Full Title: Assessing the Risk of Utility Investments in a Least-Cost-Planning Framework
Author(s): David Hoppock, Dalia Patino Echeverri, Sarah Adair
Publisher(s): Duke University
Publication Date: November 1, 2013
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Description (excerpt):
Unprecedented uncertainty in the electricity sector makes it difficult to estimate the cost or likely range of costs for new capital investments. Different assumptions about the future can make an investment that is least cost in one future or scenario high cost (relative to other investments) in another. In many states, utility commissions use a least-cost framework to evaluate different investment options, but determining what is least cost is difficult and can depend on the range of potential futures that utilities and regulators consider. In this environment, critical questions for utilities and utility regulators are (1) what is the realistic range of cost estimates and (2) what risks do different options create for customers. This paper reviews metrics that utilities and utility regulators can use to evaluate investment options as well as methods to incorporate these metrics in a least-cost-planning framework.