ALIGNING RESOURCE AVAILABILITY AND NEED Ensuring reliable and efficient operations every hour of the year DECEMBER 2019 Highlights • Significant progress was made in RAN Phase 1 to improve availability by 5 GW to 10 GW during times of need • Multiple initiatives are underway to address system needs for availability, flexibility and visibility • MISO is pro-actively ensuring reliability in an increasingly diverse portfolio misoenergy.org
Contents Executive Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 History of Resource Adequacy at MISO . . . . . . . . . . . . . . . . . . . . . . . . . 4 Resource Adequacy Timeline and Highlights: . . . . . . . . . . . . . . . . . . . . . . 4 Need for RAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Key Industry Drivers of Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Explore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Evaluation of Reliability Requirements and Metrics . . . . . . . . . . . . . . . . 10 Load-Modifying Resources Performance Requirements . . . . . . . . . . . . . 10 Fuel Assurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Forward Market Mechanism. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Resource Adequacy Construct (8760) . . . . . . . . . . . . . . . . . . . . . . . 14 Decide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Transmission Service Deliverability . . . . . . . . . . . . . . . . . . . . . . . . . 16 Enhancement to Emergency Pricing . . . . . . . . . . . . . . . . . . . . . . . . 16 Do . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Resource Accreditation Improvements . . . . . . . . . . . . . . . . . . . . . . . 18 Multi-day Operating Margin (MOM) Enhancements . . . . . . . . . . . . . . . .19 Done . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Multi-day Operating Margin (MOM) Forecast Initial Report . . . . . . . . . . . 21 Accreditation of Resources on Long-Term Outage . . . . . . . . . . . . . . . . 21 Load-Modifying Resources Availability and Visibility . . . . . . . . . . . . . . . 22 Outage Coordination Enhancements . . . . . . . . . . . . . . . . . . . . . . . . 22 MISO's Stance on RAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Executive Summary MISO’s vision is to be “the most reliable, value-creating RTO.” Since its inception, MISO has converted the capacity from committed resources to energy in order to reliably and efficiently operate the Bulk Electric System. Beginning in 2016, MISO began experiencing a marked increase in the number of Maximum Generation Emergency (MaxGen) emergencies. As a result, the Resource Availability and Need (RAN) initiative was established to identify near-term solutions to increase the conversion of committed capacity resources into energy during times of need. Five key drivers of change were identified as major contributors of increasing MaxGens emergencies. These five drivers identified market conditions which would impact reliability in the near-term and become even more prominent in the future. In early 2019, MISO released the MISO Forward report, which looks at the impacts of three major trends -de-marginalization, decentralization and digitalization. The 3Ds will intensify the operational impact of these five drivers of change as MISO moves into the future. Solutions implemented now must not only address near-term issues, but they must also take the future portfolio into account. To that end, RAN is exploring one of the most complex and critical questions in the industry: What changes should MISO make to address near-term reliability challenges while also preparing for a future portfolio likely to be comprised of far less thermal dispatchable resources, more emergency-only resources, and a large percentage (e.g., 40 percent) of renewable resources? Additionally, how does MISO sequence and align enhancements to not only address near-term issues but also provide an effective progression of changes over time? This transition away from legacy thermal units to new technologies, including more intermittent and emergencyonly resources, requires planning, markets and operations to also evolve. MISO and stakeholders must work to identify and implement new solutions to address the challenges and take advantage of the opportunities presented by the unprecedented scale and speed of industry change. This paper will describe the Resource Availability and Need (RAN) initiative and MISO's plan to address issues in the Explore, Decide, Do, Done framework. 1
The RAN program focuses on enhancements that help create better availability, flexibility and visibility of resources for MISO system needs. MISO created three guiding principles that guide our longer-term preparations while also informing more near-term enhancements. 1. Reliability Needs and Requirements: Reliability criteria must reflect required capabilities in all horizons— all hours matter 2. Reliability Contribution: Members take responsibility for meeting reliability criteria with resources that will be accredited based upon the resource’s ability to deliver those capabilities 3. Alignment with Markets and Infrastructure: Market prices must reflect underlying system conditions and resources must receive appropriate incentives for the capabilities they provide; infrastructure should enable efficient utilization of resources As initiatives flow through the Explore, Decide, Do, Done framework, solutions will be evaluated in accordance with these guiding principles. The availability of transmission and energy resources to meet requirements at all hours The ability to see and coordinate relevant resource, demand and power flow attributes on operating and planning horizons REQUIREMENTS B I The ability to anticipate and adapt to frequent and significant changes in resource output and demand, including the enabling of new sources of flexibility 2 A I V I A I B L S A I B V I L I T L Y Y I L T Y F E T X I I L
Explore • Evaluation of Reliability Requirements and Metrics • Load-Modifying Resources Performance Requirements • Fuel Assurance • Forward Market Mechanism • Resource Adequacy Construct (8760) Decide • Transmission Service Deliverability • Enhancement to Emergency Pricing Do • Resource Accreditation Improvements • Multi-day Operating Margin (MOM) Enhancements Done • Multi-day Operating Margin (MOM) Forecast Initial Report • Accreditation of Resources on Long-Term Outage • Load-Modifying Resources Availability and Visibility • Outage Coordination Enhancements THESE ITEMS CAN BE TRACKED WITH THE INTEGRATED ROADMAP ON OUR WEBSITE 3
History of Resource Adequacy at MISO The term “Resource Adequacy” refers to the electric industry’s ability to serve peak demand while also providing enough excess supply to achieve an agreed-upon level of grid reliability. In the MISO footprint, the responsibility for achieving resource adequacy rests with Load Serving Entities (LSEs) with oversight by states as applicable by jurisdiction. MISO facilitates these efforts by administering tariff-defined Resource Adequacy Requirements, which LSEs use to demonstrate their ability to serve peak demand and provide a sufficient margin of excess supply. These requirements help to ensure that the MISO footprint will have ample supply to meet demand in all time horizons. In 2004, MISO began phasing in its approach to support resource adequacy in its footprint. MISO’s approach was designed to complement state mechanisms as a majority of MISO members operate within traditionally regulated cost-of-service utility constructs. Initial efforts focused on energy pricing improvements to enhance reliability across the region. In 2008, a monthly Voluntary Capacity Auction was implemented to allow Load Serving Entities (LSEs) to efficiently buy and sell residual capacity in advance of each month. Since 2011, the Federal Energy Regulatory Commission (FERC) has required that MISO's resource adequacy construct include locational components. In 2012, FERC approved replacing the monthly auction with the annual Planning Resource Auction (PRA), which established seven Local Resource Zones. In 2018, MISO added tariff provisions to incorporate External Resource Zones, as well. Going forward, MISO must address whether there is continued value in refining MISO’s existing resource adequacy construct, or whether future reforms and enhancements must be focused on operational adequacy and energy market reforms. RESOURCE ADEQUACY TIMELINE AND HIGHLIGHTS 2004: FERC approves MISO’s original transmission and energy market tariff, with a short-term resource adequacy provision. MISO is directed to develop something more permanent. 2006: With FERC’s approval, MISO develops a phased-in approach to establish a permanent resource adequacy mechanism. Phase I develops an ancillary services market for contingency reserves; Phase II calls for a longterm integration of shortage pricing into the energy markets. 2007: Phase I of MISO’s ancillary services market is approved. MISO proposes Planning Reserve Margin (PRM) requirements for LSEs on an LSE-by-LSE basis for Phase II. 4
2008: Phase II of MISO’s resource adequacy construct is approved, with the caveat that MISO must consider multiple reserve margin methodologies and operate with a regional approach. 2008: Per FERC directive, MISO proposes an assessment to financial settlement charges on LSEs that fail to satisfy their resource adequacy requirements as well as a voluntary capacity auction to allow LSEs with insufficient capacity to meet these requirements with the opportunity to purchase capacity from market participants with excess planning resources. FERC urges MISO to take proactive steps to incorporate locational market mechanisms into its resource adequacy construct. 2011: Per FERC request, MISO proposes several changes to its resource adequacy construct including: (1) an annual resource planning process; (2) options for LSEs to meet their requirements; (3) establishment of seven local resource zones; (4) a minimum offer price rule. 2012: FERC accepts the major elements of MISO’s resource adequacy construct for an annual Planning Year with a two-month forward period and a vertical demand curve; it also accepts MISO’s locational market mechanisms. FERC rejects MISO’s proposed mandatory auction requirement and the Minimum Offer Price Rule (MOPR) proposal. 2016: MISO proposes a Competitive Retail Solution (CRS) to address emerging resource adequacy needs in competitive retail areas. 2017: FERC rejects CRS, expressing concerns that bifurcating MISO’s resource adequacy construct into two separate markets could create uncertainty in terms of price formation, market efficiency and transmission allocation. MISO then helps affected states develop long-term resource adequacy processes. 2018: MISO modified its Resource Adequacy construct to model and price External Resources in External Resource Zones to prevent inequity and address potential reliability concerns. MISO paired creation of these zones with Historic Unit Considerations (HUCs), which prioritizes holders of historic transactions for distribution of excess revenue if there is price separation. 2019: FERC accepts MISO’s filing to make enhancements to LMR testing and registration along with improvements to generator outage coordination. MISO released the MOM Forecast to provide a seven-day, forward-looking report to Market Participants. The report forecasts expected resources and obligations to assist in resource commitments. Additionally, MISO submitted a filing to provide clarity on long-term outages within the Planning Resource Auction. 5
Need for RAN The RAN initiative, instituted in 2017, came as a response to the increasing number of MaxGen emergencies events as outlined in MISO's 2018 Issue Statement Whitepaper. MISO recognized that changing market conditions were impacting the resource fleet’s operational characteristics and challenging the reliability and efficiency of market outcomes. At the RAN initiative inception, a total of 12 emergencies occurred beginning in the 2016-17 planning year through half of the subsequent planning year. That trend has continued as MISO entered MISO Market Capacity Emergency procedures 27 times through the summer of 2019. These events have occurred multiple times in every season reinforcing the notion that “every hour matters.” This differs greatly from the assumption that the system will be reliable for all 8,760 hours of the year as long as utilities have enough generation capacity to meet demand on the "peak hour" of the year, which typically occurs on an exceptionally hot and humid summer day. This white paper summarizes MISO’s actions regarding future stakeholder discussions during which it will continue to work collaboratively to enhance availability, flexibility and visibility. MISO Maximum Generation Emergencies 0 0 8 4 3 2 1 3 3 2 2 3 2 2 8 9 2+ 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 Wind Volatility 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 6/1/15 9/1/15 12/1/15 3/1/16 6/1/16 9/1/16 12/1/16 3/1/17 6/1/17 9/1/17 12/1/17 3/1/18 6 WINT SPR SUMM AUT WINT SPR SUMM AUT WINT SPR SUMM AUT WINT SPR SUMM AUT WINT SPR SUMM AUT WINT SPR SUMM AUT
Key Industry Drivers of Change In early 2018, MISO released the RAN Issues Statement Whitepaper, which outlined drivers of change with a significant impact on current operations and practices. While RAN has implemented multiple solutions, those five Drivers of Change are still relevant and are being accelerated by the 3Ds. The growth of variable energy resources (related to De-marginalization) along with the proliferation of Load-Modifying Resources (LMRs) and other Distributed Energy Resources (Decentralization) are clearly linked to Drivers of Change 1, 3, and 5. DRIVER ① AGING AND RETIREMENT OF THE PORTFOLIO’S GENERATING UNITS Retirements and increasing outage levels (both planned and forced) require MISO to operate with less available capacity than in the past. The effect is a reduction in the redundancy provided by additional resource availability. For example, daily average energy offers were down 8 GW in Planning Year 2016/17 over Planning Year 2015/16. This reduction reflects a 4 GW net resource retirement and a 4 GW (23 percent) increase in the average MWs on outage. Total Approved Retirement since 2005 (24.3 GW) 2% 2% 1% Generation Retirement Trend by Fuel Type (Capacity in MW) 1081 22% 786 242 13 7 73% 98 234 1024 880 931 1929 7001 4575 4410 953 170 Coal Gas Nuclear Oil Diesel Other DRIVER ② OUTAGE CORRELATION The MISO system has year-round load and supply needs, but is planned with a summer-focused capacity commitment. Lower overall capacity levels and higher outage rates have reduced available capacity in non-summer periods. As a result, the MISO footprint has experienced frequent MaxGen emergencies outside summer. This imposes a growing challenge to ensure sufficient available capacity in those periods. Of the 27 recent MaxGen emergencies, 74 percent of them occurred outside of the summer months. 7 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
DRIVER ③ GROWTH IN DEMAND SIDE AND OTHER EMERGENCY-ONLY CAPACITY LSEs committed more than 11 GW of LMR (demand response and behind-the-meter generation) cleared in the PRA in 2019. This was 9 percent of the summer peak load forecast. These 11 GW of resources are not available to MISO’s operators without the declaration of a MaxGen emergency under the existing framework. Overall, LMR performance has fallen short of its performance requirements during emergencies. Additionally, LMRs can have notification times up to 12 hours and can have limited or no availability outside of summer. However, based on FERCs approval of the RAN Phase 1 filing relating to LMR performance and generator outages, these resources are now required to offer their true availability and shortest notice time throughout the year. LMRs also must demonstrate their ability to curtail load on an annual basis. DRIVER ④ GROWING RELIANCE ON UNSCHEDULED RESOURCES MISO now relies more heavily upon uncertain or otherwise non-committed supply resources. In the last few years MISO has become a significant importer of energy from neighboring systems. About half of this energy is scheduled in real time with submission of interchange due just 20 minutes prior to each 15-minute interval. While MISO has arrangements in place for the purchase of emergency energy from neighboring systems during declared emergency conditions (as occurred in January 2018), availability of such energy remains highly uncertain. While the regions have successfully managed these issues to date, there could be increased risk to reliability if steps are not taken to address the changing future portfolio. DRIVER ⑤ GROWTH OF VARIABLE ENERGY RESOURCES Variable energy resources (e.g. wind and solar generation), an increasingly important resource category, has different operational characteristics than legacy thermal resources. Renewable resources are accredited based on historic contribution during past system peaks, but there is no assurance that the accredited capacity will be available during a particular emergency event. If wind or solar happen to contribute less during a particular time of need than in prior instances, the difference must be made up elsewhere. These resources, at times, will likely help conditions by producing more than accredited, so it is important to understand and plan for the operational implications of future growth of renewables . 8
Seek to understand opportunities and challenges and identify new capabilities that will sustain and enhance MISO's Value Proposition Leverage insights to conduct studies and analysis that guide economic and reliability decisions Prioritize the execution of clear solutions Done 9 Initial implementation has been completed. MISO collaborates with stakeholders to make continuous improvements to maximize value
EVALUATION OF RELIABILITY REQUIREMENTS AND METRICS As part of MISO's assessment of risk and opportunities in a transforming portfolio, MISO is evaluating how to analyze and identify appropriate future reliability requirements and metrics to meet MISO's needs - Availability, Flexibility, and Visibility. This evaluation should shed light for planning purposes on the type and quantity of specific capabilities needed from resources across all hours of the year. As an example, this evaluation of capabilities would not only address generic flexibility related services such as ramping, but it would also address how much and what type of ramping the system needs across various time horizons (immediate, within an hour, within the day and across days). Ramping is one example of a capability needed to operate the system reliably in a portfolio where at least 40 percent of the generation comes from renewables. MISO’s studies - Renewable Integration Impact Assessment (RIIA) and Portfolio Evolution Study simulations - give an indication of these needs and show the magnitude of extreme ramps will grow. Additionally, the RIIA study shows frequency regulation, system stability and local voltage support will become more challenging with increasing renewable penetration. MISO’s existing planning mechanisms, markets and operational processes are sufficient to address these needs at the region’s current penetration of renewables. However, all of these tools will need to be reevaluated and potentially revised as renewables continue to grow in the region. These assessments and related engagement with stakeholders are of the highest priority while MISO also continues to advance other directionally aligned enhancements that are more near-term in nature. Next Steps • Work with stakeholders to evaluate the effectiveness of current reliability requirements and metrics to address risk and opportunities within a transforming portfolio • Based on findings and input from stakeholders, recommend changes to reliability requirements and metrics to assess needs across all hours LOAD-MODIFYING RESOURCES PERFORMANCE REQUIREMENTS In each of the past three Planning Reserve Auction years, LMRs comprise a higher percentage of MISO resources. The region is increasingly experiencing tight operating conditions that MISO must address by deploying all types of resources — including LMRs that currently can only be called into service during emergencies. This increasing reliance on and use of LMRs, now and in the future, begs the question as to whether LMRs should continue to be treated differently from traditional generation. 10
In terms of managing the system in real time, the increasing penetration of LMRs limits MISO's ability to effectively and efficiently use all the resources that are committed under the region's capacity construct. This is partly due to a lack of sufficient locational information. Further, LMR access comes via Emergency Operating Procedure (EOP) activation at Step 2a, when conditions are volatile due to stakeholder responses to earlier emergency declarations, both within MISO and other Balancing Authorities. Additionally, MISO is limited to five LMR deployments per planning year, so use must be judicious. Lastly, LMRs are only obligated to be available during the summer season. LMR deployment is not a simple calculation. A single CPNode may cover a vast area of the reliability footprint thereby limiting system operation’s ability to know exactly how and to what extent LMR deployment will help mitigate an emergency. More precise locational information will improve MISO’s ability to mitigate system emergencies. In addition, there is a disparate and different set of tools used to Load Curtailment manage LMRs versus traditional generation. Traditional generation is dispatched via the Day-Ahead Real-Time (DART) Energy Markets Operating System versus LMRs, which are committed through a component of the MISO Communication System (MCS). Better locational information and a single platform for commitment/dispatch of traditional generation and LMRs would allow LMRs to be used for congestion management and to relieve constraints. From a market perspective, LMRs are also treated differently. Traditional generation uses a different testing and performance penalty structure for nonperformance compared to LMRs. Also, while there have been recent tariff changes on rules for utilizing LMRs more effectively, they are still only obligated to be called upon five times per Planning Year. These issues are complex as MISO markets, operations and the broader Bulk Electric System (BES) have evolved and changed significantly since the introduction of LMRs to the MISO Tariff. As LMRs continue to displace traditional generation as a percentage of total resources and are utilized more frequently, there is a need to evaluate if it is appropriate to continue to treat them differently, while also understanding the limitations in doing so. Load Modifying Resource (LMR) is a category that refers to the use of a demand resource toward meeting Planning Resource Margin Requirement (PRMR) Next Steps MISO will engage with stakeholders to: • Explore LMRs performance and impacts during MaxGen emergencies Emergency Demand Response (EDR) is a service that refers to the use of a demand resource under a specific Tariff schedule. Demand Response Resource (DRR) refers to a resource type; one that provides service to the energy and ancillary services market. • Generate options for process improvements to provide better visibility into LMR availability • Engage stakeholders to evaluate options for operational and planning enhancements 11
FUEL ASSURANCE material during extreme winter weather and contribute to reduced operating margins. Fuel-related issues with gas-fired generators impacted reliability and pricing outcomes during MaxGen Capacity Emergencies in January 2014, 2018 and 2019. During these events, MISO deployed every emergency and non-emergency resource available. While fuel issues were not the only driver of these MaxGen events, they were another risk factor associated with the extreme winter weather that led to capacity scarcity. MISO can be capacity sufficient one day and insufficient the next, should a number of often-correlated risks align. The table below shows the number of MWs of gas-forced outages during past winter MaxGens, and the number of MWs attributed to fuel issues based on Generating Availability Data System (GADS) cause codes. MISO has undertaken a number of initiatives to enhance fuel security in the region, including administering an annual, voluntary survey that provides insights into the methods that gas-fired generators use to ensure that their facilities can operate when needed. The survey was first published in 2015 and has response rates of 70-90 percent of the fuel-based generation in MISO. The survey and various internal studies indicate some redundancies for gas-fired generation in MISO (such as back-up fuel capabilities or connections to multiple gas systems). Also evaluated is the growing availability of fuel across the entire region due to the growth of shale gas supply and related improvements in gas pipeline deliverability. MISO has also completed assessments of vulnerability to disruptions of gas supply and pipeline infrastructure and found MISO much less vulnerable compared to some other regions. That said, fuel-related outages are However, past winter MaxGen emergencies have illustrated the difficulty and expense of gas procurement during extreme cold. As a result, MISO has been exploring how to provide gas generators with the certainty and flexibility they need to firm up their fuel supply when MISO expects tight operating margin conditions. This includes the recent implementation of MOM Forecasts. Next Steps • Evaluate how enhancements to MISO's resource accreditation process and markets could mitigate multiple risks that the region faces, including risks related to fuel assurance. • Work with stakeholders and the gas industry to explore firm/flex natural gas pipeline pre-positioning and offerings in a multi-day context Fuel-Related Outage Share During Winer MaxGen Emergencies Winter MaxGen Day 1/6/2014 1/7/2014 1/17/2018 1/18/2018 1/30/2019 1/31/2019 Gas forced outages in GADS 8.2 GW Coded as fuel-related in GADS 4.5 GW 12.0 GW 5.4 GW 7.3 GW 7.8 GW 5.8 GW 3.6 GW 3.7 GW 2.7 GW 6.4 GW 3.0 GW % Fuel Related 56% 45% 49% 47% 47% 46% 12
FORWARD MARKET MECHANISM Since its founding, MISO has worked with stakeholders to set up rules, processes and markets that ensure applicable reliability standards are met in ways that create value for MISO members. MISO’s Day-Ahead (DA) and Real Time (RT) energy markets utilize security-constrained unit commitment and securityconstrained economic dispatch while using industry best practices and industry-leading price formulation methods, including MISO enhancements such as enhanced LMP (ELMP) and emergency pricing. While market-based unit commitment is an important efficiency enhancing component of the energy market, given the uncertainties and incentives faced by resource owners, most commitment of capacity has occurred prior to the Day-Ahead market due to owner operational, financial, and contractual considerations. For example, given practical operational considerations, nuclear units remain running while not on outage rather than wait for a Day-Ahead market-based unit commitment. Low wholesale energy prices and the increasing volatility and uncertainty of system needs and resources has led a number of stakeholders to request that MISO provide better information in advance of the Day-Ahead market to inform unit commitment decisions. In addition to implementation of the MOM volumetric forecast, MISO is responding to this request by exploring a Forward Market Mechanism. The goal of a such a mechanism is to better inform and incent member decisions about resource availability in advance of the Day-Ahead market – ultimately with a goal of mitigating the risks of insufficient energy in real-time and preventing inefficient production cost. Decisions that could be informed by a FMM in advance of the DA include: •Outage timing & prevention •Commitment of long-lead resources •Fuel procurement decisions •Availability of flexible resources •Import and export scheduling •Flexible load scheduling and LMR use Generation Outages by Lead Time 60,000 - 40,000 - MW 20,000 - 0 - <1d 1-7d 7-90d >90d 13 JAN 17 - FEB 17 - MAR 17 - APR 17 - MAY 17 - JUN 17 - JUL 17 - AUG 17 - SEP 17 - OCT 17 - NOV 17 - DEC 17 - JAN 18 - FEB 18 - MAR 18 - APR 18 - MAY 18 - JUN 18 - JUL 18 - AUG 18 - SEP 18 - OCT 18 - NOV 18 - DEC 18 - JAN 19 - FEB 19 - MAR 19 - APR 19 - MAY 19 - JUN 19 - JUL 19 - AUG 19 - SEP 19 -
Next Steps • Discuss problem definition and evaluation criteria at the Market Subcommittee • Identify and assess potential alternative approaches • Develop, test and discuss a Forward Market Mechanism proof-of-concept results with stakeholders RESOURCE ADEQUACY CONSTRUCT (8760) MISO is evaluating whether the current resource adequacy construct is sufficient to address reliability risks throughout the year now and in the years to come. Several factors contribute to this exploration, including planned and forced outages; the changing resource mix due to retirements and addition of more variable energy resources; net scheduled interchange volatility; and extreme weather events. Historically, MISO's approach to resource adequacy has focused on ensuring that sufficient resources would be available when demand peaks in the summer--with the expectation that serving load the rest of the year would be comparatively easier. But given the increase in MaxGen emergencies in the last three years in nonsummer seasons, MISO is now evaluating whether a summer focus continues to make sense. As part of that evaluation, MISO is looking into several traits of the current construct such as the granularity, risk metrics, PRA auction design, reliability requirement, and market signals. There has been growing concern that the current construct is missing risks outside the summer timeframe. During the last three years, only one of the 10 total MaxGen emergencies has occurred in the summer. Because of this, MISO is evaluating whether a more granular construct could help provide visibility into risks throughout the year to ensure reliability during all time periods. One option would be a seasonal construct, which has the potential to match reliability requirements to specific seasons and provide the flexibility for resources to participate in the PRA in times best suited for each resource. In addition to the granularity of the resource adequacy construct, MISO is looking at the risk metrics used in establishing the PRM and Local Reliability Requirements. The industry standard used by MISO has been a loss of load expectation(LOLE) of one day in 10 years (0.1 days/year). However, given the changing resource mix and increase in variable energy resources, MISO will evaluate if the LOLE metric sufficiently reflects risk, especially across all hours of the year. There may be a need to augment the LOLE metric or consider alternatives. Expected Unserved Energy (EUE) is one alternative metric for assessing reliability risk, which has some support from others in the industry and from several stakeholders. EUE is expressed as the expected number of megawatt-hours of load that will not be served in a given time period. One reason it may be useful compared to LOLE is as storage and other variable energy resources become more prominent in the MISO portfolio, EUE has the ability to measure those attributes. There are additional alternatives worthy of consideration and MISO is evaluating those as well As MISO moves into the future, it will be essential to utilize the proper risk metric to determine reliability criteria and requirements. The reliability risk metric is not the only crucial component to accurately capture risks. Improved modeling is something MISO continuously strives to achieve and is directly linked to accreditation as shown in the feedback loop graphic. 14
Linkage Between Accreditation and Actual Operations Real World Accreditation PRM Modeling Lastly, MISO members will need to continue to take responsibility for meeting reliability criteria with resources that will be accredited based upon the resource's ability to deliver specific capabilities. This contribution to reliability can be met through self-supply or market purchases. A seasonal construct is a serious consideration for MISO because of the granularity and flexibility it provides in reliability planning and aiding in meeting the system’s future needs. Identify Risks Next Step • MISO will continue discussions related to the resource adequacy construct with stakeholders at the Resource Adequacy Subcommittee (RASC) 15
TRANSMISSION SERVICE DELIVERABILITY Potomac Economics, a Washington, DC-area company that servers as MISO's Independent Market Monitor (IMM), recommended in 2017 that all resources in the MISO region should be able to deliver 100 percent of their accredited Installed Capacity (ICAP) levels to load when needed. MISO agreed to evaluate this recommendation as part of the MISO Integrated Roadmap #65 and the 2019 RASC workplan. In 2019, the FERC encouraged MISO to continue working through the stakeholder process for implementation. The tariff requires that all types of resources be deliverable to load in order for eligibility as capacity resources. Deliverability is determined by, among other things, demonstrating the resource has Network Resource Interconnection Service (NRIS) or Energy Resource Interconnection Service (ERIS) coupled with firm transmission service reservations. MISO is working towards a solution for determining deliverability for all resources based on the entire ICAP of applicable planning resources. This will ensure consistency with MISO’s transmission planning studies, which assume that resources will perform up to their ICAP level when available. By making this change, resources would be required to demonstrate firm transmission service in the amount of their full ICAP level either by having NRIS up to their ICAP level or ERIS along with firm transmission service up to their ICAP level. However, this may not be appropriate for intermittent resources because these resources cannot consistently provide capacity at the level of their full ICAP value. Therefore, MISO is exploring options, in conjunction with stakeholders and the IMM, through the RASC on potential solutions for the intermittent resources deliverability requirement. The requirement to demonstrate deliverability for intermittent resources will be calculated and set at a more appropriate, expected output rather than their full ICAP levels. Next Step • MISO will continue the discussion with stakeholders and the IMM at the RASC in 2020 ENHANCEMENTS TO EMERGENCY PRICING MISO administers competitive electricity markets to deliver reliable and efficient outcomes at the lowest cost. Since the inception of the energy markets, MISO and the Independent Market Monitor (IMM) have analyzed the markets to identify and implement various types of enhancements. For example, pricing should be consistent with the marginal system cost and degree of reserve shortage during emergency events, considering the marginal cost of out-ofmarket reliability actions, costly demand response deployments, the Value of Lost Load (VOLL) and Loss of Load Probabilities (LOLP) during reserve shortages. Said more simply, prices should be high enough to reflect that MISO is running out of resources when it makes emergency declarations. Scarcity pricing should also reflect regional reliability risks and reserve 16
needs. MISO’s IMM and stakeholders have questioned whether prices during MaxGen emergencies reflect the scarce conditions declared by MISO so as to properly incentivize needed resource availability, avoid uplift from reliability commitments, and incent market participants to take other actions that would improve the supply-demand balance. MISO continues to look for ways to inform and enhance markets to align with desired operational outcomes. MISO pioneered the ramp product, ELMP pricing, and emergency pricing which aims to avoid price suppression by using the highest available offer when pricing emergency resources. Going forward, MISO will continue to pair solid theoretical market pricing approaches with enhancements that are expected to incent needed Market Participant behavior during times of scarcity. MISO’s pricing design must provide efficient incentives for adjustments to interchange with its market and non-market neighbors. In recent years, MISO has become a significant net importer but most of the interchange is submitted as fixed schedules and is not explicitly committed through economic market mechanisms in either the DA or RT markets. Changes in net schedule interchange (NSI) during emergencies can supply needed megawatts to meet MISO load and maintain reserves, but reductions in NSI can also lead to reserve shortages and reliability challenges if the MISO market design does not send an efficient price signal for import supply. In addition, the Net Scheduled Interchange scheduling process can create uncertainty about capacity sufficiency when making reliability and market commitments. This impact of uncertainty regarding future levels of NSI on commitment decisions has contributed to low prices during MaxGen emergencies and significant amounts of uplift. Next Steps • Enhance emergency pricing outcomes • Assess the shape and ceiling of the Operating Reserve Demand Curve including estimates of the Value of Lost Load • Decide whether/how to better optimize interchange between RTO and non-RTO regions Misalignment Between NSI and Regional Price Differences 700 600 500 400 300 200 100 0 -100 1 3 5 7 9 11 13 1/30/2019 17 15 17 19 21 23 1 3 5 7 9 11 13 1/31/2019 15 17 19 21 23 * PJM & MISO Price Vs NSI Real-Time LMP Difference Real-Time NSI with PJM RT LMP Difference $/MWh
RESOURCE ACCREDITATION IMPROVEMENTS The goal of resource accreditation is to incentivize improved availability throughout the year, especially in periods where margins are tight. MISO’s current Resource Adequacy Construct allows many exceptions to real time availability. The PRA allows resources to offer and clear the auction without a reduction in their capacity credit, even in light of these exceptions. Because resources can use these exceptions without a reduction in their capacity credit, there is little incentive to be available in times of need. Additionally, MISO has many different resource types, each with different capabilities. MISO’s current accreditation methodologies do not accurately reflect these capabilities. For instance, some resources have use limitations that are not efficiently accounted for in accreditation. One example is the lead-times of resources to respond which are not factored into the credit they receive. Ideally, MISO would have a capacity accreditation methodology that accounts for actual resource availability, specific resource capabilities as well as the deliverability of resources. Also, LMR accreditation will be critical as those resources become more prevalent within the MISO footprint and continue to make up a significant portion of the PRM as shown below in the Day-Ahead Must Offer chart. MISO developed several guiding principles related to accreditation that include: 1) incentivized availability for periods of tight margins; 2) removal of exceptions currently in place that limit availability; 3) providing visibility into actual availability of all resource types throughout the year to better manage reliability risks; and 4) the establishment of a more universal methodology for all resource types that accounts for a resource’s specific capabilities. Load-Modifying Resources are an Increasing Share of Cleared Capacity Resources Planning Resource Auction Year Total Cleared Demand Resources (DR) DR as % of Total Cleared Behind-the-Meter Generation (BTMG) BTMG as % of Total Cleared DR + BTMG as % of Total Cleared 2017-18 134,753 6,014 4.5% 3,456 2.6% 7.0% Planning Resource Auction MWs Cleared 2018-19 135,179 6,964 5.2% 4,098 3.0% 8.2% 2019-20 134,743 7,372 5.5% 4,097 3.0% 8.5% 18
Next Steps • MISO is exploring several options for accreditation with stakeholders at the Resource Adequacy Subcommittee (RASC). - Effective Outage Rates (EOR), which include planned, maintenance and forced outages and derates - A real-time availability option that would look at Day Ahead and Real Time offer data during hours of tight margins to accredit resources - LMR accreditation that reflects actual availability, which could include past performance or utilization of MCS • MISO is targeting the first half of 2020 to file a new accreditation methodology with FERC for most resource types. MULTI-DAY OPERATING MARGIN (MOM) ENHANCEMENTS MISO stakeholders want better information to help them identify potential operating day issues several days in advance. Until October 2019 stakeholders, generation and transmission owners/operators generally became aware of operating day issues only when MISO declared various advisories, alerts, emergencies and events via Emergency Operating Procedures (EOPs). Since these procedures focus on real-time operations, notice is generally provided just hours in advance of a potential issue. A multi-day operating margin and associated inputs provides better transparency to various stakeholders. Generation and transmission owners/operators are better able to assess their risk to adjust planned operations and outages on their own and better align Historical Hourly Day-Ahead Offer (MISO System, MW) 160 150 140 130 120 110 100 90 80 70 6/2014 12/2014 6/2015 12/2015 DA Offer Available 6/2016 12/2016 PRMR PRA 6/2017 12/2017 Gen. PRA Cleared 6/2018 12/2018 19 Thousands
their plans without having to wait for a request from MISO. This also provides generators better information in order to procure natural gas and make associated pipeline reservations multiple days in advance rather than the day prior to operations. MISO began posting multi-day peak hour operating margin in October 2019. This information, which is updated daily, is based on the information used by MISO Operations. MISO intends to solicit stakeholder feedback to guide work efforts on subsequent iterations, adjustments and improvements. Next Steps While specific details will be vetted with stakeholders, future enhancements could include uncertainty in load and renewable forecasts and hourly disaggregation of data. Other improvements to reduce uncertainties could include, but are not limited to: • Estimates of forced outages/capacity returning from outage • Regional Directional Transfer (RDT) flow • Interchange forecasting, stranded capacity • Behind-the-meter generation and emergency resource information Future enhancements will have to consider availability of data, effort to generate new data and data confidentiality. 20
Done MULTI-DAY OPERATING MARGIN (MOM) FORECAST INITIAL REPORT Stakeholders have expressed interest in understanding near-term system needs, especially in areas such as whether the system is expected to experience tight operating conditions on a forward-looking basis. To that end, MISO has created the created the MOM Forecast. The table below illustrates committed and uncommitted resources (broken down by lead time), along with a renewable forecast and NSI. These variables equal the total resources available. The report also provides the projected load and operating reserve margin. The total resources available minus the obligation provide the resource operating margin. The lower the number, the tighter the forecasted operating margin is expected to be. ACCREDITATION OF RESOURCES ON LONG-TERM OUTAGE The MISO Tariff does not specify adverse consequences for resources that clear in a given PRA and are either on long-term outage or have one scheduled after the beginning of the Planning Year (PY). In such a scenario, a resource would receive capacity credit during an extended time of planned unavailability. In October 2019, MISO formally presented the Resource Adequacy Subcommittee with a structure to address these situations. The framework stipulates that resources expected to be unavailable for at least 90 of the first 120 days of the Planning Year do not qualify for PRA participation. Pending FERC approval this would be effective beginning with the 2020-2021 Planning Year PRA. This filing is not necessarily intended to be a longterm solution, but rather a pathway to a more comprehensive accounting. Factors to consider during this extended review period are resource accreditation and other qualification elements, examination of further statistical analysis and potential seasonal considerations that include a more granular focus and/or increased flexibility. The target PRA for these additional elements is the 2021-2022 PRA. View our Multi-day Operating Margin (MOM) Forecast Reports here 21
LOAD-MODIFYING RESOURCES AVAILABILITY AND VISIBILITY OUTAGE COORDINATION ENHANCEMENTS The intent of Phase 1 for LMRs was to improve visibility and availability throughout the year. Through the enhancements to the LMR registration process, 9.5 GW of the 11.4 GW of LMR capacity indicated they would be available to be called on year round. Along with indicating more availability, the amount of LMRs with less than two hour notification time increased from 2.2 GW to 4.1 GW. Another enhancement to the availability and visibility of LMRs was modifications to testing requirements. To help facilitate the testing requirements during the accreditation process, MISO accounts for LMR performance during events in which they were called upon. If LMRs wish to opt-out of the testing requirements, they could do so, but with significant penalties associated with non-performance. These changes were instituted with the goal of increasing MISO’s visibility into the availability of LMRs during emergency events which can be called upon during emergency events. In order to increase availability, flexibility and visibility, MISO provided accreditation-related incentives to generators to notify MISO of their outage scheduling as early as possible. If circumstances required an outage to be scheduled closer to the operating day, the resource requesting the outage would have increased transparency of other planned outages and potential impacts. The Outages by Lead Time table shows the total outages by lead time throughout the year. When comparing outages across 2017, 2018 and 2019, outages scheduled in 2019 following FERC approval of MISO's RAN Phase 1 tariff changes show fewer overall outages. Phase 1's full impact on outage coordination will be the subject of further analysis. LMR MWs by Notification Time MW 12,000 10,000 8,000 6,000 4,000 2,000 4,473 1,970 4,127 6,150 2,523 2,192 18-19 PY ≥6 Hours >2 Hours and < 6 Hours 19-20 PY ≤2 Hours 22
MISO System Resource Outage–OOS 2017-2019 by Outage Lead Time 2017 MW 60,000 - 40,000 - 20,000 - 0 - JAN 17 FEB 17 MAR 17 APR 17 MAY 17 JUN 17 JUL 17 AUG 17 SEP 17 OCT 17 NOV 17 DEC 17 2018 MW 60,000 - 40,000 - 20,000 - 0 - JAN 18 FEB 18 MAR 18 APR 18 MAY 18 JUN 18 JUL 18 AUG 18 SEP 18 OCT 18 NOV 18 DEC 18 2019 MW 60,000 - 40,000 - 20,000 - 0 - JAN 19 FEB 19 MAR 19 APR 19 MAY 19 JUN 19 JUL 19 AUG 19 SEP 19 OCT 19 NOV 19 DEC 19 1d 1-7d 7-90d >90d 23
MISO's Stance on RAN At the Board of Directors meeting in September of 2019, it was stated that “RAN is the most timely and significant near-term strategic initiative.” While this statement is true and the focus of RAN has been near-term strategic initiatives, longer term issues must also be considered and addressed. MISO is also elevating and extending its focus to address these longer-term needs. Current drivers of change are impacting today’s planning, markets and operations in a manner which the industry has not seen before. Actions are needed now. At the same time, MISO cannot afford to focus on solutions which only resolve today’s issues without taking into account the future. To help strike the right balance, MISO will continue to proactively evaluate solutions with stakeholders in a collaborative manner. Working together will ensure that we accomplish our vision of being the most reliable and value-creating RTO. 24
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