Economic approaches to understanding and addressing resilience in the bulk power system: A workshop summary
The R Street Institute and Resources for the Future organized an economics-oriented expert workshop on bulk power system resilience to aid federal regulators, electricity industry stakeholders, energy policymakers, state utility commissions, and others in interpreting the filed comments and making upcoming decisions. Four important economics insights emerged from the diverse presentations and discussion comments at the workshop.
- Economic principles, customer valuation of outage avoidance, and benefit-cost analysis should guide decisions about resilience.
- Enhancing resilience happens through the provision of services such as real power and voltage support, rather than attributes such as inertia or a particular fuel type. They are the same services that are currently needed and procured, and they should be procured from whoever can provide them at lowest cost, through the use of market mechanisms when feasible. Regulations and planning have important roles, but only when justified by factors (“market failures”) that would otherwise prevent the market from producing the outcomes that are best for society.
- Heightened concerns about resilience and low-probability events can probably be addressed relatively well by incremental improvements to current markets, incentives, and processes, and not on an emergency basis. Generators in organized electricity markets already face incentives to be able to generate during extreme scarcity events, and those incentives are similar to the very high value that customers place on avoiding outages.
- Customers and regulators are not willing to pay boundless amounts for resilience, so resources should be allocated to where they can benefit society the most. Those opportunities are largely related to enhancing the reliability and resilience of the electric distribution and transmission systems, and in better natural gas-electric coordination, planning, incentives, and rules.