Friday, December 14, 2018

Overheard at OMS 2018 Annual Meeting

By Amanda Durish Cook

AUSTIN, Texas — The Organization of MISO States last week reflected on its 15 years of existence and looked ahead to how its member states can best accommodate an evolving grid.

Organization of MISO States

OMS Annual Meeting | © RTO Insider

During the organization’s Annual Meeting on Oct. 26, Executive Director Tanya Paslawski pointed out the group was established in 2003 at the time of the Eastern blackouts. “I think it’s entirely appropriate that OMS take credit that the lights have not gone out since for 50 million people,” she said to laughter.

OMS President Ted Thomas, chair of the Arkansas Public Service Commission, joked the group managed to land the meeting in “the largest city in America with a boil-water advisory,” referring to the flooding in Austin that rendered water non-potable for the week.

“That’s a mathematical improbability,” he quipped.

‘Decentralized AND Integrated’

Talk quickly shifted from past and present to the future of the bulk power system, the rise of distributed energy resources and cloudy jurisdictional issues.

Independent consultant Lorenzo Kristov, formerly principal of market and infrastructure policy at CAISO, said that while the bulk system isn’t likely to disappear anytime soon, grid defection is a possibility. But he said the grid can coexist with distributed resources, calling up a quote he attributed to author J.M. Greer: “The best way to get nothing done is to convince people they’re on one side or the other of a duality.”

“Decentralization can’t occur without the bulk power system,” Wisconsin Public Service Commissioner Mike Huebsch said.

Electrification will take place locally, at the “grid’s edge,” Kristov predicted, with urban planning and community-level programs. “Certainly, you can say that the bulk electric system isn’t where all the action is now,” he said.

Even in that environment, Kristov said it’s possible for the grid to become both “decentralized and integrated,” where the system operates in differently controlled layers. He said distribution utilities should consider becoming distribution system operators (DSOs), where the utility manages local electricity generation and use on the distribution network. Distribution owners could test the waters by rolling out the process on just one substation. In that framework, microgrids could assist a DSO with load management, Kristov said.

DERs

The discussion fit a pattern of recent OMS panels by veering to DERs and how states can best manage them.

Thomas wove together three rapid-fire analogies on how states must approach DERs, working in Southern euphemisms, hippies and holiday dinners.

He said the pace of solar adoption is increasing in his state. “In the South we say ‘fixin’ to happen. It’s not ‘fixin’ to happen. It’s happening. And if it’s happening in Arkansas, it’s happening in other places.”

Thomas contended that it’s time for state regulatory agencies to reach out to utilities to hammer out policies on the most pressing DER issues: “In the protest era of ‘make love, not war,’ we need to decide what policy we’re going to make love on and what we’re going to make war on,” he said.

He rounded out the quick speech by talking turkey: “It’s Thanksgiving. We’re trying to deal with a whole menu of policy items, and some things are hot, some things are served cold, [and] there are [dishes] ready at different times,” he said, urging states to first work on policies related to DER trends that are occurring today.

‘The Bus’

Sally Talberg | © RTO Insider

Michigan Public Service Commission Chair Sally Talberg reflected on a recent trip to observe Mexico City’s grid management, which she said was straightforward. There is one system operator and no state jurisdictions to worry about in the Mexican capital.

“Not that I’m suggesting that’s a great model, but it is simpler,” she quickly added.

Talberg quoted an unnamed PSC staffer that often says Michigan can respond to grid transformation by either “driving the bus, riding the bus or getting run over by the bus.”

“We try to ride the bus in Michigan,” Talberg said, meaning the state seeks to move on a mixture of developing some DER policies, making sure rate design is reasonable and working on how distribution systems that contain generation should be controlled.

We try to “get out of the bus to make sure the road is clear for the bus,” Huebsch said, explaining that his state aims for rules that allow DERs to crop up “organically” from customers and utilities.

In response to audience questions about when FERC will issue an order on DER aggregation — an issue left untouched by the commission’s Order 841 — Jette Gebhart, deputy director of FERC’s Office of Energy Market Regulation, said commission staff were paying a great deal of attention to the matter, though she wouldn’t comment on a possible date of an order.

Richard Doying | © RTO Insider

MISO Executive Vice President of Markets Richard Doying predicted the RTO will significantly redesign its markets to accommodate the switch from a one-way power system to a cloud-based system. But he also said there’s increasingly scarce time to complete a redesign.

“When we think about how much time MISO has to prepare for that, it’s virtually none,” he said.

Doying said MISO already at times experiences zero-dollar energy pricing from its wind power contingent — not a sustainable situation for coal and other thermal units.

ERCOT Senior Director of Market Design and Operations Joel Mickey said the grid operator has so far successfully supervised its high influx of wind, with penetration spiking to 50% at one point in early 2017.

Joel Mickey | © RTO Insider

“If you’d asked me 10 years ago … ‘Can you handle 50% wind?’ I’d have said, ‘Hell no.’ Luckily, we’ve gotten used to it, and we’ve proven you can integrate intermittent renewables. It’s a lot of work, and we’ve gotten into the business of forecasting,” Mickey said.

Doying said MISO is researching to find the inflection point when reliability might be threatened because the RTO can no longer accurately forecast load because of nonvisible DERs. He said MISO today has 5,000 MW of distributed megawatts offered into the market, much of it not visible to the RTO.

“I don’t know where that point is, but it’s something that we are actively studying,” Doying said.

Blurred Lines

Advanced Energy Economy’s Jeff Dennis said DERs exist in a jurisdictional gray area, governed by sporadic and “nuanced” FERC precedent and the 1935 Federal Power Act, which was drafted when there was sharp distinction between transmission and distribution.

“The reality is between 1935 and today, the system has become much more interconnected,” Dennis said.

Ari Peskoe | © RTO Insider

Ari Peskoe, director of the Electricity Law Initiative at Harvard Law School, made a case against direct FERC regulation of DER sales, saying states should oversee transactions to utilities and aggregators. He said sales by a DER to a local buyer, not an RTO, should be categorized as “other sales” and not wholesale sales “in interstate commerce,” as currently prescribed by the FPA.

“The current jurisdiction is a bit of a mess,” Peskoe said, contending that DERs should be categorized as “intrastate wholesale sales” so states can assume full jurisdiction.

“We know there is such thing as intrastate wholesale sales. Look at ERCOT,” he argued. “DERs are very much a local product. … I’d like to give states the flexibility to decide.”

But, he said, FERC relinquishing power over DERs is unlikely unless the commission is pressed on the issue by states and utilities.

That scenario set panelists into thinking about a complex set of hypothetical situations. Talberg said possible state jurisdiction over DERs could become muddled again when aggregators join RTOs as market participants, thus reintroducing FERC jurisdiction in the mix.

Kristov added that industry experts rarely raise the question of how DERs will be able to afford to participate in the wholesale markets, as upgrades on the distribution system are likely needed before the resources are equipped for RTO market participation. He hopes FERC contemplates the burden of those local costs if the commission allows DERs into wholesale markets.

Panelists also said they didn’t know what DER interconnection agreements to wholesale markets will look like. Some even ventured that states might be able to prohibit individual DER wholesale market participation if those DERs agree to enter a statewide aggregation program.

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