To gather support for the MISO board’s approval of the $10 billion transmission portfolio this summer, MISO executives sounded the alarm bells that there are “insufficient firm resources” this summer implying a greater chance of deploying emergency procedures. From April, MISO’s 2022 capacity auction prices reflected the need for increased imports. But MISO is focused on that transmission portfolio alone at the expense of demand response.
FERC must remove the MISO states’ ability to opt-out retail programs from participating in wholesale markets so that demand response can participate and reduce the risk of rolling blackouts. Transmission is not the only solution available in the marketplace, as we have seen in both California and Texas. Also, unlike in California, FERC should act before a blackout, not after, to preserve its reputation.
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Summer assessment findings
MISO’s capacity prices were followed by a summer assessment that indicated a higher risk of rolling blackouts in areas constrained by import limitations. Not too long ago, MISO had higher reserve margins. Compared to the past, higher retirements and import limitations led to higher capacity prices in the MISO Midwest region (parts of Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota, Missouri, Montana, North Dakota, South Dakota, and Wisconsin).
But MISO is focusing more on transmission projects alone to ensure adequate capacity is available for anticipated summer 2022 conditions. As conventional wisdom suggests, transmission cannot be built overnight. It takes at least 10 years for a transmission project to be in service from the MISO board approval date. Meanwhile, MISO has options, including demand response, to reduce the magnitude of these projected blackouts this summer.
Demand response can reduce the magnitude of rolling blackouts
MISO has 13,000 MW of demand response categorized based on market registration (Table 3-3 here). FERC’s annual report on demand response consistently lists MISO’s demand response as higher than its peers. So, what stops MISO from relying on DR for meeting peak load conditions?
The MISO States is a barrier to allowing their retail demand response programs to participate in the wholesale market. This “opt-out” is an issue that FERC realized and considered when mandating storage in Order 841 and aggregating distributed energy resources in Order 2222. But most MISO states, like Minnesota, can still sideline their demand response programs under Order 719. Hence, MISO states should follow Illinois’ example (which didn’t opt-out) and allow their retail DR programs to participate in the MISO market. That decision alone will help MISO this summer because, according to FERC reporting, there is 13,000 MW of demand response at MISO.
Focusing on transmission alone in the long term comes at the expense of demand response in the short term
One of the primary reasons MISO is in this situation is its focus on transmission as the sole solution to address capacity shortfalls. As past summer and winter events in California and Texas indicate, transmission could be unavailable due to wheeling restrictions (as was the case in California) or lack of interconnection support (the situation in Texas). MISO is in the middle of the country and hence needs transmission to share any renewable energy with demand in the northeast and south and likewise import any emergency energy when polar vortex-like conditions come into play.
However, sounding the alarm bells for summer, especially in the MISO Midwest region, is new for MISO. A reliability imperative should not be a mandate for new transmission alone. While MISO is allocating costs for new transmission among its north and south members separately, MISO should pursue options such as demand response.
The MISO states share resource adequacy responsibility
Since most MISO states are vertically integrated, Integrated Resource Planning (IRP) proceedings signal new capacity needed to meet planning reserve margin targets. MISO’s planning resource auction consistently sees MISO Load Serving Entities (LSEs) offer IRP resources in their Fixed Resource Adequacy Plan (FRAP). And MISO’s capacity auction is limited to a year ahead, not 3 years ahead like PJM.
If MISO states are worried about the increased risk of blackouts this summer, they should work with MISO to increase the deployment of demand response in MISO’s capacity auction.
FERC must act now to ensure a faster implementation date for Order 2222
MISO and its states have an additional tool available at their disposal – aggregated distributed energy resources. A 2021 Organization of MISO States (OMS) DER Survey reported 7,200 MW of DERs, 40% of the total is demand response with solar PV around 30%. In aggregate, this 7,200 MW of DERs can come handy for MISO’s control room operator in an emergency.
By pushing off the implementation of FERC Order 2222 to 2030, MISO would continue to run into risky situations in the 2023 summer and beyond. MISO can avoid those rolling blackouts by making a concerted effort to implement market modifications while MISO implements its gas unit improvements. Implementing natural gas offer upgrades and DER improvements ensures MISO is not exposing itself to future capacity prices, as seen in the 2022 auction.
Since MISO says, “removal of the Demand Response Opt-Out Could Jeopardize RTO/ISO Membership” in its July 23, 2021 comments at FERC in docket RM21-14, FERC should ensure MISO includes demand response in its toolkit to avoid blackouts by removing the state opt-out for DR and ensuring a 2025-2026 implementation date for Aggregated DERs in Order 2222.
If FERC does not act sooner than later, FERC’s actions will be seen in the same light as when it approved CAISO’s wheeling requirements after the summer of 2020 when the blackout happened. As a regulator of MISO, FERC should act before a blackout, not after.
Crying wolf every summer is not good for MISO’s reputation. MISO states must share resource adequacy responsibility since most MISO states are vertically integrated. MISO and MISO states can reduce the risk of prolonged blackouts and dampen the potential magnitude of the loss of the load by incentivizing demand response. An additional step for 2023 summer and beyond would be implementing Order 2222 sooner in 2025-2026 rather than the proposed date of 2030.
FERC should act now instead of waiting for a blackout in the MISO Midwest region in 2022. State regulators would quickly blame FERC if FERC didn’t act before the fact. After the fact, there will be plenty of NERC and FERC joint reporting, as seen with California and Texas events. But before the fact, i.e., blackout, FERC must act by removing state opt-out for demand response and insisting on a 2025-2026 implementation date for aggregated DERs.