MISO says gas dependency not a short term issue in its region

The Midcontinent Independent System Operator on Feb. 18 filed a Fuel Assurance Report with the Federal Energy Regulatory Commission as part of FERC’s review of gas supply reliability during peak power demand periods.

In a Nov. 20, 2014 order, the commission directed each Regional Transmission Organization and Independent System Operator to file a report on the status of its efforts to address market and system performance associated with fuel assurance issues.

“In the MISO region, Load Serving Entities (LSEs), with oversight by the States as applicable by jurisdiction, are primarily responsible for ensuring resource adequacy,” the report noted. “MISO’s role is to support and facilitate the role of LSEs and States with market designs that incentivize fuel assurance, supply availability, and the efficient dispatching of available resources across MISO’s broad, multi-State footprint to reliably meet demand. With emerging environmental regulations, evolving fuel economics, and associated lower MISO reserve margins, fuel assurance issues become increasingly prominent, requiring additional attention and action by MISO, its Market Participants and State regulators.

“While there are no explicit fuel assurance requirements within MISO’s Tariff-based energy markets and Resource Adequacy Requirements, a number of existing mechanisms encourage prudent fuel assurance practices. MISO is continually reviewing opportunities for increased transparency, reduced operational volatility, enhanced situational awareness, and improved market alignment to address fuel assurance concerns and needs as challenges become more prominent. For instance, last winter’s ‘polar vortex’ experience, while successfully navigated by MISO and its members, provided many valuable insights into areas for future improvement. Fuel assurance has been and will continue to be analyzed, discussed, and reported upon in MISO stakeholder forums. This may ultimately lead to future market or other Tariff changes to augment current MISO mechanisms and procedures.”

MISO added that its level of concern about fuel assurance is currently low, overall, but is expected to increase significantly over time as natural gas reliance increases due to environmental requirements and evolving fuel economics. “In the near term, prior to coal-fired generation retirements driven by the Mercury and Air Toxics Standards (MATS), fuel assurance concerns have been minimal, given MISO’s resource mix and more than sufficient generation capacity, which was evident during the 2014 polar vortex,” the report said. “With the potential incremental retirement of approximately 10 GW of coal-fired capacity by spring 2016, reliance on natural gas-fired generation increases during the 2016-17 winter. MISO is currently analyzing this specific timeframe to assess fuel assurance risks and evaluate the need for any potential incremental mitigation measures. Longer term, toward the end of the decade, increased demand growth and the potential for additional coal-fired capacity retirements (due to more stringent National Ambient Air Quality Standards and/or Greenhouse Gas regulation) are likely to further increase natural gas reliance and may require additional evaluation and actions related to fuel assurance.

“Historically, MISO has not faced significant fuel availability issues or impacts. MISO currently has significant estimated winter reserves of 35-45% (38-45 GW estimated reserves versus 103-111 GW of estimated peak load). Though gas-fired capacity represents approximately 40% of MISO’s total planned winter capacity it has recently accounted for only 13% of total winter seasonal generation, which is much less than other northern region RTOs/ISOs. Focusing on the MISO North and Central regions, where winter weather concerns are the most significant and the potential for fuel disruptions are highest, generation from gas-fired capacity currently comprises less than 5% of total winter generation. It should be noted, however, that even though these contributions are relatively small, MISO relies on gas-fired generators to manage volatility by addressing changes in short-term load forecasts and to cover rapid changes in loads. As a result, fuel assurance initiatives had not previously been as high a priority in the MISO processes. This is changing with the industry transition and experiences of the 2013-2014 winter.

“Looking ahead, MISO anticipates a net reduction in near-term winter reserves due to MATS. Approximately 10 GW of resources in the MISO region have either retired or are at risk of retiring before the 2016-2017 winter. During the same period, approximately 1 GW of new conventional capacity will be put into service, 2 GW have reported plans to convert to natural gas and 1 GW plan to repower. The overall impact of these actions would lead to a net reduction of approximately 7 GW in MISO’s footprint. With these changes, MISO − particularly the MISO North and Central regions − will have fewer excess reserves and will increase its reliance on natural gas fired generation to meet winter peak demand. As stated previously, MISO is currently evaluating the need for potential additional measures to further mitigate risks to reliability.

“MISO recently filed comments on EPA’s 2014 proposed rule to adopt carbon emission guidelines for existing utility generator plants. In that filing, MISO explained that the proposed rule could potentially result in additional retirements of up to 14 GW, with approximately 11 GW occurring by 2020. This is well before sufficient replacement capacity can be placed into service. MISO proposed several changes to the proposed rule to address reliability concerns.” 

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.