MISO leadership last week committed to holding future talks with stakeholders on how to retool its capacity auction to stimulate more supply.

Scott Wright, the RTO’s executive director of market strategy, said the growing reliability risk will require staff and stakeholders to discuss modifications to price signals and how to value resources’ different attributes in the capacity market.

The discussions will be held in the Resource Adequacy (RASC) and Market subcommittees during the next few months, Wright said. He added that the conversations will likely include potentially adding a sloped demand curve in the capacity auction. (See MISO Warming to Patton’s Sloped Demand Curve.)

“MISO is committed to coordinated action and is developing plans for near-term evaluation and stakeholder engagement,” Wright told stakeholders during a Resource Adequacy Subcommittee meeting Wednesday. “We’re not deferring this to next year; we want to get going this year.”

The vow was repeated the next day during a Market Subcommittee meeting.

“We’re looking through what the plan is and will return to these forums,” MISO Senior Director of Transmission Planning Laura Rauch said.

Independent Market Monitor David Patton said after speaking with state regulators following the April planning resource auction (PRA), he’s “cautiously optimistic” that MISO will be on a path to applying a sloped demand curve within six months

“The best time to implement a sloped demand would have been when you’re not in shortage,” he said.

MISO Midwest is grappling with a 1.2-GW capacity shortage following the 2022-23 PRA. The shortfall triggered a $236.66/MW-day cost-of-new-generation-entry clearing-price for the Midwestern subregion. MISO has said the deficit might force it to order temporary, controlled load sheds this summer and next as it is not expecting sufficient firm resources to handle summer peak forecasts under typical demand. (See MISO’s 2022/23 Capacity Auction Lays Bare Shortfalls in Midwest.)

Though members approached this year’s auction with more capacity year-over-year, staff said the resource additions were mostly intermittent and generally less available than retiring thermal generators.

Stakeholders Ask for Data Improvements

Constellation Energy’s John Orr said staff’s posting of preliminary supply and demand data for the PRA could use some improvements and more regular updating.

Orr suggested MISO implement a standardized timeline for posting forecasted capacity positions by local resource zone, perhaps releasing the data in January and updating it on a weekly basis as market participants update capacity values. He said MISO should periodically update how much capacity has been converted to zonal resource credits. He said if a particular zone returns a zero value ahead of the auction, that could spur members into making arrangements to avoid another capacity shortfall.

Orr said a weakness of MISO’s 2022-23 preliminary data was that it was never updated beyond a singular release.

“We all knew those numbers are incomplete, but they gave us an idea of what to expect, especially in zones that are predicted to be tight,” Orr said. He, like other stakeholders, questioned why they failed to warn of a potential shortage.

Orr said he thinks “it’s time for stakeholders to ask MISO what they want to see” and asked stakeholders to work together to develop recommendations to MISO.

He said market participants need a better idea of what resources are expected to be unavailable, either due to retirements or auction exemptions and exclusions approved by the IMM.

“The exemptions and retirements that are protected by confidentially can really kind of can throw you off when you’re going to be very tight, as it appears we’re going to be for the next several PRA cycles. And the seasonal auctions could throw another wrinkle in that,” Orr said.

WEC Energy Group’s Chris Plante said his utility is having “a lot of difficulty” preparing quadrupled data for a yet-uncertain seasonal capacity auction. FERC has yet to approve MISO’s request to conduct four seasonal auctions per year.

In the meantime, MISO leadership continues to issue grim warnings over its forecasted capacity supplies.  

During a July 7 meeting with Kentucky lawmakers, Melissa Seymour, vice president of external affairs, said that part of the state might face controlled load shedding next year.  

Seymour delivered a similar message in front of the Illinois Commerce Commission in May. (See MISO Exec, IMM Debate Next Steps After Capacity Auction Shortfall.)

“Unless more capacity is built or bought, especially capacity able to reliably generate during tight system conditions, the shortfalls we experience this year will continue and get worse going forward,” she said.

MISO’s wholesale footprint affects just 14% of Kentucky’s retail power sales.

Seymour’s comments led Kentucky lawmakers to suggest ramping up coal production, delaying coal plant retirements, and even bringing some nonoperational coal plants out of retirement.

According to its pending 2021 integrated resource plan, Louisville Gas and Electric and Kentucky Utilities intend to retire a dozen aging coal and gas-fired units from 2024 to 2036.

“As a generation unit ages, the economics of retrofitting the unit to comply with new environmental regulations become less favorable,” LGE and KU explained in the filing. However, the utilities still plan to burn coal into 2066.

New Accreditation for Renewables in the Works

MISO continues to evaluate new capacity accreditation designs with stakeholders for the footprint’s renewable resources and load-modifying resources.

During the July RASC meeting, the RTO’s director of policy studies, Jordan Bakke, said staff and stakeholders are “learning together” about accreditation options for non-thermal generation. He said MISO is still in an evaluation stage and hasn’t internally settled on an option.

Patton said once MISO more accurately accredits intermittent resources, it should send economic signals to developers to pair their renewable energy with battery storage. He said co-located renewable and storage hybrid resources will likely have a much higher capacity credit.

MISO laid out three potential options this spring to accredit renewable resources: expand its effective load carrying capability (ELCC) calculation to include solar as well as wind; use the same performance-based accreditation design that it proposed for its thermal generation and currently pending before FERC; or use a blend of ELCC and performance-driven accreditation. 

Some stakeholders expressed confusion with how the blended option would be handled. Staff said they would use its projected loss-of-load risk hours and MISO’s new concept of “resource adequacy hours” — the historical tight margin and emergency periods defined for the performance-based accreditation design — as possible inputs for the new accreditation method. (See MISO Stakeholders Insist on Consistency in Capacity Accreditations.)

The RTO filed with FERC late last year to change its accreditation for conventional resources to a seasonal value based on a unit’s past performance during resource adequacy hours. The new accreditation is contained in a larger filing to create four seasonal capacity auctions. (See Deficiency Notices for MISO’s Seasonal Capacity Auctions Bid.)

The grid operator said the blended approach for renewables has the potential to encompass a “broader range of planning and operational considerations.” Staff said loss-of-load hours and resource adequacy hours don’t necessarily occur on the same days.

MISO plans to discuss a new accreditation method for its non-thermal resources in RASC meetings and special workshops through the end of the year.