Costs and benefits of over/under capacity in electric power system planning. Final report, October 1978

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Abstract
Growing demand uncertainty, coupled with lengthening lead times for new construction, is making the process of generation expansion planning more difficult for the electric utility industry than ever before. A new approach to this problem is offered by providing a method and a working model to calculate the costs and benefits of alternative choices from the consumer's point of view. Most important, this study takes the effects of future demand uncertainty explicitly into account--a step that justifies the choice of higher planning reserve margins than would otherwise be the case. In addition to the effects of uncertainty, the study also stresses the costs of unserved demand, the benefits of flexibility, and the effects of obsolescence in making appropriate capacity planning decisions. Further research on consumer outage costs is recommended. And the value of this methodology as an integrated framework for discussion of capacity planning issues among utilities, researchers, and regulators is emphasized.

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