MISO planning resource auction prices for the 2021 planning year did not live up to their expectations from 2020 auction results. In the 2020 auction, the Michigan zone cleared at a cost of new entry of $250-per-MW-day. But in the latest auction results from April, MISO capacity prices were mostly in the $5-per-MW-day range, and in some South zones, they were at $0.00. These capacity prices are hardly incentivizing either renewable energy developers such as solar or energy storage developers.
Before jumping to the conclusion that MISO capacity prices are not high enough for new capacity, developers should look at the OMS MISO survey in June to learn more about capacity deficiencies in the MISO footprint. The capacity survey helps both MISO and its state regulators look ahead five years, given the state of vertically integrated utilities at MISO.
MISO Auction results show transmission limits not binding
What is interesting from MISO auction results, from a transmission point of view is, that the capacity import limit was not found for Illinois zone 4. Recall in 2015 auction Illinois zone cleared at the cost of new entry.
Also surprising is that the capacity export limits were not found for the Iowa, Missouri, Michigan, and Arkansas zones. The capacity import limit means there is a transmission constraint that limits the capacity to import into a zone, whereas the capacity export limit means a transmission constraint is limiting the export of capacity outside of the zone.
IRPs are opportunities for standalone storage
Almost 35% of the capacity offered and cleared in this latest auction is from integrated resource plans. Most MISO states are vertically integrated, unlike PJM’s. This integration means the opportunity for standalone storage exists with investor-owned utilities who are looking to meet their long-term capacity needs with state PUCs. Minnesota Power and Xcel Energy in Minnesota have their IRPs active at the PUC.
According to CLECO Power in the South region of MISO, “Cleco Power’s next IRP cycle will begin in the 4th quarter of this year, with the Draft IRP Report scheduled to be filed in Q4 2022.” There are additional opportunities for individual state IRP’s at MISO, and there are active discussions on distributed solar in Michigan utilities IRP and more renewables in capacity expansion plans.
Looking forward to OMS MISO Survey results in June
Renewable developers should look at the OMS MISO survey for a deep dive into each zone at MISO. In the past in June 2019, in this OMS MISO survey, the Michigan zone showed a capacity need. Hence it was not surprising to see Michigan clearing at the cost of new entry in the 2020 auction. So, it makes sense to look at the results from the OMS MISO survey in June 2021 to indicate capacity auction prices in the 2022 auction.
Between June 2021 and April 2022 auction, there is another important consideration for auction prices. The planning reserve margin requirement will be announced in November 2021, input into the auction. There is no reason to doubt that planning reserve margin will change too wildly given the last few years MISO assumptions around treating external resources as well as capacity prices and a little bit of demand growth at MISO.
Even if ESR may be delayed, SER Type II exists
The capacity market is not the only market available at MISO for energy storage and other renewable energy developers. For electric storage specifically, even though MISO is requesting FERC extension to implement order 841, MISO still has stored energy resource type 2 market resource for any energy storage resource that wishes to participate in MISO markets today.
While stored energy resource type 2 market resource does not have all the bells and whistles like an electric storage resource market participation model would have, such as charging, discharging, continuous and outage commitment modes and different bid parameters such as Max/Min Energy Storage Level, State of Charge, and Efficiency Factor, stored energy resource type 2 is currently used by batteries in MISO markets.
Hence it makes sense for storage developers to enter the interconnection queue in anticipation of the electric storage resource participation model availability if FERC approves the MISO extension for June 2025. In earlier FERC filings, MISO said they would port over the storage resources in stored energy resource type 2 to an electric storage resource participation model once that is implemented.
Transmission cannot be built overnight, but storage can be!
MISO is also making a big push for long-range transmission planning with its reliability imperative. MISO has taken the lessons learned by both ERCOT and SPP from the recent Texas winter event and made the case at FERC to have more transmission. MISO CEO is on the record that Biden’s plan does not include enough capital for transmission investments.
But transmission cannot be built overnight. Energy storage can be. This fact explains why NextEra energy resources were critical at FERC when MISO asked FERC for the Order 841 implementation date extension request.
Aggregated storage opportunities on the horizon
In addition to the current opportunities for standalone storage in MISO energy, capacity, and ancillary service markets, MISO is also working with stakeholders on aggregated distributed storage opportunities under FERC Order 2222.
The compliance plan for MISO for Order 2222 is due in April 2022, and we can expect MISO would need a couple more years after that to implement a market participation model for aggregated distributed energy resources such as fleet charging.
While MISO capacity prices in the 2021 auction are not up to the industry expectations, developers have optimism due to utility IRP and the OMS MISO survey. Additional opportunities for storage are on the horizon with order 2222.