Episode 8 – The Big Picture: Why Utilities Need Integrated System Planning

Marc (00:11)
Today’s episode is titled The Big Picture: Why Utilities Need Integrated System Planning. Over the last several episodes, we’ve talked about explosive load growth, transmission expansion, artificial intelligence, and the investments utilities are making to keep pace with demand. Today we’re stepping back and asking a more fundamental question: how should utilities actually plan for all of this?

Historically, utilities planned generation, transmission, distribution, and in many companies even gas systems, largely through separate processes. That approach worked when the system evolved more slowly and the interactions among those domains were more predictable. Today’s energy system is different. Large loads can arrive faster than infrastructure can be built. Distributed energy resources are changing power flows. The generation mix is becoming more variable.

Electrification affects both electric and gas networks, and every major investment decision can create implications somewhere else on the system. That’s where integrated system planning comes in. To help us understand why utilities are rethinking planning itself, I’m joined by Stephen Haubrich, a partner at ScottMadden and one of our leading experts on integrated system planning. Stephen, welcome to the show.

Stephen (01:34)
Hi Marc, thanks for having me.

Marc (01:36)
Stephen, integrated system planning sounds like one of those terms everyone’s heard, but few people could define consistently. What exactly do we mean by integrated system planning?

Stephen (01:50)
Yeah, I’ve also found that to be true, Marc. So traditional planning tends to ask separate questions. What’s the best generation plan? What’s the best transmission plan? What does the distribution system need? Integrated system planning, however, has a different question, and that is what is the best solution for the system as a whole? And so that means improving coordination across planning domains such as generation, transmission, distribution, and customer resources, and where relevant, natural gas. So the objective is to make better investment decisions while balancing often competing objectives of reliability, affordability, and clean energy or other policy objectives.

Marc (02:35)
That’s helpful, Stephen. You know, utilities have planned their systems successfully for decades. So what has changed that makes the traditional model less effective today?

Stephen (02:47)
Yeah, it’s a good question. I’d say the issue is not that planners have become less capable, right? Certainly not. The system itself has become more interconnected and less predictable. So planning practices were built around assumptions such as relatively steady load growth, centralized generation, and more distinct boundaries among generation, transmission, and distribution. And those assumptions just no longer hold in the same way.

Marc (03:15)
So the problem is not that any one planning function is doing poor work. It’s that each of those functions can make a rational decision within its own boundaries and still produce an answer that is suboptimal for the enterprise or for the customer.

Stephen (03:33)
Yeah, that’s exactly right, Marc. You know, the best answer inside one planning silo is not always the best answer for the full system. In fact, it’s often not.

Marc (03:44)
So, so, let’s make this concrete. Suppose a hyperscale data center requests several hundred megawatts of service on a compressed timeline, which, of course, we see all over the industry right now. Why is that no longer just a customer service or distribution planning question?

Stephen (04:04)
Yeah, it’s a that’s a good example. Well, it’s primarily because a single large customer can affect every major planning domain. The utility has to consider whether sufficient generation and capacity exists, whether transmission can deliver the power, what local upgrades are required, how quickly the load will ramp, and what risks arise if the customer does not materialize as forecast. So the

customer may also be able to phase demand. They could provide on-site generation or storage, they could procure capacity, or they could accept conditional service during constrained hours. Those options can change the generation, transmission, and local infrastructure solution. So large load growth has effectively turned the customer connection decision into a system planning decision.

Marc (04:59)
Yeah, it sounds like it’s introduced a lot of complexity into that process. How how does integrated planning help utilities to balance the two-sided risk here? So overbuilding and creating stranded cost exposure versus underbuilding and losing reliability or those economic development opportunities.

Stephen (05:23)
Well, integrated planning creates a structured way to evaluate multiple plausible futures and compare alternatives across the full system. So it can help utilities identify what must be built now, what could be phased, what assumptions need to be monitored, and where customer flexibility or other non-traditional options can reduce risk. The point is not to eliminate uncertainty, it’s to make decisions that remain sound across a range of potential outcomes.

Marc (05:54)
That’s helpful perspective. You know, one of the ideas in your work is that much of the value is created at the interfaces between planning domains. I thought that was particularly interesting, but what does that mean in practice?

Stephen (06:10)
Yeah, so what it means is that generation planners may identify an economically attractive resource portfolio, but transmission planners have to determine whether those resources can physically serve the load under a range of operating conditions. So, distribution planners understand local constraints, DER behavior, and customer characteristics that may not be visible in those higher level models. So each discipline is using the right

tools for its own purpose. The value comes from creating feedback loops so the findings from one domain reshape the assumptions in another. And it’s that iterative process that can reveal lower cost or more reliable alternatives that would not appear if the studies were performed sequentially and independently.

Marc (07:02)
Yes, and and we’ve had podcast discussions on, you know, rate applications, managing the modern utility rate case where, you know, part of that topic was around, you know, not just justifying that, you know, a project makes sense, but that it is the best of available options. I can see how this kind of capability would would feed into that.

Stephen (07:23)
Exactly.

Marc (07:25)
Can you give us an example of the generation and transmission interface? Let’s, you know, look at G and T and and why the traditional sequential approach that you’ve alluded to can miss the best answer.

Stephen (07:38)
Sure. So let’s let’s consider generation planning models typically identify a least cost resource portfolio and expected hourly dispatch. So transmission models test whether power can actually flow from those resources to the load while maintaining system reliability. If the generation plan assumes transmission availability that does not exist, and by the way that often can happen, the apparent least-cost portfolio

may not be the true least-cost solution at all. So with an integrated approach, generation and transmission planners iterate. So the transmission constraints and required investments feed back into the generation analysis and then generation dispatch informs the transmission studies. So those results better reflect both economics and physical deliverability.

Marc (08:30)
That makes sense. What what about the transmission and distribution boundary? So, you know, further downstream in the value chain. Where are utilities most likely to miss value there?

Stephen (08:43)
Yeah, so in that context, I’d say that you know the distribution system is often represented in transmission models as a relatively simple point of demand. But local networks now include solar, storage, demand response, electric vehicles, and, increasingly, very large customers. Those resources can either alleviate or worsen transmission constraints depending upon location and timing. So

Better coordination allows utilities to compare options on both sides of the substation. A distribution resource, customer program, or local storage project may defer a transmission upgrade. In other cases, the transmission solution may be more effective, but integrated planning gives the utility a way to evaluate those alternatives consistently.

Marc (09:32)
That’s helpful, Stephen. Let’s shift gears a little here. Utilities, as you alluded to, are facing enormous capital requirements and not just from load growth, but from modernization and resilience and other investments that are needed. And as a result, significant affordability pressure. How does integrated system planning improve that capital allocation decision?

Stephen (09:59)
Yeah, it does that in some important ways. I’d say it it broadens the solution set that evaluates investments at the system level. So without integration, multiple planning groups may each identify a valid project based on their own objectives, but the combined portfolio may not represent the lowest cost way to meet the utility’s overall needs.

So integrated planning helps utilities compare these: traditional infrastructure, non-wires alternatives, customer flexibility, storage, generation, and transmission in a common decision process. So that can reduce the risk of insufficient, underutilized, or stranded assets that you referred to earlier, and create a stronger basis for explaining investment choices to regulators and customers.

Marc (10:50)
Yeah, that that connects back to the, you know, some of the points we heard from our colleague Josh in the rate case podcast[episode]. How does reliability change the analysis? Is the lowest cost plan always the best plan? How does that work?

Stephen (11:08)
Yeah, great question. I’m glad you asked that. No. No, the simple answer is no. The the objective is not simply to minimize capital costs. It’s to identify the most cost-effective portfolio that can meet reliability and resilience requirements under a range of conditions. And that really is critical. So as the generation mix becomes more weather-dependent and load patterns become less predictable, utilities have to evaluate more operating hours, more contingencies

and more interactions across the system. So a plan that looks economical in one model may expose a reliability problem elsewhere. Integrated planning helps surface those trade-offs earlier before those investments are locked in.

Marc (11:53)
Got it. Steven, when executives hear integrated system planning, they may assume this requires a major software replacement or a complete reorganization. Is that true?

Stephen (12:08)
No, it doesn’t initially. There are many different ways to approach integrated system planning and you don’t have to undergo a major software change to be able to get started. So utilities should think about three dimensions: people, process, and technology. The first step is often improving communication across planning groups so everyone understands the assumptions, timelines, data, and decisions in the other domains. And you’d be surprised how often

they don’t completely understand those things. The next step is creating repeatable process feedback loops. So one study can inform another. Technology integration matters, but utilities can start by connecting existing tools and datasets without the need to replace legacy systems. There are technology options out there today that sit on top of existing planning tools and support integrated system planning.

You do not need perfect full system optimization to begin creating value.

Marc (13:09)
And and where does organizational structure help or hinder this work to plan the system in a more integrated way?

Stephen (13:20)
So I’d say that planning functions often report through different parts of the organization and may not come together until very senior levels. They may also operate under different regulatory frameworks, budgets, timelines and incentives. That makes coordination harder even when everyone agrees it is valuable.

There’s no single correct organizational model. Some utilities bring planning functions under one leader, others establish governance forums, cross-functional teams, or formal decision points. The important thing is creating a clear accountability for resolving trade-offs across domains rather than allowing each function to optimize independently.

Marc (14:03)
So it’s a a lot about those interfaces and you know staying in sync as the planning process unfolds. What capabilities become most important as utilities continue to mature their integrated planning approach?

Stephen (14:21)
You know, I’d say that one thing that’s really important is dynamic forecasting. It’s it’s really critical because load and resource assumptions are changing faster than traditional annual processes. So utilities also need common scenario assumptions, better data interoperability, and people who can work across technical disciplines. So over time the planning process becomes more iterative, more scenario based, and more continuous.

Marc (14:51)
Got it. If if a utility recognizes that need for better integration, where should it start? You answered a previous question that, you know, you don’t need to begin by installing software or completely reorganizing, but you know, for utilities who want to go down this path, where should they begin?

Stephen (15:13)
Yeah, may maybe where I’ll start there is to say, you know, don’t begin by trying to redesign the entire planning process. You know, start with one important discrete planning question that crosses those traditional boundaries that we talked about. it might be a major data center, a constrained substation, a renewable interconnection, an electrification initiative. There are many different options. Maybe it’s an opportunity to use DERs to defer infrastructure, but

use that case to identify the people, data, models, governance, and processes that require a change to help solve that problem collaboratively. So the utility gets an answer to a real business question and also learns what it will take to expand integrated system planning more broadly.

Marc (16:02)
Yeah, that’s helpful. It’s almost a a pilot approach.

Stephen (16:06)
Absolutely.

Marc (16:07)
What makes a good first use case?

Stephen (16:11)
You know, a good use case should be something that matters enough that leaders and planning teams are motivated to solve it. But it should be bounded enough to complete in a reasonable period. It should involve a real trade-off across at least two planning domains and the result should be useful in capital, regulatory, or customer decisions.

Marc (16:35)
Got it. That’s helpful. Needs to be something that will get the attention of the organization, but also something you can you can get done to demonstrate that success.

Stephen (16:46)
Right.

Marc (16:47)
You know, Stephen, we often what we do with our clients is help them avoid potholes because we’ve, you know, seen and worked on similar problems to the ones they’re facing. If you flip this around, what what is the biggest mistake utilities should avoid as they start this journey?

Stephen (17:06)
Yeah, you know, that’s a good question. We’ve talked about a couple of pitfalls along the way, but I’d say that probably treating integrated system planning as a software implementation or as a new planning study that sits beside the existing process is probably the the first one that comes to mind or the biggest one that comes to mind. So the objective is to improve the decisions the utility already has to make. If the work is disconnected from real decisions,

it it won’t become a sustained capability.

Marc (17:39)
Got it. That that’s helpful perspective, Stephen. If you, you know, zoom out, look ahead five years, how do you expect utility planning to look different from today across the industry?

Stephen (17:53)
You know, I I’d expect planning to become more continuous, certainly more iterative and you know, continue to be scenario driven. So generation, transmission, distribution, and customer, and of course gas, where applicable, all those planning assumptions will be exchanged more routinely. So utilities will not necessarily have one enormous model that does everything, but they will have a better connected

set of models to model the decisions and governance across the planning lifecycle.

Marc (18:29)
Got it. If if there’s one idea you want utility executives to remember from this conversation, what what would it be?

Stephen (18:38)
I think that you should really think about this the fact that the system itself is already integrated physically. So the planning processes have to catch up. Utilities that make decisions across the full system will be better positioned to serve growth, protect affordability, and maintain reliability than those that continue optimizing in one of those silos or asset classes.

Marc (19:04)
That that’s terrific insight, Stephen. Thank you. And and thanks for joining me today. I appreciate you helping us make a complex topic practical and explaining how integrated system planning can improve the decisions utilities are making right now.

Stephen (19:20)
It’s my pleasure, Marc. Glad to be here.