Energy for every season

North Dakotans and Minnesotans have been adjusting to four unique seasons since the beginning of human history. Now, their modern energy resources will abide by the annual cycle as well.

In May 2023, the Midcontinent Independent System Operator (MISO) held its first Planning Resource Auction under a new four-season resource adequacy construct. For many years, MISO – a nonprofit organization that combines the generation and transmission capacities of power utilities across several states – had followed a “summer-peaking” system of capacity pricing across its grid footprint, from the cold region of Manitoba, Minnesota and the Dakotas all the way down to the steady warmth of Louisiana. However, the grid operator has experienced more and more shortfalls and emergency grid events over the past few years, during EVERY season (attributed to increased reliance on intermittent resources, more baseload generation retirements, extreme weather events and declining excess reserve margin). To combat grid imbalance, MISO knew it had to start sending new pricing signals to get utilities thinking differently about their power portfolios year-round.

Before 2022, the MISO capacity market offerings fell anywhere from $1 to $5 a megawatt-day (MW-day). In 2022, that price rocketed to nearly $237, showing that extra resource capacity was direly needed and, thus, incredibly valuable. This value was based on summer needs only. The 2023 four-season construct balanced MISO’s capacity prices according to season:

• Summer – $10/MW-day

• Fall – $15/MW-day

• Winter – $2/MW-day

• Spring – $10/MW-day

Clair Moeller, MISO’s president and chief operating officer, said that this year’s auction results were “encouraging,” and that the new seasonal approach is a step in the right direction. “As we navigate an unprecedented transformation of the power system, we must continue to make further enhancements to maintain reliability and send the right pricing signals to the market,” he noted in a May 17 statement.

MISO as a whole is a “summer peaking” system, meaning its highest demand for power comes in the summer when people are running cooling systems and staying indoors. The Minnkota Power Cooperative system, on the other hand, is “winter peaking,” which means its highest demand falls in the cold winter months. Minnkota long benefited from the capacity pricing of summer- peaking resource planning, but it will now engage in new resource scheduling techniques to ensure affordable and reliable participation in the energy and capacity markets.

The nuances of the new seasonal construct can be difficult to understand, so we sat down with Minnkota Energy Supply Manager Dan Trebil to explain what MISO’s pricing changes will mean for Minnkota, as well as the entire MISO grid.

How does MISO’s Planning Resource Auction work? Is it an actual auction with bids?

“It’s not quite that exciting. There’s no real auction. Basically, utilities submit their demand obligation (their load obligation), and then their capacity resources that they’re using to use to meet that obligation. Once those are submitted, MISO goes back and does its calculations to determine if you met your obligations, if the local resource zone met their obligations, and if the entire footprint met its obligations. The prices come from those calculations.”

With the new construct, how does Minnkota’s energy marketing team need to look at resource scheduling differently?

“There are a lot of things that we’re changing. When we initially started working with the auction, we were expecting to be short capacity. The way it worked out, we were long in all four seasons. There were a lot of different inputs that we had to consider and we had to calculate in order to get to our capacity number. There was significant back-and-forth with MISO. In the end, MISO was wonderful – they were great to work with.”

Is there a season that will now be more of a challenge for Minnkota?

“Fall is going to be our tough one. That’s when we always schedule our major outages [at the Milton R. Young Station]. We are talking with the plant team right now as far as the potential to move some outages for Young Unit 1 to have capacity available.”

How will the new seasonal construct affect Minnkota financially in the long term?

“How it will affect us financially is really more in the future. We anticipate that at some point under this construct we will be short capacity and we will have to secure it either from the MISO market or bilaterally from neighboring utilities. Under the previous construct, the likelihood of us being short capacity was really minimal, because we don’t take planned maintenance outages in the summer, and our obligation is lower in the summer than it is in the winter. Generally speaking, under the single season construct we would have, for the most part, been long capacity – if not even. Where under this new construct, we’re somewhat confident that at some point we will end up having to buy capacity.”

Why should members be confident that Minnkota is ready for shifts in MISO regional capacity?

“Part of it is our baseload resources. We also have a significant amount of wind that helps cover those baseline resources when they’re not available. Not to mention the fact that we’ve forged good partnerships with our neighboring utilities that will allow us to leverage those relationships to share capacity when we need it.”

Will MISO’s new four-season construct do anything to reduce the current risk of grid reliability issues?

“Short term, it will not. Long term? That’s to be seen. Part of the reason MISO wanted to do this was to incentivize those utilities who lean on the market – or who lean on other utilities or neighboring RTOs (regional transmission organizations) – to find different ways of either reducing their load, reducing their demand, or increasing their generation resources. But right now, the resources that are available are still the resources that were available last year, so short term I don’t believe it will have any impact on the reliability of the grid.”

MAIN IMAGE: Minnkota Energy Marketer Sarah Horner reviews the daily energy markets. (Minnkota/Michael Hoeft)