Least-Risk Planning for Electric Utilities

In an environment of significant uncertainty about fuel prices, environmental regulations, and energy demand growth, traditional utility planning leads to investment decisions that create considerable risks, according to this report co-authored by the Nicholas Institute for Environmental Policy Solutions.

The paper describes how a minimax regret analysis could supplement current planning techniques, which typically weigh cost. By considering risk across a broad range of scenarios facing the industry, minimax regret analysis may help utilities better avoid decisions that reduce their flexibility to respond to changing market conditions. As a result, utilities can avoid regrettable investment decisions and negative effects for ratepayers while better measuring diversity in their portfolio—ensuring no one energy resource is relied on too heavily.