MISO and its Independent Market Monitor are at odds over how — and exactly how quickly — the RTO should address its resource adequacy, board members heard Tuesday.
Both sides presented their opinions during a June 16 virtual meeting of the Markets Committee of the MISO Board of Directors.
Monitor David Patton said MISO’s worsening resource adequacy situation is a top concern for his staff, noting that RA solutions will be a centerpiece of his annual State of the Market report due out next week.
Patton said he continues to have “diplomatic disagreements” with MISO over how to handle RA, calling attention to low capacity prices in the April Planning Resource Auction, despite a historically high cost of new entry price for Lower Michigan’s Zone 7. (See MISO: New Outage Rules Boosted Mich. Capacity Prices.)
Outside of Zone 7, MISO zones cleared at $5 to $7 per MW-day, “inefficiently low at less than 3% of the cost of building a new peaking resource,” he said. Capacity should be priced at or above $200/MW-day in those zones, or about 80% of the cost of building a new resource.
Reliability is “almost free” in MISO based on capacity prices, Patton argued. He also said current prices nudge coal generators to retirement and prompt other capacity resources to sell outside the footprint.
“As MISO’s capacity margin continues to fall and renewables enter, it will be increasingly important to send efficient long-term price signals,” Patton warned.
The subregional transmission limit from MISO South to MISO Midwest often binds on the 2,500 MW limit, restricting supply that can be sent from South, whose zones are often in a better capacity position than zones to the north.
“Replacing a megawatt of coal in the North with a megawatt of gas in the South is not contributing effectively to the planning reserve margin,” Patton said.
The Monitor presented its viewpoint after a review of results from the Organization of MISO States-MISO survey, released last week.
The five-year RA survey forecasts MISO will have 0.8 GW of excess firm capacity beyond the planning reserve margin for 2021, although the surplus could reach as high as 7.2 GW. But MISO may confront a 0.4 GW shortfall as early as 2022, with 2023 to 2025 seeing anything from a 6.8-GW deficit to a 12.5-GW surplus, depending on the volume of new resources that come online. It also said some of that surplus in local resource zones could probably cover potential scarcities in other zones. (See OMS-MISO Survey Sees Uncertain Supply Future.)
More Coming than Going
MISO’s generator interconnection queue currently contains 417 projects, totaling about 64 GW, with solar generation accounting for nearly 60% of proposed megawatts. Last year, the queue hit a peak of about 100 GW.
MISO is anticipating a little more than 9 GW to interconnect by year’s end and expects from 8 GW to 39 GW of new resources to join the queue in 2020. And while MISO has executed about 36 GW in generation interconnection agreements from 2015 to 2019, only 18 GW of generation retired over the same time period.
“More has come on than has actually retired on an installed capacity basis,” MISO Executive Director of Systems Planning and Competitive Transmission Aubrey Johnson told board members.
Director Barbara Krumsiek said she was not particularly concerned about a near-term shortfall, although “the press picked up on it.” However, she asked if the possibility of a capacity shortage in a few years might prod MISO and OMS to conduct the survey more frequently than on an annual basis.
“That would be more important if we saw more red [deficits] in 2021 or some more potential shortfall in 2022 … I think right now we’re not contemplating a more frequent survey,” Executive Director of Market Operations Shawn McFarlane said.
Director Theresa Wise suggested that stakeholders would be more reassured if MISO also provided details about how closely past surveys matched eventual supply.
“Would it help this message if we saw what was predicted for 2021 or 2022 four years ago?” she asked.
McFarlane said he was “almost positive that six years ago, 2021 would have showed red.” He said the survey’s indications of retirements and increasing planning reserve margins likely prompt some resource owners to make their generation more available, helping to avoid capacity shortages.
“I think that’s a constant iteration of this process, these actions and reactions based on data,” McFarlane said.
But he added that capacity additions in the interconnection queue are overwhelmingly renewables and intermittent in nature, making efforts to ensure future reliability imperative.
“The resource shift shows no signs of waning,” McFarlane said.
Patton also pointed out that wind resources represent virtually all recent generation additions in Midwest.
“It’s important to keep an eye on that trend; it might cause a capacity problem in the North,” he said.
Spring Easily Managed
The auction played out against a spring backdrop where real-time average energy prices fell to $18/MWh compared to an average $24/MWh in 2019 and about $30/MWh in 2018 and 2017.
“Prices remain low across the MISO footprint, and when you compare to last year, it’s a 25% decrease,” Executive Director of System Operations Renuka Chatterjee said, adding that the low prices were a product of falling natural gas prices and stay-at-home orders in response to COVID-19.
Patton said the spring price drop was the largest he’s ever seen in MISO.
Overall, spring temperatures were about 2 to 3 degrees above the 30-year average in Midwest and about 1 to 2 degrees below normal in South.
Prior to the pandemic, MISO predicted spring energy usage would peak at 100 GW in May — which peaked at just 80 GW. (See MISO Foresees ‘Typical’ Spring.)
“The load was lower, so we didn’t have any significant reliability issues,” Chatterjee said.
Patton said his monitoring team observed a 35% drop in day-ahead revenue sufficiency guarantee (RSG) payments and a 57% decrease in real-time RSG payments compared to last spring. He said the dip was expected and a good sign.
“It signifies that the markets do a really good job of responding to supply,” he said.
Chatterjee said MISO is seeing a return to more normal load levels as states allow a staggered reopening of businesses. MISO continues to forecast day-ahead demand using a “COVID and non-COVID model” to more seamlessly return to predicting normal loads.
“In the early days [of the pandemic], we struggled to get our model to learn the impacts,” he said.
MISO said a forecast for a warmer-than-normal summer with higher air conditioning demand might counter the load-reducing impact of the pandemic. However, it warned that the return of full-force closures could again constrict demand. The RTO projects a 125-GW summer peak. (See MISO Preps for Balmy Summer with Pandemic Effects.)
“There’s still a degree of uncertainty as we head into summer,” Chatterjee said.
“The reality of COVID isn’t a complete crash in demand,” MISO President Clair Moeller told board members.
