Emerging Practices
Paul J. Alvarez leads the Wired Group, a consulting practice dedicated to unleashing latent value in distribution utility businesses.
Dennis Stephens EE is a Senior Technical Consultant at the Wired Group specializing in grid planning, operations, and investment.
Sean Ericson is a Wired Group Associate and PhD candidate in economics at the University of Colorado who specializes in energy industry econometric analyses.
As reported in Part One of this two-part series, state regulators in the U.S. are being asked to consider multi-year, multi-billion-dollar proposals to make reliability-related electric grid investments with increasing frequency.
Part One described how IOUs, aided by their experts and software suppliers, are turning toward subjective risk modeling to identify assets for prospective replacement, rather than relying on objective best practices like asset testing, formal inspection, and historical performance observation.
The authors provided evidence that subjective modeling results in far more extensive asset replacement than standard, objective industry practices dictate. As a result, the authors conclude that asset failure rate reduction estimates, and associated reliability improvement projections, are therefore commonly and significantly exaggerated.
In Part Two we will examine common weaknesses in the methodologies IOUs employ when developing benefit-cost analyses for grid investment proposals. First is a critique of how IOUs translate reliability improvements into dollar-denominated economic benefits to customers and communities. In particular, we will examine the deficiencies in the data used in the U.S. Department of Energy's online Interruption Cost Estimator tool.