Uses risk-analysis tools to ensure it can narrow supply-demand gap and meet consumers' needs

BC Hydro (www.bchydro.com), Canada's third largest electrical utility, is using Palisade's risk analysis software to measure the uncertainty around its energy conservation efforts, both at the project stage and at a higher portfolio level. The move has enabled it to ascertain the most effective ways to tackle the gap between supply and demand in British Columbia.

Trends such as an expanding population growth, and the increase in energy usage per customer, have led to a rise in the demand for electricity.  By legislation, BC Hydro must aim to meet these energy needs through implementing cost-effective energy conservation approaches before it can turn to increasing the supply.  The company has set itself one of the most aggressive targets in North America, with a plan to meet almost 75 percent of its incremental load through Demand Side Management (DSM) over the next 20 years. 
 
BC Hydro uses @RISK to capture the level of uncertainty of the estimated savings for each individual DSM venture.  These include compact fluorescent light promotions; subsidies for energy efficient appliances; variable speed motor promotions (for home furnaces); and promotional activity aimed at motivating customers to use less energy.  Around 60 projects were analysed on a case-by-case basis, and a probability distribution around the forecast outcome was developed. 

In recognition that projects do not operate in isolation, BC Hydro also used @RISK to explore the interrelationships between key uncertainties: the participation and savings per participant, and the participation across projects.  The analysis showed that if a 'conservation culture' was developed in the province, it would result in an increase in energy savings across all programmes.  However, it also illustrated that, if this culture failed to materialise, the performance of all programmes will be dragged down.

Following ten years of a flat rate for electricity costs in the region, BC Hydro also wanted to estimate savings it might achieve through implementing a step-function pricing strategy.  By using @RISK to model these uncertainties, BC Hydro could communicate to its regulator and stakeholders not only how much energy it might save through these changes, but the level of certainty it had around its different rate structure options.   

Going forward, BC Hydro expects to meet the majority of its incremental load growth through conservation measures.  Exploring uncertainty using @RISK allowed BC Hydro to find the best balance between the uncertainties of supply side resources and those of relying heavily on energy conservation. 

Basil Stumborg, senior business strategy advisor at BC Hydro explains: “There is a huge incentive for utilities such as BC Hydro to encourage energy conservation.  But while the motivation is there, it is often difficult to know whether these ambitious targets can be achieved.  Because @RISK was able communicate complex analyses in a transparent and meaningful way, BC Hydro has been able to set very aggressive energy conservation goals while feeling confident that the right balance between conservation and finding new supply side resources has been found.”