By Tom Kleckner

OKLAHOMA CITY — Reducing SPP’s current 13.6% reserve margin to 12% could cut required capacity by about 1,000 MW, saving $86 million annually and $1.3 billion over 40 years, a task force told the Markets and Operations Policy Committee.

The Capacity Margin Task Force has been evaluating resource adequacy since SPP became a central balancing authority with the Integrated Marketplace’s implementation in 2014. The RTO’s capacity margin has been unchanged since 1998 despite an expanding footprint, operational changes and significant transmission expansion.

Task Force Chairman Tom Hestermann, manager of transmission policy for Sunflower Electric Power, said the group believes the reserve margin can be reduced without affecting reliability. He said stakeholders have been supportive of reserve margins as low as 12.5% but less so when the margin drops to 12% or less.

“The more reserves you require, the more it will cost,” he told members during a four-hour educational forum preceding the MOPC meeting. “We want a good balance between reserve margins and system reliability. If 12% is where we want to be, we have a good story to tell. We believe we can do this successfully.”

The savings would come from reduced generation investment made possible by transmission upgrades. Hestermann said lower margins could align with generation retirements due to the Clean Power Plan.

Hestermann noted resource adequacy is generally expressed in terms of capacity margin or reserve margin for planning purposes. Both are measured using the same numerator: the difference between available resources and net internal demand. SPP uses capacity margin, in which resources serve as the denominator. Reserve margin, used by NERC and other regions, uses net internal demand as the denominator.

Hestermann said the task force will recommend switching to reserve margin, where a 13.6% margin is equivalent to a 12% capacity margin.

“NERC doesn’t have a standard for planning reserves,” Hestermann said. “SPP enforces this requirement through the membership agreement.”

The task force ran “limbo studies” — “How low can you go?” Hestermann explained — that simulated four reserve margin levels for each of three years: 2016, 2017 and 2020. The analysis found SPP could maintain required loss-of-load expectations in every case except 2017, and then only when the reserve margin was set at 7.53%. (The study assumed additional transmission infrastructure.)

“The current criteria requires an assessment every two years to ensure 12% is adequate,” Hestermann said. “What we haven’t done before is see whether we can go lower than that and still maintain a reasonable level of reliability.”

The task force has completed a white paper defining load-responsible entities, which was approved by MOPC and the board last July and is currently being discussed within various task forces. Tariff revisions or changes to previously approved policy will be brought back to the MOPC for approval.

The group will present its reserve margin requirements and a deliverability study for MOPC approval in April. It also will present a planning reserve assurance policy, an enforcement mechanism using payments, not penalties, from LREs short on capacity to those who are long.

The task force also is still working on a distributed energy resource policy.