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Transmission Economics: MISO tries to coordinate capacity planning

Published On
Jun 14, 2022

Transmission economics has become a critical stumbling block in U.S. efforts to boost renewable energy supplies. One regional system operator is taking a big-picture view of how well-coordinated transmission planning can bring value to players throughout the electricity-delivery value chain. This effort is getting positive marks from many in the power industry.

The Midcontinent Independent System Operator (MISO) is a regional transmission organization (RTO) managing the power grid for 42 million customers across 15 states and Manitoba, Canada. The group recently wrapped up two major planning efforts resulting in proposed projects to benefit transmission capacity within its northern region and, in cooperation with the adjoining Southwest Power Pool (SPP), along the RTOs’ shared border.

MISO’s planners say the proposed lines of the first project would cost $10.4 billion and return $37 billion in benefits across the system’s northern region by supporting the addition of approximately 53 gigawatts of wind, solar, hybrid generation-plus-storage and standalone battery-storage projects over 20 years. Separately, MISO and SPP identified seven possible transmission projects that, if installed across their border, could support up to 28 GW of new renewable generation capacity.

In both cases, the expanded capacity could help reduce the backlog of proposed generation now waiting in the queue. As it currently stands, those power developers are on the hook for the entire cost of adding the transmission capacity required to deliver their power to the grid, while any follow-on projects would take advantage of those new transmission lines at little additional cost.

“Both initiatives are new, and not quite the way MISO has done transmission planning in the past,” said Natalie McIntire, a technical and policy consultant with the Clean Grid Alliance, St. Paul, Minn., a member-based organization representing the interests of the renewable energy industry in the stakeholder process that led up to these plans’ development.

Though both efforts are important, she said the Long-Range Transmission Plan (LRTP), within its own borders, will have the most impact. This is just the first of four stages that will eventually include even more transmission in MISO’s northern region, add proposals for its southern region and eventually improve interconnections between north and south.

Utilities in MISO’s northern region face stiff renewable-portfolio and carbon-­reduction goals from their respective state utility regulators, putting it at the head of the line. However, there’s also strong motivation to address the need for greater transmission capabilities between the RTO’s north and south. This bottleneck is one reason prices in MISO’s capacity auctions spiked this spring in the northern region, McIntire said.

While the Joint Targeted Interconnection Queue (JTIQ) Study with SPP might have less direct economic impact than the LRTP, McIntire said it’s still significant and a “first-of-its-kind study,” adding that it was motivated by MISO and SPP seeing projects proposed for one side of the border posing issues on the other requiring substantial costs. As a result, some projects simply dropped from the queue.

“We’re having those issues across the country—they’re not specific to MISO and SPP,” McIntire said, noting that a similar effort with the RTO to MISO’s east could also prove valuable. “We do hope this can be a model. The study effort itself is something I hope that MISO might do with PJM.”

The report proposes adding transmission between MISO and SPP in the wind-rich upper Midwest. While the advantages for opening up more opportunities for fossil-free wind generation might seem obvious, figuring out who should pay for the transmission construction is much more complicated. This process, called cost allocation, is also next on the agenda for the LRTP. The Federal Energy Regulatory Commission requires costs be allocated in a way that’s “roughly commensurate” with the benefits parties are expected to receive.

Typically, such benefits are focused primarily on a single issue, such as lower energy costs or improved reliability. In both sets of recommendations, broader advantages—such as reducing regional carbon emissions or providing capacity for future projects 5–10 years from now—also are at play. The projects these reports address cross state lines, so state utility regulators will need to be brought on board with approving potential rate hikes to pay for improvements that might not directly reduce their citizens’ energy costs.

“Cost allocation is a tough nut to crack, and it’s very contentious,” McIntire said, but it could be critical to taking full advantage of available renewable resources at a regional level, using the JTIQ Study’s recommendations as an example. “Without the solutions on the MISO/SPP seam, any new generation on that seam is going to be impacted or hindered. The potential is that we can spread those costs among a greater set of interconnection customers.”

About the Author

Chuck Ross

Freelance Writer

Chuck Ross has covered building and energy technologies and electric-utility business issues for a range of industry publications and websites for more than 25 years. Contact him at chuck@chuck-ross.com.

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