ESTIMATING THE FLEXIBILITY OF UTILITY RESOURCE PLANS - AN APPLICATIONTO NATURAL-GAS COFIRING FOR SO2 CONTROL

Utility planners must cope with large uncertainties concerning fuel pr ices, environmental laws, power demands, and the cost and availability of new resources. In this situation, flexibility is valuable. A flexi ble plan is one that enables the utility to quickly and inexpensively change the system's configuration or operation in response to varying market and regulatory conditions. We present a decision tree-based met hod for quantifying the economic value of flexibility. The method is t hen used to compare the relative flexibility of natural gas cofiring w ith other strategies to comply with the acid rain control requirements of the 1990 U.S. Clean Air Act Amendments. For the utility studied, w e conclude that cofiring gives the system significantly more flexibili ty than flue gas desulfurization or switching to low sulfur coal. The reason is that cofiring enables the utility to take advantage of low g as prices or high emissions allowance prices by burning more gas at th ose times. The value of this flexibility is approximately $0.05 to $0. 35 per million BTU of natural gas, or $0.03 to $0.26/MWh of plant outp ut. These values are significant compared to other types of benefits t hat have been previously quantified for cofiring. We also compare our measure of flexibility with one based on the standard deviation of pre sent worth. The latter perversely finds the least flexible technology (scrubbing) to be the most ''flexible.''