Publish Date: March 30, 2022
Acceleration of the clean energy transition is dramatically shifting the types of electric generation technologies used to meet electricity demand and reliably operate the grid. Rapid cost declines in advanced energy technologies like wind, solar, and energy storage are making them increasingly competitive choices for new generation additions. While there has been considerable attention devoted to determining the reliability value of these new resource types, the methods used to evaluate the resource adequacy, or capacity value, of conventional thermal generating resources (including coal, natural gas, and oil-fired power plants) have not been formally reexamined or updated in decades.
AEE engaged Astrapé Consulting to conduct a technical analysis of the prevailing methodology, resulting in the report “Accrediting Resource Adequacy Value to Thermal Generation.” This AEE white paper, “Getting Capacity Right,” presents in summary the findings of that technical report, which show that the traditional valuation method can overstate the capacity value of conventional power sources by over 20%. Putting in place more accurate methodologies would improve incentives for all generators to take steps to improve their accredited value, add new incentives for demand response and flexible load to enter the market, and send a signal for inefficient and poor performing thermal generators to retire, all of which can lower the total costs for capacity that customers pay to ensure reliability.
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