US Midcontinent ISO expects adequate generating capacity this summer, reversing shortfall

The Midcontinent Independent System Operator expects to have adequate generating capacity this summer, thanks to the grid operator's new seasonal resource adequacy construct and market participants' efforts to delay retirements and obtain new generation and imports.

"This year's results are encouraging and indicate that the new seasonal approach to resource planning is a step in the right direction," Clair Moeller, president and chief operating officer at MISO, said in a May 18 statement.

The results of MISO's Planning Resource Auction showed that MISO North and Central have 4.7 GW of excess capacity for the 2023-24 planning year that starts June 1, MISO said. That is a dramatic change from last year, when MISO North and Central had a 1.2 GW shortfall. MISO South has 1.7 GW of excess capacity for the 2023-2024 planning year, a decrease in capacity from last year's excess of 2.8 GW.

Seasonal capacity prices were largely low across the region, coming in at $2/MWd in the winter, $10/MWd for the spring and summer, and $15/MWd in fall. The only exception was Zone 9, which covers most of Louisiana and part of Texas, which had a clearing price of $59/MWd in fall and $19/MWd in winter, MISO said in a presentation to be discussed at a May 19 workshop.

These prices are far below last year's clearing prices of $236.66/MWd in MISO North and Central, where there was a 1.2 GW shortfall. Last year's capacity shortage came as a surprise to many, and the outcome sent market participants scrambling to find new capacity and retain existing capacity for this year's capacity auction.

The North American Electric Reliability Corporation on May 17 improved MISO's risk metric from high risk for summer 2022, to elevated risk for summer 2023, noted Mason Lester, a senior research analyst with S&P Global Commodity Insights. "So, even with relatively low capacity prices for this upcoming summer, reliability risk still remains, but less so compared to last year," he said.

Regions that NERC finds are high-risk could face power shortfalls even under normal peak conditions. And regions at elevated risk may see power shortfalls in extreme conditions. NERC found that almost two-thirds of North America is at elevated risk of shortfalls this summer.

Improved capacity picture

This was the first capacity auction held under MISO's new seasonal capacity construct. The new seasonal paradigm helped the capacity picture by reducing the summer planning reserve margin and accounting for retirements on a seasonal basis, according to the presentation. A reduced load forecast also contributed to the improved capacity situation this summer in MISO North and Central, the presentation said.

The steps market participants took to boost capacity this year may not be repeatable in the future, and do not erase the capacity risks posed by the clean energy transition, according to MISO. Historic trends and projections based on member-announced plans show a continued decline in accredited capacity even as installed capacity increases, the MISO presentation said.

"This year's collectively lower clearing prices should not distract us from urgently moving ahead with market reforms to align resource performance and system reliability needs as the resource mix evolves, extreme weather events intensify, and electrification expands," Todd Ramey, MISO's senior vice president of markets and digital strategy, said in a statement.

Summer weather outlook

In addition to releasing the results of its capacity auction, MISO also held a workshop to discuss its summer outlook. MISO meteorologists expect near-normal temperatures this summer with heat likely to be front-loaded in June rather than July or August, according to a presentation discussed at the workshop.

MISO will monitor the potential for heat focused over the PJM Interconnection footprint that might impact imports into MISO, the presentation said. But with above-normal precipitation expected in the eastern US, thunderstorm activity will likely hamper elevated afternoon load on the East Coast, the presentation said.

MISO is expecting a near-normal to slightly below-normal hurricane season thanks to a developing El Nino weather system, the presentation said. However, warm ocean water temperatures seen in recent years could lead to rapid development of hurricanes that do occur, Adam Simkowski, a meteorologist at MISO, said during the workshop. "So while El Nino is certainly favorable for less development, we do have a ... contradicting factor with those warm sea surface temperatures across the Atlantic basin," he said.

A transmission analysis for the summer found that there were not any major constraints that were not already identified through real-time operations, Dalton Daughtrey, a MISO operations planner, said during the workshop.

MISO's seasonal assessment of generation is not yet available due to a delay of the grid operator's capacity auction. The summer generation assessment will be discussed at a May 23 Reliability Subcommittee meeting, according to the MISO presentation.