MISO Interconnection Rules for Hybrid Resources Shape Access to Electricity Market

Electricity market rules in development by the Midcontinent Independent System Operator (MISO, the region’s grid operator) will impact the competitiveness of hybrid resources, a type of electricity resource which can bring more carbon-free energy to the region. Emerging MISO interconnection rules and processes will determine how hybrid resources connect to the grid, which will shape everything from how these resources are designed to how much electricity and other grid services they can provide.

This is the second post in a series that explores issues relevant to hybrid resources, including how electricity market rules and system study practices will drive their development. The series will also explore why the development of market participation rules for hybrid resources will impact carbon emissions in the region.

• Part 1: Hybrid resource use cases/value propositions. This post focuses on hybrid resources in the MISO electricity ­­­­market and describes their unique attributes and value to the grid, which can help inform how market rules incorporate them.
• Part 2: Hybrid resource interconnection
• Part 3: Hybrid resource market participation (forthcoming)
• Part 4: Hybrid resource capacity accreditation­­ (forthcoming)

As described in our first post, hybrid resources are two or more resources (e.g., wind, solar, and battery storage) behind a single point of interconnection and many hybrids are beginning to appear in the MISO interconnection queue. We also highlighted recent policies that enable these resources to enter the market, including the Federal Energy Regulatory Commission’s (FERC) Order 845.

Here, we’ll dive deeper and discuss the potential implications of the transmission interconnection process for hybrid resources and reforms underway that can bring hybrid resources onto the grid.

Key takeaways:

• Interconnection study processes tailored to hybrid resources provide a foundation for their participation in the electricity market.
• Emerging rules and processes at FERC and MISO will shape the competitiveness of hybrid resources in the marketplace.
• The significant number of hybrid resources in the interconnection queue demonstrates the need to develop additional market rules that can maximize their value to the grid and region.

Overview of the interconnection process

To access the grid and sell electricity into the MISO wholesale electricity market, any generator must apply for interconnection rights (the total amount of power [megawatts] they’re allowed to inject on to the grid at any given time at a single point of interconnection) and go through MISO’s Generation Interconnection Queue.

Through the interconnection process, MISO studies generation resources to ensure their injections onto the transmission network will not cause reliability problems. Generators are studied up to the amount of interconnection rights they are applying for. Generation resources are also studied to ensure that their energy will be able to reach end-use customers, also known as “deliverability.”

The way MISO studies generators for system impact has significant repercussions for their economic viability. Upgrades to the equipment on the grid are often required to accommodate the new generator on the network. These improvements, known as network upgrades, are paid for by the oncoming generator and can be significant for many generation projects.

At the end of this process, assuming the applicant wants to pay for any required network upgrades and move forward, a Generator Interconnection Agreement is signed, providing contractual interconnection rights to the generator to inject energy on to the grid.

The MISO interconnection study includes specific assumptions about how a power plant will operate across a variety of grid conditions. In late 2019, MISO established Tariff and Business Practice Manual (BPM) language for how new hybrid generators will be studied in the interconnection process (see figure 1 along with additional timeline details in the notes section).

 Figure 1. Timeline of FERC Order 845 and MISO hybrid resource interconnection process development 

Source: Maggie Kristian, Great Plains Institute. Note: See additional timeline details in the notes section of this post.

In parallel, MISO is developing rules that could enable modified hybrids (i.e., adding generation or storage resource to an existing generator). Driven largely by FERC’s Order 845, which addressed interconnection issues, MISO created rules to allow a generator to use interconnection service lower than the nameplate capacity of the generator. These rules mean that a project could build more generation capacity than it plans to actually inject into the grid at any given time, which can improve performance and increase its reliability contribution (we discussed this in the shifting and arbitrage section of our last blog).

MISO also created rules allowing existing generators to add resources to the generator and become hybrids through a process called “Surplus Interconnection Service.” Note that MISO’s Surplus Interconnection process is still under development.

These reforms affect how hybrid resources can be designed, if they will need to pay for transmission upgrades to interconnect, how much energy they can sell into the market, and when that energy will be sold.

MISO interconnection rules for new hybrid resources

For interconnection studies, MISO defines a hybrid resource as generation that incorporates two or more distinct fuel types behind one point of interconnection. It can include any combination of generator types that exist for study in the MISO Generator Interconnection Queue process, which includes all conventional generation types, wind and solar, and energy storage. Hybrids are also distinctly different than something like a combined cycle generator that has two generators (combustion and steam turbines) that both originate from the same combustion fuel source.

During a conventional interconnection system impact study, MISO assumes different dispatch levels (megawatt [MW] injection levels) during the summer peak and shoulder scenarios for different fuel types:

• Summer peak means the time during the summer with the most load (demand for energy).
• Shoulder scenarios are during the transitional months of the year, like spring or fall, when energy demand does not hit its annual peak.

For example, at the summer peak, MISO assumes that wind will produce 15.6 percent of its nameplate MW capacity, because historical data shows that during the middle of a hot summer day, on average, not much wind is expected to blow. In contrast, solar, using all that summer sun, is projected to produce at 100 percent during the summer peak.

Rules developed by MISO and its stakeholders over the last two years dictate that a hybrid resource will have an assumed dispatch level based on the dispatch level of the combined resources. The assumed dispatch levels must stay within the generator’s interconnection rights; projects with excess generation capacity beyond their interconnection rights will have their assumed dispatch level adjusted down to the maximum allowed that the generator is requesting.

For example, a hybrid plant with 100 MWs of wind and 50 MWs of solar only requests 120 MWs of interconnection service. For this hybrid plant, MISO’s assumed dispatch in the summer peak case would be 65.5 MW (15.6 MWs of wind + 50 MWs of solar). In the shoulder peak case, the assumed dispatch of the hybrid plant would be 120 MWs because the interconnection service being requested (120 MWs) is less than the combined assumed shoulder peak case for each component of the hybrid resource (100 MWs of wind + 50 MWs of solar).

MISO interconnection rules for modified hybrid resources

Given the values that a hybrid resource can offer, generator owners might consider modifying existing power plants to create a hybrid generator. So, how would a generator that has already gone through the interconnection queue go about adding a new, co-located generation or storage resource (for example, adding a battery to a solar farm or adding solar generation to an existing wind farm)?

MISO has rules for modifying an existing resource, but these rules are primarily designed for generators that need to conduct maintenance or plan on upgrading or replacing generation equipment. Generators that intend to add a second kind of generation behind the same point of interconnection will need to apply for Surplus Interconnection Service.

Figure 2. A possible arrangement/use case of surplus interconnection

Source: Maggie Kristian, Great Plains Institute.

Surplus interconnection rules can be used by any kind of generation resource looking to share unused interconnection rights, regardless of fuel type. To set the terms for sharing a point of interconnection, surplus interconnection requires a Monitoring and Consent Agreement between the current generator and the new oncoming generator. This agreement outlines how much of the existing interconnection rights will be made available to the new resource and when it will be allowed to use those rights. An existing resource owner might choose to allow the new resource to be available up to a set MW amount of interconnection rights at any point in the day, or they might choose to allow the new resource to only use the interconnection rights during certain times of the day.

The existing generator gets priority to the interconnection rights by default. However, the existing generator can choose to forgo its priority and cede its rights to the oncoming generator. This would mean the existing generator would be subject to the requirements set by the oncoming resource.

Applying for Surplus Interconnection Service still requires a system impact study to evaluate the reliability impacts of the added generator at the point of interconnection, but the cost of the study is a flat $60,000 as opposed to study costs assigned on a per MW basis, as is done in the standard interconnection process.

This method of interconnection allows generators that become hybrids to use up to the maximum MW level of the pre-existing generator’s interconnection rights. However, it cannot be used as a generator replacement. The use of the interconnection rights is still tied to the original resource, and if that resource is retired, the new resource must also stop using those interconnection rights within a year of the retirement.

Conclusion: Implications of interconnection process reforms for hybrid resources

The process changes that have been developed through the MISO stakeholder process, and those driven by FERC Order 845 that are still underway, provide a path for hybrid resources to connect to the transmission grid in the MISO region. As a result, there are now nearly 3 gigawatts of these resources working through the interconnection process.

While important questions remain on energy market eligibility and participation rules, MISO and its stakeholders (GPI is a stakeholder) have made meaningful progress over the last few years to help this emerging market develop.

Interconnection rights are foundational to generator participation in the wholesale electricity markets. They determine what transmission network upgrades are required for reliable injection and delivery of energy and set the stage for how generators will be represented in terms of representation in market models, visibility into operations, capacity accreditation, and optimization of market offer structures. Taken together, these factors largely determine how competitive hybrid resources will be in the wholesale market and when competing for power purchase agreements.

We’ll dive deeper into these issues in our next posts on capacity and market participation.

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Notes

This table provides a detailed description of the events described in figure 1’s timeline of FERC Order 845 and MISO hybrid resource interconnection process development.