Hazy Midwest Power Outlook Clears a Bit; More Regional Cooperation Needed

Moore Headshot 3Sept 25, 2014 by John Moore

Some energy industry observers recently have made much ado about concerns that the Mid-Continent Independent System Operator (or MISO), the entity responsible for managing the electric grid in the Midwest and middle South region, is tight on power supplies and faces an increasing risk of blackouts. Fortunately, recent and ongoing work by MISO and others in the region make the likely reality look better than the cries of concern might suggest.

Protecting the reserve margin

MISO has been focused on its “reserve margin” of available power in 2016, which is the deadline for coal power plants to comply with U.S. EPA’s mercury and air toxics standards, a/k/a MATS. With many coal plants already in dire financial straits because of stagnant demand, competition from cheaper natural gas power plants, and contributions from renewable energy and energy efficiency, there is concern that the plant closings driven by the 2016 deadline will lower the reserve margin to below acceptable standards.

Maintaining a power supply reserve margin of around 15% beyond the forecast demand helps grid operators be prepared for unexpectedly high demand during extreme hot or cold weather or if power plants unexpectedly trip off line. Think of it as a little like the extra gas below the empty line on your car’s fuel gauge.

Few disagree that power supplies will continue to be tight for the next several years, at least until more wind power and other cleaner resources are built in MISO. However, recent information suggests that MISO will be able to manage the problem; blackouts will be extremely unlikely and the grid will continue to function well.

MISO (Source: MISO)

For the states in MISO north of Arkansas – the green states in the map above — MISO currently is projecting about a 2.3% shortfall from the 14.8% target reserve margin of power for 2016. In other words, MISO estimates that while it needs about 112,400 megawatts of power in the northern regions, it believes that 110,100 megawatts may be available, leaving a 2,300 megawatt (or 2.3 gigawatt) gap, as depicted in this graph:

Chart 1

(Source: FERC)

However, as MISO’s chart shows, the South region should have a surplus, and MISO as a whole also will have a slight surplus in excess of the reserve margin. Even more to the point, the shortfall is in only 3 of MISO’s 9 planning areas, and areas with surpluses can help those areas with shortfalls when the system is under stress:

Chart 2

(Source: FERC)

Reason for optimism

While MISO is responsible for managing the electric grid, most states in MISO are in charge of ensuring that enough power is available to meet their own state power demand needs. For example, some states review their electric utility plans for building new power plants and may require them to build more plants, or invest in more efficiency, if a power shortfall looms on the horizon. Since MISO is responsible for preventing blackouts across the entire region, it has a very important stake in ensuring that states obtain sufficient power.

FERC also is paying close attention to the MISO supply outlook, and last week it brought MISO and states together to discuss the issue. While some of the headlines in the trade press were gloomy, many of the comments at the meeting told a different story. For example, in discussing how states have most of the responsibility in MISO for assuring that sufficient power exists for MISO to meet its reliability obligations, Wisconsin Commissioner Callisto – who also heads the Organization of MISO Statesexplained what states are doing to improve the situation in advance of 2016:

Many of the states in the footprint have an integrated resource plan and require their utilities to bring generation plans to them years in advance for approval. Others have different processes to ensure that generation or its proxy will match load. Regardless of the state specific process, states continue to monitor resource adequacy, particularly under the challenges being faced by the fleet in the short term, and have the knowledge and authority to ensure the public’s needs are met.

Michigan Commissioner John Quackenbush also spoke, noting among other things the valuable role for state-led demand response and energy efficiency to help increase reserve margins. These and other comments from both state commissioners led the MISO representative at the FERC meeting to say that he was “quite confident” that the states and their utilities would be successful in maintaining sufficient supply in MISO.

Ways to increase the reserve margin

Here are more ways to fill the small projected shortfall in the reserve margin in 2016 and beyond:

  • MISO has identified between 900 and 1,300 megawatts of underused existing generation in its region, and is working with power plant owners to access this power;
  • As Wisconsin Commissioner Quackenbush said at the FERC meeting, states could activate more demand response programs – this would be a relatively fast and low cost solution to meet unexpectedly high peak power demand;
  • State energy efficiency improvements should help, especially since it’s not clear whether all of the efficiency savings that utilities report to MISO, especially from non-utility programs such as building codes and industrial efficiency, are included in MISO’s current forecasts;
  • If need actually does get tighter than expected, MISO will be able to draw on power from neighboring regions, just as its neighbors did during last winter’s Polar Vortex.

Looking ahead – more joint planning needed

MISO and the states can work more closely together to ensure sufficient power supplies and maintain grid reliability. MISO has the grid’s long-term health in mind; every year it commences a new, rigorous process for planning and improving the system up to 15 years in the future. Through this planning and other activities, MISO can identify gaps in power supply needs and help to guide the states. For their part, states can approve more demand response and energy efficiency programs and new power plants when necessary. If it is clear that state action isn’t sufficient to avoid reserve shortfalls, MISO may have to develop other solutions to ensure grid reliability.

Written by John Moore