Tackling the energy crisis by managing demand, using risk modeling software

One of the side-effects of the recession appeared to be a reduction in the demand for electricity as businesses and consumers alike looked to make savings on their outgoings. However, economic recovery seems to render this trend as temporary, meaning that the global need to tackle energy-consumption is as pressing as ever.

BC Hydro, Canada’s third largest electrical utility provides an interesting case study in how to  ascertain the most effective ways to tackle the gap between supply and demand of electricity 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 across the region. 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. DSM projects 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.

BC Hydro uses @RISK risk analysis software to measure the uncertainty around its energy conservation efforts, both at the project stage and at a higher portfolio level. Around 60 projects were analysed on a case-by-case basis, and a probability distribution around the forecast outcome was developed. @RISK helps BC Hydro to capture the level of uncertainty of the estimated savings for each individual DSM venture.

In recognition that projects do not operate in isolation, BC Hydro also uses @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.

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. Employing Decision Making Under Uncertainty helps BC Hydro to meet both financial risk analysis and environmental risk analysis goals. As a result, it expects to meet the majority of its incremental load growth through conservation measures.

» Read the BC Hydro case study

Craig Ferri
EMEA Managing Director of Risk & Decision Analysis

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