8