By Aaron Stemplewicz of Earthjustice, reposted from Earthjustice.org.
If we are to shift to a clean energy system, as we must, grid operators must rethink the way in which they manage electricity markets and the rules governing essential support services. One of the U.S.’s largest grid operators is stuck in the past, banning renewables from providing ancillary services even though renewables are fully capable of doing so.
Midcontinent Independent System Operator (MISO), operating across 15 states and Manitoba, explicitly prohibits wind, solar, and battery hybrid systems from providing the services that help grid operators maintain a reliable electricity system by balancing supply and demand, known as ancillary services.
In January, Earthjustice challenged this ban before the Federal Energy Regulatory Commission (FERC). Although FERC upheld the prohibition, it warned MISO to prepare for the future when it will be necessary for renewables to provide ancillary services. We recently filed a request with FERC to allow battery hybrid resources to provide ancillary services, which would begin to open this market to cleaner generating resources.
Ancillary services markets are critical to operating the grid reliably
Wholesale power markets primarily consist of three different services that are needed to provide reliable and economically efficient electric service to customers. These services include: 1) day-ahead and real-time energy markets, 2) capacity markets, and 3) ancillary services markets. The day-ahead and real-time markets schedule electricity production based on forecasts, and then reconcile any differences between the schedule and the real-time load. Capacity markets are designed to ensure enough generation is available to reliably meet peak power demands, whereby generators receive compensation for investing in future generating capacity. Ancillary services markets govern the provision of essential support services to maintain the grid’s stability and reliability. These services include frequency regulation, voltage control, and regulating reserves to balance supply and demand, ensure reliability during extreme weather events, and help the system recover after a power system outage.
Renewables can provide ancillary services more cheaply and more effectively than fossil fuel-based resources, with less pollution
Wind, solar, and battery hybrid systems (or inverter-based renewable resource generation) can not only capably provide ancillary services, including regulation, spinning, and supplemental reserves, they can often do so more accurately and more quickly than fossil fuel-based resources. The figure below summarizes the quality of many of the services that inverter-based resources can provide.
Allowing inverted-based resources to compete in the ancillary services market has been shown to “increase system stability while reducing costs.” In addition to lowering costs and creating appropriate price signals that reflect operational needs, participation by inverter-based resources will also create a more reliable grid by adding operational flexibility to the system. Because renewables can provide these services so competitively, thermal resources would run (and pollute) less frequently.
MISO’s outdated ban on renewables providing ancillary services hurts consumers and the public and helps polluting fossil-fuel plants
Inverter-based resources are increasingly the most economically dominant players in energy and capacity markets because they have no fuel costs. MISO is the only FERC jurisdictional grid operator to outright ban renewables from providing ancillary services but elsewhere renewables have been effectively locked out of ancillary services markets as a result of outdated rules governing things like minimum run times. Fossil fuel generators continue to provide nearly 100% of ancillary services for the grid today.
MISO’s ban was put into effect over a decade ago when grid operators had little experience with operating inverter-based resources. At the time, MISO assured stakeholders that the ban would be temporary. But it’s been more than a decade, and MISO has made no meaningful progress on incorporating renewables into this market — for example, MISO has not updated its software to address issues that MISO now claims are an obstacle to removing the ban. By passing up the opportunity to take advantage of the superior operating capabilities of renewables, MISO is favoring fossil-fuel generators and imposing unnecessary costs and pollution on consumers and the public.
Earthjustice urges FERC to overturn MISO’s ban
In January of 2023, Earthjustice submitted a complaint to FERC on behalf of a clean energy trade association challenging the prohibition. Unfortunately, after briefing the issue before FERC, on August 31, 2023, FERC denied our complaint.
FERC not only acknowledged the ability of renewable resources to provide ancillary services and MISO’s problematic differing treatment of them, it even urged MISO to be prepared for a future where these types of resources are required to provide the reliability services that our grid depends on. But FERC erred in not striking down the ban immediately.
MISO claimed that inverter-based resources will provide higher-priced energy (rather than ancillary services) unless they are blocked by transmission congestion, in which case the resources likely cannot deliver ancillary services either. Although MISO acknowledged that fossil fuel-based resources also encounter congestion-based deliverability issues, MISO claimed that it was feasible to manually screen undeliverable thermal resources that were behind congestion, but not renewables (MISO’s computer systems are currently incapable of automatic screening). The FERC ruling allows MISO to continue treating inverter-based resources differently than thermal resources, and did not end the ban (yet).
In a concurring statement, Chairman Phillips and Commissioner Clements noted the narrowness and “fact-bound nature” of the order and warned that in the future such a ban would be discriminatory. They also urged MISO to update its software.
- FERC acknowledged that as renewable resource penetration increases, “a tariff that fails to allow DIRs [renewables] to provide those services could be rendered unjust and unreasonable and unduly discriminatory or preferential.”
- FERC “strongly urge[s] MISO to continue to improve and enhance the software on which its markets rely.”
- The “positive subtext coming out of these proceedings is of an influx of important new resources that, in the near future, may be able to provide significant amounts of ancillary services in MISO and other markets. We anticipate the continued development of these resources and encourage MISO to be ready for them as they come online.”
MISO must update its ancillary services market for a clean energy future
Grid operators must not continue to delay preparing the grid to run on clean, renewable energy. Grid operators will have only themselves to blame if they do not prepare now and are prevented by their own rules and software limitations from accessing these essential services when they are most needed. There is no question that as we progress to a cleaner grid, grid operators such as MISO need to make changes to their rules and software systems to ensure that ancillary services can be provided by the lowest cost, most accurate, and highest quality resources. MISO’s outdated approach threatens reliable service for the 45 million people it serves.
Earthjustice will continue to fight to remove unfair barriers to clean energy and ensure that the energy markets do not exclude or discriminate against clean energy resources. Today we filed a request for rehearing of FERC’s order because none of FERC’s rationale regarding limitations on deliverability apply to battery hybrid resources. Allowing battery hybrid resources to provide ancillary services would be a great first step in opening this market to cleaner generating resources.
As we transition to a cleaner grid, it is imperative that grid operators take holistic view of each of its complementary market products and ensure that they provide equal opportunities for clean resources to compete. Earthjustice will continue to challenge barriers to clean energy and market manipulation that favors fossil fuels.
 See, e.g., id. at 19-29; Minhui Gao et al., Essential Reliability Service Requirements from Utility-scale Solar and Wind in Bulk Power Markets, Master’s project, Duke University (2019); Michael Milligan, Sources of Grid Reliability Services at 1–7, The Electricity Journal 31 (9) (2018); Gevorgian & B. O’Neill, Advanced Grid-Friendly Controls Demonstration Project for Utility-Scale PV Power Plants, National Renewable Energy Laboratory (Jan. 2016); see also M. Morjaria et al., A Grid-Friendly Plant: The Role of Utility-Scale Photovoltaic Plants in Grid Stability and Reliability, IEEE Power and Energy Magazine, 12:3, (2014); Jimmy Nelson et al., Investigating the Economic Value of Flexible Solar Power Plant Operation, Energy + Environmental Economics (Oct. 2018); Paul Denholm et al., An Introduction to Grid Services: Concepts, Technical Requirements, and Provision from Wind, National Renewable Energy Laboratory (2019).