The Public Utility Commission of Oregon, in an order entered on April 26, said that it has adopted its staff’s recommendation for the commission to open a general capacity investigation.
As noted in staff’s recommendation, an investigation to examine generic capacity values was called for in the recent commission orders from the resource value of solar (RVOS) dockets. According to those orders, a comprehensive approach to establishing greater understanding of capacity value may inform and harmonize how capacity is assessed across several dockets.
The capacity provided by a resource to the electric system plays a central role in determining that resource’s overall value and therefore, informs fair compensation to that resource, staff added in its filing. The ongoing transformation of the energy market regionally and across the western United States has changed the resource portfolio to one that has an increasingly greater penetration of variable energy resources (VERs), leading utilities to examine their system capacity needs in different ways from the past, staff said.
That change requires an examination at how capacity from various resources should be valued, staff said, adding that it and the commission have not had the opportunity to look at the issue of valuing capacity holistically and consistently across dockets and technology types.
For existing programs, capacity related issues have been dealt with on a piecemeal basis, staff said. There have been several methodologies used to establish capacity values based on resource type, such as distributed generation, utility scale generation, energy efficiency, and other upcoming technologies, including energy storage and demand response, staff said.
Dockets and OPUC activities involving capacity range from the RVOS, energy efficiency, and even addressing the overall system need for capacity, as in utility IRP planning and the determination of a sufficiency/deficiency demarcation, staff noted.
A holistic investigation into those issues related to capacity could lead to a harmonization of some of those disparate approaches, staff said.
Capacity valuation also plays a role in evaluation of new programs, staff said, noting that demand response programs may forestall or forgo investments in new capacity resources. Other time-of-use rates should incorporate economically efficient pricing, that is, higher rates for those increasing system costs, staff noted. Other program benefit evaluations where capacity value needs to be considered include transportation electrification and energy storage, staff said.
Staff said that it suggests an investigation scope that examines three central questions relevant to valuing capacity in today’s markets:
- What is capacity?
- How is capacity acquired?
- How should capacity be valued?
Those overall scope questions would define the phases of the investigation, staff said, adding that in phase 1, for instance, it would look to determine a consistent definition for capacity. Historically, capacity has been seen as more of a concept related to peak need, with “energy” related to average electric needs. Currently, staff added, increasing amounts of VERs and distributed energy resources have changed planning perspectives. Some questions to be considered in phase 1 include what system operational needs does capacity meet, staff said.
Phase 2 would examine how utilities acquire capacity, staff said, adding that an investigation into the approach for acquisitions would examine, for instance, the methods of acquisition, whether they be through requests for proposals, bilateral negotiations, market purchases, or capacity that is “put” to the utility (community solar, for example).
Phase 2 would include a set of questions to be considered, including does the approach to acquiring capacity differ for supply-side versus demand-side resources?
Staff added that in phase 3, the investigation would focus on establishing an appropriate valuation methodology for capacity by resource characteristics defined previously. Those methodologies would be consistent across utilities but based on the value to each utilities system, staff said. Questions that should be considered around the appropriate cost/values include should multiple approaches be considered in valuation, or can a one-price fits all method work, staff said.
Launching a three-phased general capacity investigation would ensure a common framework of understanding by parties and stakeholders of appropriate assumptions to value capacity, staff said, adding that it envisions the investigation resulting in establishment of a methodology that looks to the characteristics of capacity a resource provides.