Increasing Renewables and Energy Efficiency through Portfolio Management

Deregulation has removed the integrated planning function from the utility and dispersed it to individual power producers who look only at their own operations when making decisions on investing in new resources. In addition, since there is no permanent ownership of customers, there is little incentive for electric service providers to invest in demand-side management tools like energy efficiency. Similarly, least-cost planning discourages investment in renewable energy due to its higher cost and discourages investment in energy efficiency due to the difficulty in valuing the savings. In light of the deficiencies in the current planning environment, it is clear that the electric industry would benefit from an integrated planning approach that considers both the short- and long-term and considers the risks of resource decisions. Portfolio Management is such an approach.

The report aims to provide the reader with a thorough understanding of portfolio management and how it strengthens electric resource portfolios. It also aims to provide an understanding of the link between renewable energy, energy efficiency, and reduced risk. The report focuses specifically on the need for developing a resource planning process that can mitigate the short-term, fossil fuel-centric focus that currently exists in most of the country. It provides the information necessary for industry participants to start moving forward with developing and implementing portfolio management, thereby increasing the penetration of renewable energy and energy efficiency.