The MISO Environmental Sector supports MISO’s proposed market enhancement to create a separate category for fast-ramping resources to be dispatched prior to slow-ramping resources. This is consistent with the intentions of FERC Order 755 and will improve the overall performance of regulation resources in MISO. MISO’s AGC enhancement proposal should be prioritized as a near-term market enhancement. To date compliance with Order 755 compliance has not resulted in a significant shift to increased use of fast-ramping resources in the MISO markets. As part of this effort we should also evaluate other barriers to entry for fast-ramping resources in the MISO markets.
As traditional baseload units retire and variable renewable energy continues to enter the marketplace, having a high-performing fleet of regulation resources in MISO is important. Effective market rules should be put in place to ensure that fast-ramping resources can compete on a non-discriminatory basis and are fully compensated for the services they provide. FERC Order 755 acknowledged that that fast-ramping resources provide greater amounts of frequency regulation, and should be compensated appropriately.
Benefits of Fast-Ramping Resources
There are multiple benefits to bringing more fast-ramping resources into the MISO market. Currently, most frequency regulation in MISO is provided by conventional generators, whose characteristics are better-suited to participate in energy markets. Attracting new, fast-ramping resources into the marketplace will free up capacity currently committed to the regulation market to participate in energy markets. MISO analysis presented at the October 28th Market Subcommittee showed that a modest increase in new regulation capacity would generate production cost savings of about $10 million per year.
PJM has already seen the benefits of additional fast-ramping resources. Since enacting Order 755-related “pay-for-performance” in October 2012, hundreds of MWs of new, fast-ramping regulation resources have entered the marketplace. As a result, PJM has been able to lower their regulation requirement while still meeting NERC frequency regulation standards, from 1.0% to 0.70% of their peak/valley load forecast- a reduction of about 250 MW.
MISO Should Evaluate Additional Barriers to Entry for Fast-Ramping Resources
Two years after MISO’s Order 755 compliance filing in December of 2012, there has not been a material improvement in the makeup of MISO’s regulation fleet, despite increasing regulation prices. The main impact has been a large, ten-fold increase in penalty charges levied on regulation resources for poor performance. Generators providing frequency regulation are now incorporating the anticipated penalty charges into their offer costs, contributing to the rise in regulation prices. One would expect this to drive an increase in demand for fast-ramping resources, which can provide the service without incurring penalties, but we have not seen this in MISO. Implementing priority dispatch for fast-ramping resources in the regulation market as MISO proposes will help. As part of this effort we should also evaluate other barriers to entry and participation by fast-ramping resources in MISO.
Fast-ramping resources are generally smaller than conventional generators, and there exists barriers to entry for small resources in MISO. For example, resources less than 5 MW are unable to fully register and participate in the MISO markets. In comparison, PJM’s minimum limit for resource participation is 100 kW. Also, MISO market rules prevent an LSE from aggregating and controlling multiple distributed energy resources to bid into the marketplace (like a virtual power plant), if the resources are located across multiple Local Balancing Areas. LSEs are able to do this in PJM. These issues should be considered together as a package of reforms to ensure equitable treatment of resources and to improve overall performance in MISO’s frequency regulation market.
Thank you for the opportunity to provide feedback.