Several recent complaints involving PJM and now at FERC pose fundamental questions on how regulators and grid operators should attempt to price and allocate grid rights and costs. Is the...
Wooing the Western Wind
How a move to bring power markets to the Great Plains has uncovered a crisis in grid planning.
They call the United States the “Saudi Arabia of Wind.” That’s due in large part to the huge potential of the Great Plains. But there’s a hole in the metaphor. Wind power development in some parts of the prairie is falling short of expectations.
Consider rankings from the American Wind Energy Association (AWEA), listing the top states in terms of: 1) total wind energy potential; 2) projects already online; and 3) projects under construction (third quarter 2008) (see Figure 1) .
These rankings show that wind project development lags in South Dakota and Nebraska. In part, that’s because those states remain largely shut out of power markets run by the Midwest Independent Transmission System Operator (MISO), a regional transmission organization (RTO) certified by the Federal Energy Regulatory Commission (FERC). These two states lie on the wrong side of the irregular, overlapping, and intertwined geographic seam between MISO and the Mid-Continent Area Power Pool (MAPP). That means that many wind projects and other generation resources located in South Dakota or Nebraska must pay an extra, pancaked transmission “out” charge to sell their output into MISO Midwest markets.
Not so for Iowa and Minnesota, which are largely integrated within MISO, and so enjoy access to MISO’s day-ahead and real-time bidding auctions, including locational marginal pricing (LMP) and financial transmission rights (FTRs) available to hedge against grid congestion.
Donald Furman, senior vice president for development, transmission, and renewables at Iberdrola Renewables, put his finger on the problem when testifying at a conference held at FERC last November. Furman was talking about wind projects slated to hook up with MidAmerican Energy, a utility located within MAPP, and lacking membership in MISO or access to MISO markets:
“We have two wind farms currently either under construction or in advanced stages of development … in MidAmerican’s service territory. As we look … at where we’re going to sell that output, having access to MISO is extraordinarily important.”
Furman then noted how a new tariff proposed by MISO might go a long way to fix the problem:
“When you’re outside of an organized market, it’s purely bilateral. You’re really tied to the local utility and maybe one wheel over. What this does [the MISO proposal] is give us access to the entire Midwest.”
‘Day Zero’ Grid
The fix to which Furman was referring has come to be known as the MISO “Western Markets Proposal,” or MISO tariff “Module F.” Filed at FERC nearly a year ago, MISO’s new three-part tariff idea would permit utilities within MAPP to choose “Market Coordination Service” and participate in MISO’s day-ahead, real-time, and operating reserves markets without joining the MISO RTO as full-fledged signatories. The concept is all the more remarkable, since many MAPP utilities are cooperatives, municipal districts, or federal or state-run public power agencies that are restricted in their ability to convey resource rights or participate in combined public-private ventures. (See