Guest Feature: MISO North-Central has a capacity surplus—for now

By Isaac Orr

On May 19th, the regional electric grid to which Minnesota belongs, the Midcontinent Independent Systems Operator (MISO), announced the results of its recent capacity auction.

MISO concluded that the region now has a surplus of reliable generating capacity, but MISO officials warned this year's results might not be reproducible in the future. Officials stated that the continued shift away from reliable coal and natural gas plants in response to environmental regulations and state decarbonization goals could lead to blackouts.

The auction results

The capacity auction results indicate that the MISO North-Central region went from having a 1,231 megawatt (MW) capacity shortfall, meaning there was not enough reliable power plant capacity to meet the region's peak electricity demand, plus a margin of safety, to a 4,760 MW capacity surplus. At least, that's how it appears on paper.

MISO's presentation indicates multiple reasons for the new surplus: multiple utilities delayed the planned retirement of their coal-fired power plants, like the Columbia Station in Wisconsin, keeping 3,540 MW of reliable capacity available to the grid.

The figure below shows other reasons for the improved capacity situation: 1) MISO's estimate that peak electricity demand will be 1,169 MW lower than last year, 2) the addition of 3,250 MW of accredited capacity in the region, 3) an increase of 740 MW of firm imports were made available to the auction, and 4) MISO gave wind and natural gas plants higher capacity values.

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Increased accreditation for wind

The figure above shows an increase in new capacity totaling 1,960 MW of increased accredited capacity for natural gas, wind, solar, and "other" resources. Here, it is most important to talk about the increase in accreditation for wind.

In previous years, MISO has expected wind turbines to operate between 14.1 percent and 16.6 percent of their potential output during periods of peak electricity demand. However, this year, MISO expects wind turbines to produce 18.1 percent of their possible production during peak summer demand.

This means that the approximately 27,360 MW of wind capacity currently on the MISO system will be relied upon to provide 4.952 MW of firm capacity during peak demand, even though the wind may be underperforming this value when the electricity is needed most.

For example, in the summer of 2021, there was a multi-day period when the wind was operating below 18.1 percent of its potential output. At one point, it was running at just 0.71 percent.

This is why Mitch Rolling and I call wind capacity accreditation "Phantom Firm" capacity. It may or may not meaningfully contribute during periods of high demand, so allowing it to bid into capacity auctions is problematic.

New capacity, wind, solar, and demand response

The auction also reported 3,250 MW of new natural gas, wind, solar, demand response (DR), and "other" capacity, constituting another significant portion of the new surplus.

The largest portion of the new capacity is natural gas, followed by DR, which is when electricity customers agree to voluntarily reduce their electricity consumption during peak demand periods to reduce stress on the grid.

For example, in Minnesota, iron mines are sometimes asked to reduce their operations or shut down during peak demand periods in return for lower electricity costs. While demand response can be a useful resource in a pinch, it should not be considered the same as having a peaking natural gas plant available to the grid.

Many DR contracts have limits on how long they have to reduce their electricity consumption and limits on how many times they have to reduce their consumption in a season. For these reasons, DR is less of a sure thing for resource planning than a peaking plant.

Ultimately, MISO likely has enough reliable capacity on its system to keep the lights on this summer. Still, the grid operator warns that urgent reforms to MISO's resource adequacy and market design are necessary to ensure continued reliability. If companies like Xcel shut down their coal-fired power plants later this year as intended, reliability could be lower next year.

Isaac Orr is a policy fellow specializing in energy and environmental policy at Center of the American Experiment.

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