Citizens LeagueElectrical Energy: Affordability and Competitive Pricing Working Team

Electric Transmission

Why this presenation?

• At prior meeting, several transmission or MISO specific questions were brought up

• Request was made to learn more about MISO and transmission current events

Agenda

• Introduce Midwest Independent System Operator - MISO

• ransmission and electricity prices• Current transmission topics– Renewable integration– Cost allocation– Generator retirements

Disclaimers

• I work at MISO. But this presentation represents my own ramblings, and should in no way be construed as an official MISO presentation.

• Disclaimer disclaimer. I wrote the above disclaimer. I am not an attorney. I assume no responsibility or liability for any inaccuracies, intended or unintended, contained in the above noted disclaimer.

• Oversee the flow of power over the high voltage wholesale transmission system in all or parts of 13 states and the province of Manitoba

• Provide independent wholesale transmission system access• Provide Reliability coordination• Operate a day ahead and real time energy market• Manage congestion on the grid• Set reserve margin requirements for load serving entities• Plan Regional transmission expansion• Serve as independent market monitor

MISO – Plan and Operate the Transmission Grid for most of the Midwest

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MISO Fast Facts• Non-profit organization• Voluntary membership• Regulated by the Federal Energy Regulatory

Commission (FERC)• $41 billion energy market • 1,896 pricing nodes• Governed by independent eight member board• About 750 employees• Main office in Indianapolis, branch office in St. Paul.

MISO, Entergy, PJM and SPP Footprints

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Real Time Prices – MISO Runs an Energy Market

June 2011 Generator Interconnection Queue Map

Transmission – the Great Enabler

• Like an interstate highway system, transmission can enable access to lower cost electricity

• New transmission generally reduces wholesale prices by reducing congestion, improving access to lower cost energy. In aggregate, net benefits increase, but it can create winners and losers

• There are other benefits beyond lower production costs

• See simplified example on next slide

Apples and electricity *• Imagine 2 valleys, separated by a mountain range. The

apples on the west side cost $5/bushel, while the apples on the east side cost $10/bushel.

• A new highway goes through the mountain, allowing people on the east to buy western apples. The new market price of apples for everyone is $7.

• Western growers and eastern consumers are happy. Western consumers and eastern producers, not so much.

• Now substitute the word electricity for apples, and transmission for highway.

* At this point please refer to disclaimer on slide 3

Costs and Benefits• Of course building that highway or

transmission lines is not free• If you spend $50 million dollars to build a

transmission line that isn’t needed, you don’t produce net benefits, only costs

• MISO engineers conduct detailed studies of transmission costs and benefits in order to justify whether a line should be built, and optimize location, size, etc

Current Events

• Integrating renewables into the Grid– Transmission expansion– Integration challenges

• Cost Allocation (who pays)• Generator retirements (EPA, cheap natural

gas, aging plants) and its effect on reliability and prices

Transmission Expansion to Integrate Renewable Energy

• Most states in the MISO footprint have Renewable Portfolio Standards (RPS’s) requiring a certain percentage of renewable energy

• MISO conducted 2 major studies to determine the amount of transmission needed to meet RPS’s.– Regional Generation Outlet Study (RGOS) – Regional

15 year plan to meet state RPS’s - $15 to $20 billion.– Candidate MVP Study - $5 billion. An in progress,

more detailed plan to justify the first phase of new transmission projects to meet RPS standards - $5 billion.

RGOS Study

Candidate MVP Study

Integrating Renewables

• Renewable Energy Sources (wind, solar) are variable or intermittent

• To integrate renewables:– Dispatchable Intermittent Resource (DIR)– Improved Forecasting– Benefits of Scale to Smooth Level of Variation– Energy Storage– Manitoba Hydro

Cost Allocation

• How to pay for regional transmission?• Traditionally local area paid for local

transmission, or shared with immediate neighbor• Hard to make traditional model work for long-

distance renewable generation• In response, MISO developed the concept of

regional Multi-Value Projects (MVP’s)• Costs of MVP’s shared across entire MISO

footprint

MISO studies more than just transmission

• As Reliability Coordinator, MISO helps ensure the region has adequate supply of electricity

• For example, recently, MISO conducted an EPA Regulation Study to determine potential level of generator retirements likely under different EPA regulatory scenarios

• Summary – New Federal EPA Regulations will not have a dramatic impact on MISO supply, reliability, or prices