In the last year, there have been some serious concerns raised resulting from the combination of Winter Storm Uri, which caused blackouts for much of the state of Texas in February 2021, followed by the slightly increased risk of capacity shortage identified during the MISO Planning Resource Auction in 2022. The latter added fuel to the fire. Then, there were similar warnings from the National Association of Regulatory Utility Commissioners (NARUC) when their Summer and Winter Reliability Assessments showed elevated risk of outages. This news fanned those flames even higher. The good news is that the sky is not falling. And in fact, these worries have brought important issues into the forefront where we can help people understand what these concepts mean and put them in context. These events and reports have also helped utilities, and their regulators work to be better prepared in the future.
As the Midcontinent Independent System Operator (MISO) and the region are preparing for the 2023 Planning Resource Auction, it is a good time to review what occurred in last year's auction, why MISO experienced a shortage in capacity, what the implications of that shortage were, and what solutions are available to utilities and regulators going forward.
The Planning Resource Auction (PRA) is an annual process culminating in a computer automated auction, that seeks to ensure that all the utilities in the MISO region have enough generating capacity to meet consumer demands at all seasons of the year. The first step for MISO planners is to determine what the peak consumer demands will be, and in what seasons. The PRA is called a residual market, because it is used only to trade a small amount of generating capacity (5-10%) between those utilities that have a small need, and those that have some excess. This process is important because reliability depends on having enough generating capacity, which is served by a diverse portfolio of resources across our footprint.
The PRA is an annual check to make sure all the MISO utilities together have enough generators to serve their collective load.
Image by Pabitra Kaity pixabay.comStep two is to add a buffer, called the Planning Resource Margin (PRM). To be resource sufficient, we want to make sure that we have extra beyond just what is needed to meet load. MISO maintains a buffer of available resources every day, and they also require a buffer in this annual planning process. It ensures that if some generators are unexpectedly unavailable, there is extra generation available to fill in. It is like a savings account that you might maintain in case your water heater breaks or something else in your house needs repair. Some might also think of the Planning Resource Margin as an insurance policy, and we don't always need to use our insurance or the full amount.
Image by HUNG QUACH pixabay.comThe combination of the peak consumer demand plus the resource margin is the Resource Adequacy Requirement. MISO tells each utility what their share of that requirement is, and the utilities tell MISO what generating resources they own or have under contract to meet this requirement. Each utility has a different size requirement, or bucket, they need to fill based on the demand of their customers. But because the load changes over time, and it can take years to build new generators, some utilities fall a little short in their bucket, while others find that theirs is overflowing. Utilities are not required to participate in the auction if they can show that their bucket is full, meaning they have enough electricity generation owned or under contract to meet the demands of their consumers.
Mitigating Risk of Outages
All grid planning is done with the expectation that there may be some small number of outages for customers. If we built the system to ensure there would not be any outages, we would be gold-plating the system, and it would be very expensive for consumers. So, MISO plans around the idea that there will be one day of outages every 10 years, or effectively .1 day of outages every year.
When there was a shortage in the PRA in 2022, what really happened was that the size of the buffer of extra generating resources was smaller than planned. In other words, the savings account wasn't as big as they had planned. As a result, instead of meeting the 1 day in 10 years planning standard, our effective risk of outage in MISO was 1 day in 5.6 years. But just because you may not have put as much money as you had planned in your account, it doesn't mean that your water heater will break that year. Similarly, just because MISO didn't have the level of buffer it usually plans for, the region didn't experience any consumer outages during the summer heat or winter storm Elliot. So, the shortage we experienced last year meant that our risk of outage was a little higher than we usually plan for. But in fact, that risk did not materialize in any electricity outages.
There are several solutions that states and utilities can undertake to avoid shortages in the Planning Resource Auction in the future. In the short-term,
- A Sloped Demand Curve would provide more of a signal to states, utilities and the marketplace that the MISO region is nearing a shortage before we experience one.
- Expanding Demand Response and Load Modifying Resources, whether through aggregated smaller consumers, or large industrial consumers that can reduce their electricity usage when conditions are tight, is one of the fastest ways to increase capacity to address the shortage. (Reduced demand acts similarly to adding a new generator in terms of making sure our load and generation stays in balance.)
- Using Surplus Interconnection Service & Generator Replacement offers faster pathways to add new generation resources to the grid, especially storage at existing sites. Surplus Interconnection Service allows new generators to share transmission interconnection sites with existing generators that don't run all the time, while Generator Replacement allows new generators to use the sites of old uneconomic generators that are being retired.
- Build more storage and renewables, which can be constructed in 3-5 years
Storage, wind, and solar, all bring additional generating capacity to the grid to meet MISO's requirements. These resources can be constructed more rapidly than coal, gas, or nuclear plants.
2. Increase the contract path between MISO North and South without constructing new
When MISO experienced a capacity shortage in 2022, it was only short in the northern part of its footprint. The utilities in the south had excess generation that they could share. However, there is limited transmission capacity to move power from the south to the north, and expanding this transmission bottleneck by contracting to use more transmission capacity of MISO's neighbors could allow more resource sharing within MISO.
3. Expedite state approvals of LRTP lines and construction
In July 2022, MISO approved 18 new transmission lines that will allow more generation to be built in the northern MISO states. Before these lines can be built, they must go through state approval processes that can take years. If states can expedite those approval processes, we can build these new lines to support new generation more quickly.
Long-term solutions – Transmission, transmission, transmission
Identifying new transmission lines that can support the reliable addition of new generation, as well as delivery of the energy from these resources to consumers when and where they need it is a key piece of addressing the MISOs resource adequacy requirement. MISO's many transmission planning processes work to identify the most cost-effective transmission additions, within each of the subregions, between the North and the South, and between MISO and its neighboring electricity markets, SPP and PJM.
- Identify and build more transmission capacity that can support reliable addition and delivery of new capacity resources through the LRTP and other MTEP planning processes
- Build new transmission to increase the transfer capability between MISO North and South
- Create a Minimum Interregional Transfer Capacity between MISO and SPP and MISO and PJM
The sky is not falling. In fact, even though our buffer of generating resources was lower than usual, MISO managed through the extreme heat wave in June of 2022, and Winter Storm Elliot without any customer outages. MISO was even able to share its excess energy with its neighbors who were experiencing high demand and unplanned generator outages during these extreme weather events.
MISO always plans for a certain amount of risk, and allowing for some risk helps us keep electricity costs lower than if we planned the system to never have an electricity outage.
Buidling more gas is not the only solution. Instead, MISO should fast-track removing barriers to bringing on new capacity resources, especially wind, solar, and storage. For example, Minnesota's new 100% Clean Energy Bill includes provisions that will help, particularly the Permitting Reform that changes certain requirements for low-voltage transmission lines and improves the environmental review process and other regulations by removing red tape.
Increasing contractual arrangements for capacity use between MISO North and South, expediting state permitting and siting process for the LRTP lines, and, finally, building out our transmission grid to support new capacity resources are other solutions for avoiding capacity shortfall again in the future. They will require a lot of work and take time, but this work can and must be done. And the sooner the better.