Monte Carlo simulation techniques and electric utility resource decisions

This paper explores the use of Monte Carlo simulation techniques as an approach to electric utility integrated resource planning (IRP) that explicitly identifies key risks imposed on decision makers and/or shareholders, We discuss in general methods of examining risk, including sensitivity analysis, decision analysis and Monte Carlo simulation. We also present an example of how Monte Carlo simulation can be used in the context of resource planning, When used in conjunction with a model that captures the main engineering, economic acid financial operations of a utility, Monte Carlo simulation can be used to account for planning uncertainties and examine tradeoffs between expected costs and risk.