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Report Offers Recommendations Tied to Western Region Adequacy Program

Utilities need to align their reliability planning efforts with those of the Western Region Adequacy Program’s if they want to achieve the program’s goals of achieving reliability with a smaller portfolio through regional load and resource diversity, economies of scale, and reduced planning uncertainty, according to a new report.

The differing timelines of WRAP – one to five years – and of long-term utility planning efforts —which range from one to 20 years – may limit the long-term economic efficiencies intended in the program’s design, a report by California-based GridLab said in a September 2023 report.

“To bridge this potential gap in alignment, planners and policymakers must simultaneously work to implement WRAP in its initial design, as a near-term program which overlaps (but does not replace) utility-level reliability planning, while engaging with regional partners through the governance structure to enhance WRAP’s near-term coordination and long-term planning value through improved resource sharing and long-term reliability analysis,” the report’s authors said.

WRAP is a multi-state policy construct intended to drive regional coordination and cooperation across the many utility and regulatory decision-makers responsible for resource planning and procurement decisions across the West.

WRAP consists of two related design features: a biannual forward showing of resource adequacy and an operational program intended to identify and resolve shortfalls through a bilateral trading framework between participants.

As of August 2023, WRAP included 22 participants from nine states and one province, representing approximately two-thirds of the Western Interconnection retail load outside of California.

While the primary focus of the report is on state-regulated utilities, “it is our hope that the report’s insights and recommendations will be helpful for governing boards of public utilities and cooperatives,” the report said.

With the approval of WRAP’s tariff by the Federal Energy Regulatory Commission in February 2023, the program’s binding compliance obligation is expected to go into effect in 2026-2028. But the report warned that the experience of participating utilities is likely to be “a highly varied experience” based on participants’ current resource portfolios and needs.

Some participants may easily comply with their existing resource portfolios and “may even enjoy some financial benefits from selling their excess positions and transmission rights, other utilities are likely to require significant additional resources in order to meet their compliance obligations,” the report said. “For some utilities, access to firm transmission rights may be as challenging as access to generation and may also play a key role in the ability to count new resources towards WRAP compliance,” the authors said.

The report noted that WRAP is unique among resource adequacy programs in its requirements for firm transmission rights, a constraint typically addressed by the overlay of a resource adequacy program with an independent system operator. “It is likely that the ability to access firm transmission will be a key limiter to effective and efficient regional transactions, as well as to the development of new resources to be shown for WRAP compliance,” the report said.

Further, the planning horizon and modeling approach may need to evolve to include more frequently refreshed and more long-term analysis than is currently provided in the two- and five-year ahead advance assessment framework.

The report also cited the limitations imposed by each utility’s limited visibility into regional needs. The authors noted that issue could only be resolved through the willingness of participants to improve the transparency of shared planning data, one of the issues that remains unresolved and presents a barrier to full and robust implementation of the program.

In the implementation of WRAP’s initial design, planners and policymakers must confront “significant policy questions,” including how to align utility and WRAP planning inputs and assumptions, how to address differences between utility and WRAP reliability requirements, and the degree to which utilities may resolve shortfalls through forward transactions between participants within the WRAP footprint in lieu of resource development, the report said.

WRAP will not be a “drop-in solution” for reliability, the report said, but “it presents an opportunity to standardize modeling approaches and datasets, particularly for utilities and regulators with limited capacity to develop and maintain their own models.”

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