Valuation of Renewable and Distributed Resources: Implications for the Integrated Resource Planning Process

The document argues that traditional integrated resource planning (IRP) is too generation-centric and fails to account for the specific operational, financial, and grid-side benefits of distributed and renewable energy. It introduces the Energy Resource Investment Strategy (ERIS) methodology, which uses probabilistic load and fuel forecasting and portfolio theory to value these resources. Key technical discussions include the use of Effective Load Carrying Capability (ELCC) to measure reliability contributions, the role of geographical dispersion in reducing portfolio variability, and the financial advantages of modular, short-lead-time resources in mitigating the risk of overbuilding capacity.

• Traditional integrated resource planning (IRP) is limited because it is "generation-centric" and often ignores the operational costs and benefits of the distribution system, as well as the risk tradeoffs between fossil and renewable resources.
• Intermittent renewable resources provide a non-zero contribution to system reliability, which can be measured using Effective Load Carrying Capability (ELCC). This value typically decreases as the penetration rate of intermittent renewables in a system increases.
• Geographical dispersion of renewable resources can reduce overall portfolio variability and risk. For example, a study of five dispersed wind farms found the standard deviation of total output was 30 percent lower than if they had been co-located.
• Operational costs associated with integrating intermittent renewables—including regulation, load following, and unit commitment—are generally low in interconnected U.S. systems, typically ranging between $2 and $6 per megawatt-hour.
• Distributed resources can significantly lower supply costs by deferring investments in distribution capacity. Marginal distribution capacity costs (MDCC) can vary widely, ranging from $0 to $1,200/kW depending on the specific area and time.
• Modular, short-lead-time distributed resources mitigate financial risk by reducing the likelihood of overbuilding capacity. A central resource with a four-year lead-time can carry a 45 percent cost premium compared to a distributed source with a one-year lead-time due to the costs of idle capacity.
• The Energy Resource Investment Strategy (ERIS) methodology replaces deterministic load scenarios with probabilistic representations and uses portfolio theory to create an "efficient frontier" that balances expected costs against fuel price risk.

APA

RMI (2007). Valuation of Renewable and Distributed Resources: Implications for the Integrated Resource Planning Process. https://rmi.org/app/uploads/2017/05/RMI_Document_Repository_Public-Reprts_2006-09_ValuationRenewableDistributedResources.pdf

Chicago

RMI. Valuation of Renewable and Distributed Resources: Implications for the Integrated Resource Planning Process. 2007. https://rmi.org/app/uploads/2017/05/RMI_Document_Repository_Public-Reprts_2006-09_ValuationRenewableDistributedResources.pdf.

Wikipedia

{{cite report |author=RMI |title=Valuation of Renewable and Distributed Resources: Implications for the Integrated Resource Planning Process |date=June 2007 |url=https://rmi.org/app/uploads/2017/05/RMI_Document_Repository_Public-Reprts_2006-09_ValuationRenewableDistributedResources.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rmi2007valuation, author = {{RMI}}, title = {{Valuation of Renewable and Distributed Resources: Implications for the Integrated Resource Planning Process}}, institution = {RMI}, year = {2007}, month = jun, url = {https://rmi.org/app/uploads/2017/05/RMI_Document_Repository_Public-Reprts_2006-09_ValuationRenewableDistributedResources.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }