Estimating the flexibility of utility resource plans: an application to natural gas cofiring for SO2 control

Electric utility planners must cope with large uncertainties concerning fuel prices, environmental laws, power demands, and the cost and availability of new resources. In this situation, flexibility is valuable. A flexible 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. The authors present a decision tree-based method for quantifying the economic value of flexibility. The method is then used to compare the relative flexibility of natural gas cofiring with other strategies to comply with the acid rain control requirements of the 1990 U.S. Clean Air Act Amendments. For the utility studied, they conclude that cofiring gives the system significantly more flexibility than flue gas desulfurization or switching to low sulfur coal