INDIANAPOLIS — For years, MISO executives have been warning about the coming of a future electric grid that upends traditional utility operations. The time of reckoning may be close at hand, according to industry experts speaking last week at the RTO’s second biennial Market Symposium.
MISO billed the event as a preparation for wholesale market design that includes the trends of “digitalization, de-marginalization and decentralization.”
CEO John Bear said that when he tells people he works in the energy industry, few are “wowed” by how fast the technology and innovation moves.
“But that’s changing,” Bear said, adding that 88% of MISO’s 90-GW interconnection queue is composed of renewable generation.
“The future is really already here in varying degrees,” said MISO board member Mark Johnson. “The bulk electric system, depending on where you live, already operates differently. … Bidirectional flows on the grid are more prevalent and will continue to occur.”
‘Fork in the Road’ for Markets
FERC Commissioner Richard Glick said the industry is at “the proverbial fork in the road in how we view markets.”
Glick said he is astounded at today’s wind penetration levels, which exceed any forecasts he provided while working as a wind energy lobbyist. “Lobbyists don’t lie, but you know, we pick the highest [statistics],” he joked.
Today’s energy industry is divided into two camps, Glick said, with one supporting returning to a centralized grid with an emphasis on older-technology power plants that offer resilience.
“The other camp is saying you can’t put the genie back in the bottle. … And I’m certainly in that particular camp,” he said, adding that “people just aren’t investing” in centralized power plants. “I hope we move forward, and don’t move back to the system of the past.”
However, Glick thinks the transmission system will remain a key factor in future markets.
“Decentralization doesn’t mean no transmission system,” Bear agreed. “It means a different transmission system.”
Transmission and Distribution Blurring
Several speakers agreed that transmission will become increasingly synonymous with the distribution system.
Gabe Murtaugh, CAISO regulatory policy developer, said the future transmission system will “connect households instead of a power plant that’s 500 to 1,000 miles away for load.”
“We’ve spent the last several years making sure there’s a bright white line between T&D, and that’s changing,” said ScottMadden partner Cristin Lyons.
Rocky Mountain Institute’s Mark Dyson said blockchain technology deployed at scale in the grid will further blur transmission and distribution. Other speakers said MISO could eventually become a founder network for blockchain technology.
But Grid Strategies President Rob Gramlich said he thought the RTO could use more transmission infrastructure first, but only if it aligns its interconnection queue and transmission planning process.
Electrification and Data
Experts agreed that there’s a natural role for electrification in the future grid.
“We’re looking at a world of declining load, and utilities are looking at their bottom lines and saying, ‘Holy cow, either my rates have to go up or my load has to go up,’” Lyons said.
“We’ve seen stagnant load growth for the past 15 years, but I think that’s about to change,” said Andy Lubershane, director of research at Energy Impact Partners. He predicted that electrification of transportation, space heating and indoor agriculture will soon drive up load.
Rob Threlkeld, General Motors global manager of renewable energy, said the utility and the automotive industries are more aligned than they ever have been because of the innovations disrupting both.
Responding to an audience question, Threlkeld said he’s not sure if GM will pivot to producing home storage batteries, styling itself after Tesla, but added he wouldn’t be surprised if his company eventually develops them.
Threlkeld said customers are used to managing several activities via smart phone applications, but that same understanding does not yet apply to distributed energy resources: “The electricity market is really new to them.”
Lubershane said data can reveal what motivates customers to purchase smart devices, and they’re not always energy management reasons. He said while Ecobee customers mostly give the smart thermostat verbal commands to adjust the temperature, the second-most used command is to play music.
“I don’t know if disruption is really the word. It’s more an evolution,” said Ryan Wartena, president of energy software company Geli. “If we don’t have metering on the low-voltage distribution system, it’s going to make this [evolution] difficult.”
Georgia Institute of Technology professor Pascal Van Hentenryck said coordination of DER optimization is a major challenge facing energy markets.
Panelists debated the role of the vertically integrated utility in a world where load has leveled off and new generation is often not utility-owned. Some said it was the role of utilities to aggregate and optimize use of DERs and behind-the-meter resources. Wartena said DER aggregators should eventually be able to hand control of DER aggregations over to MISO to shape the load.
Other panelists said now is the time for RTOs to standardize data collection and maintain open architecture computer programs to increase visibility of DERs. Sandia National Labs’ Jean-Paul Watson pointed out that MISO’s markets are currently inhibited by computer programs devised in the late 1990s.
Kate Sherwood, 3M senior director of grid modernization, said data are needed to forecast use of harder-to-control distributed renewables.
“Uncontrolled environments require more data to manage,” Sherwood said.
Lyons predicted it will take another 10 years before the industry can realize the benefits of collecting so much data by turning them into actionable grid insights and better managed energy use. “In five years, we’re going to have a lot of data, but we won’t have cracked the code,” Lyons said. She also said states are taking a lead in creating privacy provisions for customers so their home patterns are aggregated for analysis and not individually revealed.
Dyson said MISO is in the thick of a retirement movement. “I think what we’re seeing today is a trend of retirements — coal retirements. And we’re asking if we can replace that generation with renewables. My answer is ‘yes,’ but you’re asking the wrong question,” he said. “The question is not, ‘Can I replace the coal-fired asset?’ The question is, ‘Can I provide all of the services that the coal asset provided?’ And the answer to that question is ‘certainly, and at a lower cost.’”
Dyson said that within a few years it will be difficult to justify the costs of natural gas-fired water heaters in homes. He predicted heat pumps at a neighborhood level could save consumers millions of dollars.
Propped Up Pricing?
Michael Hogan, senior adviser for the Regulatory Assistance Project, said there’s a “real risk” that electrification becomes difficult to manage for grid operators in terms of pricing.
“We’ve gotten away so far with pricing wholesale energy very simply. … We need to talk about security-constrained economic dispatch, not simple economic dispatch,” Hogan said.
“I think the ISOs are getting caught between a rock and a hard place,” said Lawrence Makovich, IHS Markit vice president and senior energy adviser, pointing to renewable incentives, subsidies for some non-carbon-emitting generators and not others, and carbon credits in only some states.
“I see serious market distortions as a result of this. … We’ve gotten to a point where we’ve suppressed prices. If we didn’t have distorted markets, you wouldn’t have to pay for flexibility,” he said, referring to pricing for ramping capability.
Makovich said California can either be cited as a roadmap or a cautionary tale because the state’s carbon emissions have not decreased from 2002 levels despite renewable adoption because artificial market forces rendered zero-emission nuclear plants uneconomic.
“It’s easy to paint a horror picture of California, and I can do the same of Germany,” Hogan responded. He said ERCOT is a better example of renewable integration because its transmission system is truly an energy island. Despite a record-setting summer, ERCOT has not had to curtail load, he noted.
“We’re not seeing ERCOT trying to move in and patch this and patch that … with micro-procurement policies. They’re getting the prices right,” Hogan said.
Makovich agreed that pricing from ERCOT’s operating reserve demand curve seemed to work this summer, raising prices enough to allow some generators to postpone retirement. But he cautioned that the attractive prices might keep more clunky and expensive generation in the market too long.
Hogan agreed that previous generation investments must be jettisoned before the new crop of investment resources can move in. “There’s a problem that market prices are paying for the wrong resources. … We do have a problem of [needing to move] uneconomic resources out of the market before we see real pricing emerge.”
No Operator Bots
Alberto Ruocco, a partner at research firm Gartner, cautioned against artificial intelligence making grid decisions autonomously.
“I think, wisely, the industry has come back and said that’s not the goal,” Ruocco said. He said that while machine learning can work through a lot of data, human operators should be on hand to make decisions. “I don’t think we should abdicate something as important as the operation of the grid. … I think complete delegation of control is not realistic.”
But more digitalization is inevitable, panelists said.
“It’s not ‘if,’ but ‘when’ you need to adapt your digital business model,” said Stephanie Woerner, a research scientist at the MIT Sloan Center for Information Systems Research. She said her recent research found that digital disruptions could threaten an average 28% of future revenues for companies across all industries.
Richard Doying, MISO executive vice president of market development strategy, said it has now become risky to postpone decisions to accommodate new technologies in the energy market.
Bear summed up the discussion by quoting President Dwight D. Eisenhower: “Plans are worthless, but planning is everything.”
— Amanda Durish Cook