MISO and DER Framing and Discussion Document MISO works collaboratively with stakeholders to understand the implications of Distributed Energy Resource (DER) growth, including the exploration of reliability coordination, planning, resource adequacy, and market effects. Why focus on Distributed Energy Resources? • These resources will present both challenges and opportunities for the electrical system in the MISO region, and will require more coordination between the MISO-managed transmission system and the state-jurisdictional distribution system. • Planning and modeling processes will need to evolve to better incorporate the growing influence of DERs. • As the electrical system evolves in terms of its fuel mix, technologies, and overall design and operational characteristics, DERs could help provide the availability, flexibility and visibility needed to remain reliable. misoenergy.org
D N N E D D - T M C C A T T O A E E Z R I N N L A G T T A I L L Z R R N I A A Contents MISO's Distributed Energy Resource Strategy. . . . . . . . . . . . . . . . . . . . . . 1 Exploration of DERs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 A Changing Energy World . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 DER Planning and Modeling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 The Effect of DER on Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Market Considerations of DER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Workshop Insights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 DER 100 Workshop –DER Explained. . . . . . . . . . . . . . . . . . . . . . . . 12 DER 200 Workshop – The Importance of DERs to the Bulk Electric System . 12 DER 300 Workshop – The Transmission/Distribution Interface. . . . . . . . . 13 What are the Next Steps? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 About MISO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 I Z Z T I E E O N O O N D I G I I A L T A A I I I
MISO's Distributed Energy Resource Strategy DER growth poses a host of new and significant challenges for the electricity system in the MISO region. These challenges span the realms of reliable operations, efficient markets and forward-looking resource planning. DERs also pose jurisdictional issues at the interface of the MISO-managed, highvoltage transmission system and state-regulated, lower-voltage distribution systems. The current processes for existing DER such as demand response and load modifying resources may also need to evolve in the future. Consistent with its vision to be the most reliable, value-creating RTO, MISO must continue to enable reliable operations by coordinating across the transmission and distribution interface. MISO’s Strategy Ensure: Mitigate the risk of unintended impacts from DER growth, while maintaining the reliability of the electrical grid. Enhance: Improve approaches for managing the grid by updating the current processes for existing DERs such as Demand Response (DR), Aggregators of Retail Customers (ARC), and Load Modifying Resources (LMR). Jointly investigate communication and visibility needs and improvements for system operation. Enable: Identify ways to enable the capabilities of DERs to support grid reliability and participate in wholesale markets. Five-Year Outcomes • Planning and modeling processes will incorporate DER growth. • Communication, coordination, tools, and processes will enable operations to receive the DER (including demand response) data they need for situational awareness to reliably and efficiently operate. • Markets and settlements will enable the effective participation of DERs for the services they can provide, including potential load-shaping. 1
Exploration of DERs MISO serves as the Balancing Authority (balancing generation and load) and the Reliability Coordinator (ensuring reliable operations) for more than 42 million end-use customers. Megatrends such as Decentralization, Digitalization, and Demarginalization detailed in the 2019 MISO Forward Report will re-shape the region's $29.2 billion energy market. With change comes opportunity, and MISO designed a strategy to collaborate with stakeholders to develop, explore, and act on these changes. The MISO footprint has a long and successful track record of providing electricity to homes and businesses via the traditional industry model of central-station power plants, high-voltage transmission lines and local distribution systems. Transformative investment and asset innovation happening across the country impacting distribution grids will have the potential to change how energy flows, and how power markets compensate services which keep the grid stable and reliable. These changes will impact the relationships between energy institutions and will necessitate different ways of working together. This DER Framing Paper outlines MISO's strategy regarding DERs and the associated mega trend of Decentralization. MISO's future steps with DER will involve exploratory conversation and collaboration with stakeholders, as well as attention to how DERs relate to the attributes of availability, flexibility and visibility as identified in the MISO Forward Report. Today’s grid distributes power from generation to the end-customers Bulk Grid Distribution Grid End Users In the future, DERs will require new grid management protocols 2
MISO's DER evaluation includes six categories PLANNING: Bulk electric system planners do not have good data on the amount and location of DERs MODELING: Current models do not accurately reflect the impacts of DERs MARKETS: Current design may need modifications to enhance participation options and capture benefits of DERs VISIBILITY: Bulk electric system operators do not have visibility into how DERs behave and affect conditions on the distribution or transmission system OPERATIONS: The variable profiles of DER could impact system unit commitment and ramping needs COORDINATION: Bulk electric system operators lack methods to coordinate with owners/aggregators of DERs and distribution operators 3
A Changing Energy World Utility-scale solar. Smart homes. Rooftop solar. Electric vehicles. Rapidly changing technologies, evolving consumer demand and decentralization affects the way that MISO and its stakeholders adapt to changes in generation, transmission and distribution. Decentralization, as a trend, will continue to transform the industry and the MISO footprint as it shifts away from its historical dependence on large, centralstation plants towards greater reliance on smaller and more geographically dispersed DERs. In response to stakeholder needs, MISO is currently exploring what increasing amounts of DERs mean for grid operations with high DER penetration, and learning more about issues by conducting workshops and listening to voices from across the transmission and distribution spectrum. DER can be organized into three primary technology categories: • Demand-side management, which may include energy efficiency measures, load-modifying resources and demand response (e.g., smart thermostats, large water pumps, variable-speed motors) or ways to control electric vehicle charging. This usually includes incentives to help shape the consumption of energy from the grid to provide value to the end user and/or to the grid. • Distributed generation, which is generation connected to the distribution grid. It may be infront-of or behind the meter, and may be used to reduce customer net load or to provide energy or services sold into the grid. DERs are power generation, storage, or demand-side management connected to the electrical system, either behind the meter on a customer’s premises, or on a utility’s distribution system. • Distributed storage, which is customer or utility/ third-party-owned resources, located on the distribution system or behind the customer meter, that can withdraw energy for later use or injection into the grid. D 70° U 4 Y D G I S T R I E B U E T E R N E R R S E S C O
2019 DER Capacity in MISO Footprint (MW) 4,698 913 7,250 11,740 16,438 3,577 Behind-the-Meter Generation (BTMG) Demand Response (DR) Intermittent BTMG Total Registered DER Potential Not-Registered DER Source: MISO registration data and OMS 2019 Annual DER Survey results MISO currently has about 11 GWs of DERs participating in the wholesale market. There are additional resources that exist on the system and are not visible to MISO, such as behind-the-meter-generation or utility loadmodifying resources, which do not participate in the wholesale market. As the 2019 Organization of MISO States (OMS) survey suggests, DERs are expected to increase. With this growth in mind, MISO wants to better understand the opportunities and challenges to sustain and enhance reliability and MISO's value proposition. OMS 2019 Survey of Distribution Connected Assets not registered with MISO 15% 2% 3% 5% 5% 2% 14% 11% 43% Solar PV Wind Internal Combustion Hydro Gas Turbine Battery Storage Demand Response Biodigesters Other 5
DER Planning and Modeling In 2018 and 2019, MISO worked with its Load-Serving Entities (LSE) to reform the MISO Transmission Expansion Plan (MTEP) energy planning load forecasting process. As a result of these reforms, MISO now asks load-serving entities to provide gross monthly demand and energy forecasts for 20 years, and stand-alone projections of energy efficiency, demand response, electric vehicles, DERs and behindthe-meter storage. This will give MISO some visibility, for the first time, into the impact of these assets on planning and modeling. MISO will supplement industry data with assistance of external consultants. An increase in DER penetration requires updates to the planning and modeling processes at MISO as well as member utilities. MISO is committed to engaging with stakeholders in these efforts. Robust transmission planning starts with accurate system modeling. For the MISO Planning 2020 Model Series, MISO will encourage members to begin to identify electrical buses where current or forecasted DER penetration represents a significant portion of their net loads. Because it can be difficult for MISO members to distinguish between gross load and DER negative load at any given electrical bus, MISO proposes to create a new Business Practice Manual to help its members with this task. The continued growth of DERs creates planning complexities. MISO identified an initial set of questions to investigate collaboratively with stakeholders. • How will MISO model DERs in economic and reliability planning assessments, including thermal and voltage transmission limits? • What steps might DER interconnection and retirement processes include, and what level of information is needed about the types of DERs and gross/net load patterns at the transmissiondistribution interface? • How will DERs behave in abnormal conditions and what are the system impacts? The challenges and opportunities of increasing levels of DERs require MISO to have better visibility of the existing and future DERs within the footprint. MISO seeks to enhance the planning process by increasing the visibility into long-term energy and demand forecasts and demand-side management programs. MISO expects the improved energy and demand forecasts, including the DER forecasts, to provide foresight into reliability risks and help MISO plan for appropriate risk mitigation, as well as avoid value erosion. 6
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The Effect of DERs on Operations Growth in DERs could affect operations in various ways. Visibility becomes an important consideration for all players across the transmission and distribution spectrum. DER may change the way MISO operates its system given increasing variability, uncertainty and unconventional net load profiles. DERs can help self-supply the energy needs at the local distribution level, using instantaneously available renewable fuel supply or by leveraging battery storage. Greater DER penetration suggests increased real-time resource variability across the entire footprint as DERs react to local weather and load conditions, even if complemented by the unique operational characteristics of battery storage. As the number of DERs increase, reliability will depend increasingly on local distribution and weather conditions, including sun, clouds, rain, ice and snow. DERs introduce an additional level of uncertainty to MISO Real-Time Operations. New DER tools and forecasting methodologies must be introduced to better manage this uncertainty. Accurate and aligned price signals at the distribution and transmission interface may also assist in managing this uncertainty. Suppose a large metropolitan area has 500 MW of installed solar panel DER capacity. An unexpected rain storm rolls in, blocks the sun and reduces solar generation to nearly zero megawatts. MISO's tools would indicate a large spike in energy needs, because the DERs are unable to meet the local demand. To overcome this spike MISO may have to deploy reserves and/or possibly commit fast-start generation resources such as gas-fired combustion turbines, which can be costly to operate. Such risk can begin to be better managed through improved DER visibility, which could help MISO see what is happening at the local level, as well as provide insights on capacity, capability and generation. With this knowledge, MISO and/or Local Balancing Authorities may communicate with and receive realtime information from the DERs. Visibility information on the electrical location and size of the DER would allow MISO to apply forecasting methodologies to determine the expected DER generation. MISO would need to establish new tools for DER situational awareness to compare forecasts to actual output. This will allow analysis and betterinformed future decision-making, including response to abnormal events. Finally, MISO would need to maintain visibility related to DER availability, including awareness related to large-scale DER outages and returns to service. MISO and stakeholders could further explore the nexus of DER and operations through examining questions such as: • How might distribution operators and MISO coordinate to address real-time reliability risks? What level of detail and timing is needed? • How will DER outputs be forecasted (Intra-hour? Day-Ahead?) and how might such a forecast be shared and maintained? 8
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Market Considerations of DER In addition to addressing important reliability-driven considerations in planning and operations, MISO and stakeholders can enhance value for DERs that already participate in MISO’s wholesale markets as well as investigate ways of incorporating new forms of DERs in the future. One participation option is aggregation, which allows many small DERs to participate in the wholesale markets as larger, consolidated blocks of assets. Without aggregation, MISO's least-cost commitment and dispatch system cannot efficiently optimize a large number of small resources with large centralstation power plants. Also, small individual resources may see prohibitively high participation costs. Meanwhile, MISO needs visibility and coordination to manage reliability at the transmission-distribution interface. An aggregation over a large region, without details of locational injection into the power grid, can challenge MISO's ability to efficiently manage transmission constraints. Aggregation should support a balance between efficient DER participation and overall system reliability. MISO offers products in energy, capacity, ancillary services and congestion hedging. What market rule changes or new market approaches are possible/ required to enable broader participation, coordination and optimization of DERs? Could such potential new market rules apply uniformly to all types of DER technologies, such as utility-scale solar, rooftop solar, load management, and batteries? Or might some types of DERs require unique market approaches? Other questions to consider: • Can the current eligibility requirements be modified to further maximize the value of these resources? Accurate price signals are needed to incentivize efficient market outcomes, investment and transmission-distribution coordination. MISO optimizes resources to serve demand at the least cost and reflect the marginal costs in Locational Marginal Prices of energy and Market Clearing Prices of ancillary services. • How can aggregated DER effectively participate in pricing and maintain local price accuracy? 10
Limited Aggregation • Small participation size • Data/communication cost • Large number of data points • Computation burden The Aggregation Balance Broad Aggregation • Transmission flow error • Potential reliability risk • Market inefficiency (Nodal versus Zonal) • Visibility/forecast challenges • State boundaries According to FERC, U.S. DER capacity could come close to equaling 10% of U.S. peak demand in five years 70,000 60,000 50,000 40,000 30,000 20,000 10,000 Distributed Generation Distributed Energy Storage Microgrids Electric Vehicle Charging Load Demand Response Energy Efficiency 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Source: Distributed Energy Resources: Technical Considerations for Bulk Power Systems, FERC Staff Report, February 2018 11 MW
Workshop Insights In order for DERs to grow in the MISO region in a reliable and value-enhancing manner, entities that play different roles in the process - including state regulators, utilities, and MISO, among others - need to communicate and work together. To that end, MISO and OMS, which represents the region's state regulatory agencies, collaboratively developed a series of workshops in 2019 to establish a common language for DER discussions and to begin framing key questions. DER 100 WORKSHOP What Are DERs? This introductory-level DER course focuses on familiarizing stakeholders with the language, types, future growth, aggregation and wholesale market participation of DERs. KEY QUESTION • What technologies compose the DER ecosystem and what can each technology provide to the electric system? BIG IDEA • DERs offer the potential of new resources to help maintain grid reliability but will also have potential reliability impacts, which must be considered. DER 200 WORKSHOP The Importance of DERs to the Bulk Electric System This course focuses on the technical concerns about adding significant DERs to the electrical grid. Topics include communication and latency, visibility, load modification, forecasting, planning and reliability. KEY QUESTIONS • Communications and Visibility: How will DERs communicate with the utility and the bulk electric system? What data needs to be shared? • Ensuring Reliable Operations: How might DER growth require changes to operational practices to ensure operators receive the data they need to make decisions? BIG IDEAS • Load Curves: As DERs continue to grow, load curves will change. Forecasting models will need to incorporate the behavior of growing penetrations of DERs. • Grid Planning: Planning at the transmission level looks many years into the future; transmission lines and traditional generation can take years to develop. DERs can be built much more quickly, and planning will need to become more nimble. 12
DER 300 WORKSHOP The Transmission/Distribution Interface These sessions are moderated small-group discussions between MISO, transmission operators, distribution providers and regulators. Groups consider questions about potential impacts of widespread adoption of DERs and the reliability of the bulk electric system. KEY QUESTIONS • How should MISO and stakeholders consider planning, modeling and information sharing across the transmission/distribution interface? • Can DERs generate congestion on the distribution system? • What forecasting tools are needed to address behind-the-meter and other less-visible generation? BIG IDEAS • Visibility Needs: Identifying the right level of information and visibility is critical. Various parties will need to accomplish this as well as identify communication protocols and security and privacy concerns. • Market implications: There is potential for new or enhanced DER participation models to help manage reliability challenges or leverage DER benefits. • Additional Seams: Communication across the distribution and transmission seam is limited. Relationships need to be built and a common language and understanding established. Click on each workshop title for access to the session's slide presentation, or find them on MISO's website at: https://www.misoenergy.org/stakeholder-engagement/committees/der-workshop/ 13
What are the Next Steps? The upward trend for DERs and their potential impacts merits study, conversation and potential action. MISO will use its Explore, Decide, Do model, formally introduced in March 2019 MISO Forward Report, as a framework to set this examination into motion. MISO and OMS continue to host DER workshops to further conversations and discuss the questions posed in this report. By stakeholder request, it will also consider options that create enhancements to existing products and services in the DER realm. MISO will continue reliable delivery of low-cost energy, including a future where there are increasing numbers of DERs, while maintaining transparency with stakeholders. Visit MISO's stakeholder calendar for more information or to register for these workshops. Distributed Energy Resources (DER) Explore Decide • Studies to explore communication, modeling and forecasting options, as well as enhanced situational awareness across the transmission/ distribution interface • Continued enhancement to existing products and evaluation of future possibilities • Software solutions for Aggregators of Retail Customers • Enhancement of the MISO Communication System, including alignment of demand response tools Do • OMS joint stakeholder workshops • Changes to the MISO tariff and Business Practice Manuals regarding Aggregators of Retail Customers • Collaborative stakeholder effort to draft IEEE15472018 guidance 14
“Distributed Energy Resources – in particular, flexible load - will become increasingly important to maintaining reliability during peak system conditions. Looking forward, MISO is focused on continued collaboration with stakeholders to explore how increasing amounts (MW) and types (generation, storage, flexible load, etc.) of DERs can help provide the availability, flexibility and visibility needed for reliable system operations.” Richard Doying Executive Vice President MISO 15
About MISO The Midcontinent Independent System Operator (MISO) is a 501(c)(4) not-for-profit organization with responsibility for ensuring the reliability of the high-voltage electric transmission system to deliver low-cost energy. MISO began providing reliability coordination and other services in December 2001, and is one of the ten Independent System Operators (ISOs) in North America. MISO manages the largest power system in North America in terms of geographical scope, serving about 42 million people across all or parts of 15 states, stretching from the Canadian border to the Gulf of Mexico. MISO's energy markets are among the largest in the world, with more than $29.9 billion in annual gross market charges. MISO also serves as the reliability coordinator for MISO entities in these 15 states and one Canadian province. Currently, the MISO region contains about 66,000 miles of high-voltage transmission assets with an aggregate value of approximately $38 billion, as well as 175,000 megawatts of electricity-generating capacity. MISO does not own any of these assets. Instead, with the consent of its asset-owning members and in accordance with its FERC-regulated tariff, MISO exercises functional control over the region’s transmission and generation resources with the aim of managing them in the most reliable and cost-effective manner possible. MISO North Eagan, MN MISO Central Carmel, IN MISO South Little Rock, AR MISO’s reliability footprint and locations of regional control centers. 16
KEY FACTS 5-minute dispatch $29.9 billion gross market charges (2018) More than 450 market participants 42 million end-use customers 17
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