Electric utilities face a variety of uncertainties that complicate their long-term resource planning and acquisition. These uncertainties include future economic and load growths, fuel prices, environmental regulations, economic regulations, performance and construction cost of existing power plants, cost and availability of purchased power, and the costs and performance of new demand and supply resources. As utilities increasingly turn to demand-side management (DSM) programs to provide energy and capacity resources, it becomes more important to analyze the interactions between these programs and the uncertainties facing utilities. This report uses a new planning model (DIAMOND, developed at Oak Ridge National Laboratory) to explore quantitatively the uncertainty implications of supply-only vs DSM + supply resource portfolios. The analysis focuses on risks to society, with only limited attention to the allocation of risks among customers, shareholders, and others. Four sets of uncertainties are considered in these analyses: economic growth, fuel prices, the costs to build new power plants, and the costs to operate DSM programs. These four types of uncertainties serve as proxies for the many others that face utilities, including delays in completing power plants (proxied by cost of completing plants) and the energy and load reductions caused by DSM programs (proxied by cost of DSM programs). The two types of resource portfolios are tested against these four sets of uncertainties for the period 1990 to 2010. Sensitivity, scenario, and worst-case analysis methods are used. Results show that it is feasible to analyze the effects on uncertainty of including DSM programs in a utility's resource mix. In light of these results, utilities, which to date have done very little such analysis, should conduct such studies as part of their integrated-resource planning activities.
