I hear you guys like long detailed threads on IRP Planning where I go off on a rant.

Today’s topic: 384 billion dollars, and why the sum of money in the headline doesn’t matter.

So here’s my (mostly) complete take on the Southeast RTO study (opposed to the half thought out questions I was pelting the VCE team with the other day, who were all super courteous and helpful btw).

Best I can tell VCE Study has savings from 4 distinct areas:

1.Re-optimization
2.Smaller portfolio from shared planning areas
3.Transmission Optimization
4.“RTO”

Here’s my take on each.

1.Bulk of the savings come from the re-optimization. It’s easy to understand why. It’s a different world view from the IRPs with different forecasts for fuel costs, capital cost forecasts, o&m forecasts, etc

If you could be the utility commission and make Southern Company use these same forecasts you would end up with an objectively different IRP. It would look objectively more like what VCE came up with.

So in the same way that the IRP portfolios look like crap with VCEs assumptions, I promise that VCEs portfolio would look like crap with the IRP assumptions.

This isn’t a dig at VCE, renewables, or the assumptions. This is just how it is and the nature of scenario development.

The magnitude of risk operating in unpredicted conditions changes between portfolios, but that’s not what I’m talking about here. (Portfolio resilience is important though!) I’m also not talking about all the other cool shit that Chris’s model picks up that legacy models don’t.

My point here is that I used the word forecast a lot, everything here is a guess.

But I can’t in good faith attribute these savings to an RTO because of different assumptions.

This is also why I roll my eyes at every “an RTO saves half a trillion dollars tweet”. (Yes, you)

I’m just sooo over arguing over forecast assumptions. There’s no point. No one knows and they’re all wrong. But they’re how you get catchy headlines. I could design a study where the answer was $400B, $800B or -$400B based on different assumptions.

2.Smaller portfolio. This is HUGE! Assuming the numbers play out in VCE vs EIA-861 there’s a 100GW here up for grabs.

Carrying costs on $100B+ of capital is an instant win.

But here’s the rub. I don’t think you can do it.

I wasn’t sure if this was a reliability org thing but it sounds like it’s a state commission thing.

Either way i doubt you’re going to get permission to share reserve margins over this large of an area.

How do you do rates across different utilities? Different states?

How do you get GA/FL/NC/SC to trust that AL will totally provide everyone’s power.

I think this is something worth working towards, but there’s political headwinds in the nuts and bolts.

3.Transmission expansion. More savings and another big win!

Probably. Transmission is expensive, and gets more so when you look at specific routes. This is too far outside my area of expertise to comment critically.

But another worthy area of pursuit.

The big play in the study here is that the study attributed transmission expansion to the RTO.

I consider them separate.

TVA could build those wires. There’s nothing that says you shall have an RTO to build transmission.

4.“RTO”. If you remove the transmission expansion, the costs saved here are really just wheeling costs that’s utilities charge to use them.

So what we’re talking about is does the incurred wheeling costs impact dispatch a bunch? And does it pay for the overhead of running an RTO?

Might, might not.

But that’s the discussion energy Twitter should be having in regards to RTOs and I wasn’t able to parse it out of the study.

Also why something like SEEM might make sense.

Verdict:

1 - wash, play by the same rules guys
2 - huge, but political headwinds
3 - big, but shouldn’t be tied to an RTO
4 - could swing either way, but bet it’s closer than you think

Again, really REALLY want to reiterate that I think this is a good study and provides great value.

I just want to offer a different and more nuanced take from “vertical utilities bad” or “look another insane renewables study”.

Production cost modeling isn’t the entire story.

My personal mantra “All models are wrong, some are useful.”

This one is definitely useful, just probably not why you think it is.

Other minor details I thought were cool outside of the typical WISDOM coolness:
⁃Seasonal Battery Usage Patterns
⁃Utility vs distribution battery patterns
⁃All the construction in FL!
⁃But everything still comes from Alabama?
⁃LP vs MIP, presumably because of the large area

So stop tweeting $384 billion dollars, it makes you look ignorant.