The Midcontinent Independent System Operator faces a number of challenging conditions, including changing fundamentals, regulations and relationships between suppliers and consumers of electricity, John Bear, MISO president and CEO, said Thursday, but stakeholders and staff are working through them.
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With MISO's headquarters in Carmel, Indiana, Bear has opportunities to see the latest innovations in high-performance vehicles at the Indianapolis Motor Speedway.
During a recent event in which he witnessed battery-powered race cars being tested at the speedway, Bear said the lack of internal combustion engine noise was "really eerie."
Formula E, a racing series with all-electric racecars that resembles an Indycar, has not yet scheduled a race at Indianapolis, but Indianapolis-based Andretti Autosport announced in July that it would field a team with a BMW-powered car.
"I think we're going to see an electrification of our transportation industry take hold, and that's going to push a nice up-kick in demand ... out past 2020," Bear said.
An "up-kick" would be different from what has been the trend in MISO since it integrated the Entergy operating companies' service areas of Arkansas, Louisiana, Mississippi and Texas in December 2013. For the 12 months ending in October, MISO cleared less than 654 TWh, down 3.2% from the same period of 2014-15.
'WE KNOW CHANGE IS COMING'
Such a change in load direction would add to the clutter on the horizon for electricity market stakeholders, who pose a challenge for MISO in getting them "to pivot at a time when so much change is coming."
"We know change is coming, but we can't quite see the horizon," Bear said in an interview Thursday. "I think that more than any other time in our industry, change is accelerating, and it's pretty significant. ... We are seeing a significant shift in our resource portfolio ... [with] a lot of intermittent resources and a lot more gas," he said.
As of 2016, 42% of MISO's 131.5 GW of generation capacity was fueled by natural gas, 42% by coal, 5% by renewables and 9% by nuclear power, according to the 2016 State of the Market Report composed by Potomac Economics, MISO's independent market monitor. In 2013, only 30% of MISO's 107.7 GW of summer capacity was fueled by natural gas or oil, 57% by coal, 3% by renewables and 7% nuclear power, according to the 2014 State of the Market Report.
MISO's most recent corporate fact sheet, released in March, showed it had 16.3 GW registered wind generation capacity, and Bear said he expects MISO to "double what we have" over the next few years.
INTEGRATING STATE ENERGY POLICIES INTO MARKETS
On the regulatory front, Bear said MISO has effectively integrated state-level energy policies such as Illinois' zero emissions credits and various states' renewable portfolio standards into its system in such a way that the markets work.
One federal regulatory issue that may be decided in 2018 is the US Department of Energy's "resiliency" notice of proposed rulemaking, to which the Federal Energy Regulatory Commission is slated to respond by January 10. The rule is designed to compensate resources in capacity market areas for maintaining at least 90 days' supply of fuel.
Almost all of MISO's footprint has vertically integrated utilities in which state regulators have retained responsibility for ensuring sufficient generation capacity is available, and Bear said, "They have done a great job."
"We don't have any resiliency problems, and we don't have any resource adequacy problems," Bear said, adding that MISO thinks the resiliency NOPR "should not apply to the MISO market."
Some have cited the resiliency NOPR as a retreat from competitive power markets to "cost-of-service regulation," but Bear said competitive markets are working "really well" in MISO, while ISOs to the east have been "struggling with wholesale capacity markets."
"I think it's still being debated," Bear said, and so far, no single model is being held up as a panacea for ensuring reliable, affordable, sustainable power markets.
FOCUSING ON 'THE GRID OF TOMORROW'
Bear cited MISO's strong relationship with stakeholders as one of its strengths, but some of those folks would rather not make any significant changes with an uncertain future.
In early December, MISO made some executive changes to free up Richard Doying, MISO's executive vice president and chief operating officer "to focus on designing the grid of tomorrow," Bear said.
For example, MISO is working with load-serving entities regarding distributed generation to determine "what sort of programs they are going to see, how do you price that, how do you aggregate that," Bear said.
Distributed generation "creates a gray area between the distribution system and the transmission system, as to where the line is," Bear said, and someone has to decide whether power from distributed resources is priced at wholesale or retail.
Other questions that MISO must answer is how to communicate about the status of such resources, what they are, where they are and when they are available, Bear said, "so we can reliably keep the grid safe."