Midwest grid operator tries to ease rift with renewable energy developers over upgrade costs

Transmission lines outside Houston, Texas (Courtesy: BFS Man/Flickr)

Midcontinent Independent System Operator (MISO) is drawing criticism from renewable developers by bringing forward a proposal from Xcel Energy in Minnesota. The distribution factor (DFAX) proposal would lead to higher network upgrade costs for renewable developers with no certainty for firm transmission access. Changing the initial narrative in this proposal from congestion as a driver to reliability is also not helping MISO. This discussion misses the role alternative transmission technologies and distributed energy resources could play in reducing transmission congestion.

MISO’s proposal – Xcel Energy is the main driver

Initially, Xcel Energy brought the issue to MISO’s attention claiming transmission congestion. Xcel said it had found transmission congestion in Minnesota when the distribution factor is at 20% and lowering that percentage by half reduces that congestion. But in the stakeholder call on August 15, Xcel claims this is a reliability issue because new renewables are running into increased curtailments resulting in capacity accreditation issues. Xcel also claims that curtailments of new resource interconnections lead to renewables not getting their production tax credits.

MISO says this congestion is unique to the West region, of which Xcel is a transmission-owning member. Since this congestion is not seen in the South region yet, MISO South stakeholders are asking MISO why they would reduce this factor for the entire region, not just the West region, where this congestion is occurring. Xcel and MISO are convinced that this transmission congestion will only get worse without this distribution factor reduction.

A stakeholder in favor of this proposal even brought the recent Inflation Reduction Act (IRA) into the mix and said that without lowering the distribution factor, IRA would only increase transmission congestion on the MISO transmission system, which would endanger MISO states meeting their climate goals.

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MISO developers’ concerns – why now?

MISO renewable developers are not convinced about the problem defined by MISO and Xcel. Some developers are questioning the timing of this proposal, given the first wave of the Long Range Transmission Plan (LRTP) approved by the MISO Board. But MISO insists LRTP projects won’t solve current transmission congestion since it takes at least 8 years for those projects to be in service.

Proponents in favor of this change (even though they are not convinced that 10% is the right percentage) assert that transmission congestion resulted when MISO Board approved the Multi-Value Projects (MVP) portfolio in 2011, the precursor to LRTP projects. But developers are concerned that lowering the distribution factor means higher network upgrade costs which developers would be required to pay.

The consensus among MISO developers indicates they want to see additional data from MISO replicating Xcel’s results and access to power flow models with the congestion identified. MISO said they ran the current interconnection study models in their final stage (phase 3) with a 10% factor.

MISO says Market Efficiency Projects are not the solution

Is transmission congestion an economic or a reliability issue? That question is on top of some stakeholder concerns expressed at the August 15 meeting because MISO has a transmission project dedicated to congestion drivers called the Market Efficiency Project. If the need is reliability, then it is called Baseline Reliability Project. Lowering the factor to 10% is a quick fix, claims Xcel, because going thru the steps to justify an MEP takes multiple years.

Compounding the narrative, MISO and Xcel initially said the problem was transmission congestion, and then they reverted to reliability during the stakeholder call. This changing narrative is not calming developer concerns because transmission owners claiming reliability as an excuse for expensive network upgrades is not new.

Other concerns

Another stakeholder perspective in this dialogue is the discussion on the real purpose of these distribution factor calculations. This factor shows the contribution of the renewable developer project to a transmission line flow. When a developer requests Network Resource Interconnection Service (NRIS), they know they must pay for network upgrades for that firm network service. But if they are not willing to pay for that firm access, they have the option to request less firm Energy Resource Interconnection Service (ERIS). By lowering the distribution factor in an ERIS study, developers would be expected to pay for network upgrades even though the transmission service is non-firm.

One stakeholder wondered why this ERIS is an issue when developers routinely face transmission outages and transmission owners lowering line ratings on an ad-hoc basis, leading to curtailments.

Alternative solutions to DFAX proposal

If transmission congestion is the main driver behind the DFAX issue, alternatives exist, including alternative transmission technologies (AATs) and aggregated distributed energy resources. The Federal Energy Regulatory Commission (FERC) pointed out the role of AATs defined as “advanced power flow control, transmission switching, dynamic line ratings, static synchronous compensators, and/or static VAR compensators” in the generator interconnection proposed rulemaking.

FERC staff also point to distributed energy resources (DERs) role in reducing transmission congestion in their February 2018 report. FERC staff assert in that report, “effective planning for DER integration using accurate models could address any increases in congestion, though further study would be needed to confirm this conjecture.” MISO should evaluate these alternatives to the DFAX proposal if congestion is the main driver.

Next steps

MISO says this proposal is a simple Business Practice Manual change effective quarter 1, 2023, and does not require a FERC tariff change. But some stakeholders are not convinced that a simple manual change would suffice. It remains to be seen what information is shared by MISO and where this proposal eventually lands. One thing remains for sure, by raising an Xcel issue that could lead to developers paying higher network upgrades in the future, MISO is not resting on the laurels of LRTP Board approval.