Simulating Transformative Resources in the

Electric Power Industry:

Andrew FordProfessor, School of the Environment

Washington State University

February 11, 2014

Case Studies of Conservation & Energy Storage

Electric Power in the 1970s

Power companies deal with the energy crisis, and the

financial challenge of building new power plants

Building Bigger and Bigger Plans was no longer the answer.

The Golden Years: 1960s

The Difficult Years: 1970s

Business Week, May 28, 1979

Business Week, May 23, 1983

new plants are forcing rate increases-further cutting the growth in demand

The Death Spiral

The Death Spiral in Context

electricityconsumption

actual price ofelectricity

indicated priceof electricity

allowedrevenues

value of therate base

constructionstarts

forcecasted needfor capacity

++

installedcapacity

-

+ ++

+

-

-

constructioncompletitions

+

+

the deathspiral

(+)capacity

expansion (-)

delayeddemandcontrol

(-)

Questions?

Next: how did the electric utility companies

simulate the death spiral?

Start with a Demand Model

Now Calculate Capacity Additions

Now Add a Model of Costs

300+ modelers! Can’t someone simulate the Death Spiral?

Not just 3 models, but 33 models .... with ~ ten staff each

OK, let’s build a single model(a Corporate Model)

• Workshop by EPRI: only 1 of 12 models did the spiral

• Workshop for Dept. of Energy: only 1 of 13 models did the spiral

• Absent system dynamics, managers had to simulate the spiral in their head

Conclusions from my own “Spiral Study”

• Waiting for regulators to raise rates won’t necessarily solve the financial problems

• The IOUs could improve their situation by building smaller, shorter-lead time plants

• And by slowing the growth in electricity demand through efficiency programs

The 1980s: A Move to Small Scale and Conservation Programs for Many Utilities

Conservation: a transformative resource then,

often the best resource today

2nd Case: Storage

Some promoters say storage is the

Holy Grail for Renewables

Storage proposals are exploding.But does storage have significant value?

• A dozen or more modes of value can be described, but are seldom quantified

• The few attempts to quantify value usually show value at less than half the cost

• Our focus: the value of fuel-free, compressed air storage in the Ontario Power System

View of the Long-term Model

A Combination of Models

Wind in the Long-term Model

Wind in the Short-term Model

Exports & Curtailments on a windy Thursday

Short-term model shows Curtailments

Major Curtailments on a windy Thursday

Key Stock in the Short-term Model

Short-term Model shows Storageused for “Load Leveling”

Questions?

Back to the Long Term Model: OPA: Ontario Power Authority Cash Flows

Value of Load Leveling and CT Displacement

$2.1 Billion is less than half the cost!

• The team (& the agencies) agree with this finding

• Indeed, this finding built confidence in the model.

• So, where is the value of storage?

Integrating the Wind with GCAES

wind is too low;

run generators

wind is too high; run the pumps

January 2028 Result: 90% Wind Integration

run generators

run the pumps

What is the $/MWh value of performing wind integration?

The Value of Wind-Integrationviewed in the long-term model

$ 5.1 billion

Select Middle Curve

$7 billion: Value that meets or exceeds the cost!

Load Leveling all year Load Leveling 4 months/yr and Wind Integration 8 months/yr

Wind Integration all year0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

2.23

2.10

5.09

8.07

Value of Wind Integration ($ billions) Value of Load Leveling & Reduced CTs ($ billions)

Future Plans in Ontario• Long-Term Model:

Key stakeholders have shown great interest in continuing to help expand and improve the model

• Short-Term Model: The operations model will be expanded to continue exploring ways to use storage

• Storage Demo: The Ministry of Energy will include storage in the acquisition process, starting with 50 MW by 2014.

Advice for the Practice of Applied System Dynamics

Thank You.