A Day in the Life of the Grid

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A Day in the Life of the Grid: July 21, 2011
This snapshot of the hour-‐by-‐hour operation of a large regional transmission
organization on a hot summer day illustrates the benefits of greater
regional oversight of the transmission system and points the way to even
greater benefits, as end-‐use customers gain the ability to interact with the
regional wholesale market.
by Paul Feldman
ISO the Midwest Independent
Transmission System Operator1
is an independent regional
transmission organization that
encompasses all or part of 11 states.
MISO manages a large portion of the bulk
electric system in the central and upper
Midwest through an organized market.
This approach provides buyers and
sellers the real, instantaneous price of
1
MISO r -‐time
wholesale electric energy markets, directing and
controlling over 131,000 MW of generating
resources and approximately 50,000 miles of
transmission lines. Consumer loads in the MISO
region have been as high as 104,000 MW during
peak summer days, and MISO settles more than
$23 billion in gross market charges annually.
wholesale electricity over a region,
which has a huge intra-‐day and
geographical variance. Exposing these
prices, along with technology and tariff
advances over the past several years,
gives rise to even more opportunities for
economically attractive transactions at
M
Paul Feldman,
independent Board of Director, extends his
who
were instrumental in preparing the
information presented here.
to the National Association
of Utility Regulatory Utility Commissioners in
February. The video presentation is posted on
the MISO website linked here and below.

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the retail level, through improved
coordination between the wholesale and
retail markets.
Improvements in communicating
accurate retail price signals to end-‐use
consumers, coupled with providing them
access directly or indirectly to the
wholesale markets would allow their
consumption decisions to benefit
themselves and general market
outcomes. To the extent these
opportunities are wisely pursued, the
bulk electric system can be made less
expensive and more reliable for all.
This may soon be possible, but there is
still a lot to be done.
This presentation was
developed to show
how the wholesale
market works and
why it is important to
retail pricing
decisions and,
ultimately, the end-‐
customer. While this
is based on events
within the MISO footprint, the hour-‐by-‐
hour observations made here would
apply to virtually all RTOs.
MISO uses price maps to show energy
prices across its regional footprint
throughout each day. This link to a
video from the MISO website depicts the
series of price maps from Wednesday
July 21, 2011, which shows the changing
price of wholesale electricity across the
24 hours of the day. The time of day is
registered in the upper right corner. The
price maps are a direct reflection of the
least cost deployment of resources
throughout the region while respecting
the reliability criterion to protect the
system from any single generator or
transmission outage.
he prices depicted are actual
Locational
Marginal Prices, or LMPs for short.
The prices are represented by colors,
with the highest prices being orange to
red in the 10 to 20 cents per kilowatt-‐
hour range, and the lowest prices being
green to blue in the 3 cents to zero
cents per kWh range. While the video
shows Megawatt-‐hour prices, w
divide these by 1,000 and use kWh
prices to better
make the
connection to retail
reality.
These are the
actual prices for
wholesale
electricity prices
an economist would
like to see motivate
energy decisions. As you
watch the video or follow developments
in the text below, think about how these
widely varying wholesale prices compare
with the average, time-‐constant retail
price that most people and businesses
actually pay and the disparity between
the two. Remember that the disparity is
quite expensive at peak load periods,
contributing to a greatly underutilized,
but very expensive asset: the generation
and transmission facilities which
comprise the bulk electric system.
Also, think about the end-‐customer
assets distributed generation or
T
Consider how widely-‐varying wholesale
prices compare with the average,
time-‐constant retail price that
most customers
and the disparity between the two.

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reduced customer demand that could be
called upon that customers might
choose to make available in return for a
substantial saving.
Finally, think about how these savings
could be used by consumers and
businesses alike to invest in our
economy, while strengthening the bulk
power system at the same time.
Other things to note: The faint gray
dotted lines shown throughout the
region are existing 345 kV transmission
lines. The heavy dark lines shown on
the map are the 16 elements of a $5.8B
Multi-‐Value Project (MVP) portfolio of
proposed transmission lines. This
portfolio is specifically designed to
reduce congestion in the MISO footprint
and enable least cost generation to
reach load throughout the footprint. In
December, 2011, the MISO Board
approved implementation of this
portfolio after careful and considerable
review of a very conservative business
case that includes a Benefit to Cost
Ratio of more than 2 to 1. A 2 to 1
Benefit to Cost ratio is an extraordinary
value in any
business.
For now many low
cost wind
generation
resources are
largely trapped in
the western part of
the MISO regional
footprint, as you
will see through this
peak day and
virtually all future days until more
transmission is built.
No
Wednesday July 21, 2011, and take a
closer look at each of these 24 hours
and . . .
Midnight:
It is midnight moving into July 21, 2011.
The previous day had been swelteringly
hot, and we are starting a new day
expected to be just as hot.
peak for the MISO region was almost 104
GW about 15% of the electricity used in
the entire US.
similar. Figure 1 is a price map for
midnight July 21, the beginning of our
day. A transmission constraint has
caused the high prices observed at this
unusual time, a graphic illustration of
-‐value
transmission projects are designed to
prevent.
Instructions have already been sent to
every one of over 1,300 generation and
participating load-‐side resources in the
footprint letting them know what
conditions are expected each hour of
Figure 1

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the day.
These instructions will be monitored
throughout the day and modified as
conditions dictate, but every five
minutes a reminder or new instruction
packet is released so everyone is up to
date on next steps.
Wholesale price volatility is a very real
and daily phenomenon caused by widely
ranging fuel prices, very limited storage
ability, weather conditions, transmission
line constraints, and other factors. You
are looking at the state-‐of-‐the-‐art in
terms of price setting delivering prices
that result in lowest cost system
deployment and high reliability. The
system planning and resource adequacy
efforts have targeted only one end-‐user
outage every 4,000 days.
not all. These prices
are transparent to everyone, and
therefore used to inform future
bilateral contracts governing the value
of these contacts by shedding a bright
light on true costs. Where organized
markets do not exist price discovery is
more of an art-‐form.
Throughout the ensuing description, I
will weave in a few vignettes, which mix
fact and fiction a bit to make a point of
possible interest.
However, despite any
fictional elements
they are all entirely
possible and realistic
today.
1:00 AM:
We are one hour into
implementing the
grid management
plan for the day.
As shown in Figure 2,
prices are below 3 cents/kWh across the
region except on the southern Illinois-‐
Indiana border, where a transmission
constraint has limited the flow of low-‐
cost power into the area and 10
cent/kWh generators have been brought
on line to serve the load. Just 130 miles
north of the 10 cent energy price, zero
variable cost wind resources are trapped
and cannot get out due to lack of
transmission line capacity, driving prices
to zero.
Operators in the control room are
constantly looking at the weather
forecast and system conditions.
Software runs quietly in the background
collecting data from 250,000 points
every 4 seconds across the grid on
cyber-‐secure channels. The same
systems check every potential grid
failure point every 89 seconds and
calculate protective reactions for every
one of them.
B
Figure 2

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Meanwhile, prices are determined and
posted every 5 minutes for energy and
multiple ancillary service products for
each of 1,976 locations. You are looking
at just energy prices and not all the
separately-‐priced ancillary services
products, although there is a very high
price correlation between all these
products at any moment in time.
2:00 AM:
By 2:00 AM, with more people in bed,
temperatures and load across the region
has dropped off further. Wind
generation output is at 3.5 GW, leaving
6.5 GW of name-‐plate, zero incremental
cost wind capacity unproductive for lack
of wind.
ransmission constraints are
virtually nonexistent, as load is
down and the system is greatly
underutilized.
Shop-‐Mart, a large multi-‐state retailer,
monitors the weather daily and predicts
that prices today at the wholesale level
will be even higher than yesterday due
to higher forecasted temperatures in the
region. The corporate energy manager
gave orders to offer all of their demand
response capability into the MISO market
wherever states allow such action.
Many states pictured here and elsewhere
are sorting through options related to
allowing end-‐customers to access
wholesale markets directly, through
aggregators, through energy companies,
or combinations thereof.
Shop-‐Mart is a sophisticated energy user
with many locations and capability to
control HVAC, refrigeration, and lighting
that would allow them to save millions
of dollars each year if they could
consistently participate in organized
market demand response and ancillary
service program tariffs. Such access
would have the additional benefit of
lessening the need for future
generation, increasing reliability,
dampening wholesale prices in the near
term, and freeing capital for
investment.
3:00 AM:
Figure 3 shows that prices are near zero
in the western portion of
footprint. Wind farms producing with a
fuel cost of zero are willing to be paid
anything above minus 2.9 cents per kWh
as they receive a Production Tax Credit
of 3 cents/kWh for energy they
actually produce.
A data center in White Fish Bay,
Wisconsin, carries out orders left earlier
in the day to fully charge all batteries at
the $0 price they expect at this hour.
The data center exists on an industrial
campus configured as a microgrid and
has access to the wholesale market as
an industrial customer.
Every electric car expected to be built
in the next 15 years could charge at this
hour and not strain the bulk power
system. Even the most aggressive retail
Time of Use tariffs that have been
adopted have minimum prices far in
excess of the actual variable price of
electricity at this moment. This leaves
lots of room for states to consider
stimulating the electric vehicle market.
T

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4:00 AM:
MISO control room operators continue to
monitor the software outputs and keep
an eye on the 10 by 70 foot data screen
that dominates the control room in
Carmel, Indiana.
Systems in the St. Paul, Minnesota
backup control center 581 miles away
are updated on a real-‐time basis and
operators there are ready to take over
on a flash-‐cut basis in the event of a
failure at the main control center.
There is little change from the prior
hour, as system load settles in at its
minimum for the day 67 GW. The
equivalent of more than 23 nuclear
plants will be fired up in the next few
hours to meet the peak later in the day.
Prices in the west plummet to zero and
below, as load drops off and the wind is
generating at 3 GW.
On the early morning of the peak day
and the most expensive day for the year
the average real wholesale price
across the
entire
footprint
between
midnight and
4:00 AM is
2.3 cents per
kWh.
On this same
day in this
same
footprint,
actual price
of gasoline is
$3.82. Working through the math, if
you wanted to buy an incremental mile
of fuel for your car right now, gasoline is
over 1800% more expensive than
electricity.
5:00 AM:
People in Michigan are starting to get up
and turn things on. Prices rise as more
expensive, although still cheap,
generation is brought on-‐ line in
anticipation of the daily ramp up.
Winds in Lafayette, Indiana, are non-‐
existent and the football-‐field-‐long
turbine blades stand idle in what is
usually a very windy area.
Figure 3

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6:00 AM:
Demand is
increasing faster in
the eastern portion
of the footprint than
in the west, as the
sun continues to
clear the eastern
horizon. A price-‐
map of each
ancillary service
product would show
very similar price
separation and
variability across the region.
ning but a price
disparity between Iowa and Michigan is
already obvious in Figure 4.
Incremental energy in Iowa is nearly
free, while in Michigan energy is already
up to 7.5 cents per kWh, reflecting
transmission constraints that prohibit
less expensive energy from flowing into
the state. Michigan would clearly
benefit from additional transmission into
the state.
7:00 AM:
Winds have started to pick up in
Lafayette, Indiana and wind generation
is ramping up inside this traditionally
transmission-‐constrained area. Low cost
generation is trapped in the area
because there is not enough
transmission to move it out to where it
is needed. This results in all generators
in the area that are subject to market
prices receiving a near zero price. The
two dark lines out of the area show
proposed transmission lines that will
ultimately move the low cost energy to
a wider market, resulting in a lower cost
to the overall footprint and giving the
wind generator a better price for its
product
ind creates some unique
challenges to a balancing
authority. Despite its near
zero variable costs, in a small balancing
reliability issues and additional costs as
other resources are needed to manage
capacity. MISO transitioned in 2009
from 23 balancing authorities to a single
balancing authority, allowing these
challenges to be better managed at the
lowest cost. The geographic diversity of
MISO also moderates the
overall variability of the wind. The
scale of the footprint also provides more
options in siting of wind, allowing states
lacking wind resources greater access to
higher wind capacity resources.
MISO is similar in size and geographical
diversity and was previously similar in
W
Figure 4

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terms of its proliferation of Balancing
Authorities to the Western
Interconnection, minus California.
8:00 AM:
As Figure 5 shows, trapped wind in
west-‐central Indiana is pushing prices to
zero and less, while nearly adjacent
areas are at $100 per MWh more than
twice the average system price.
Grid software has properly determined
that raising the price on the high-‐price-‐
side of the transmission constraint and
electrically pushing back on the
constraint will enable the lowest total
cost for the region at this moment.
Traders caught short in the red area are
not happy campers.
Dealing with constraints is also an area
where end-‐customer resources can
prove to be of value in lowering cost and
maintaining reliability. Software
overlays from either aggregating energy
companies or independent aggregators
can configure end-‐customer resources to
provide energy and ancillary service-‐
equivalent functionality to the grid
operator, who remains legally agnostic
between the possibilities. Over the
long term, traditional generation assets
and end-‐customer resources that can be
configured to provide grid services
should each contribute according to
their marginal cost structures and fine-‐
grained functionality.
MISO launched an ancillary services
market in 2009, which resulted in a
large increase in the value MISO
provides, as measured annually in its
ongoing Value Proposition Study. A good
example of this is the provision of
frequency regulating reserves which
manage the instantaneous changes in
load that
continuously occur
on the system.
Prior to 2009,
each balancing
authority managed
its own
regulation,
typically with
reserves held on
its newest coal
units, which
tended to have
the best control
systems. In total,
over 1,100 MW of low-‐cost coal
generation was held back for regulation.
Consolidation into a single balancing
authority and providing frequency
regulation through a central market
allowed the regulation requirement to
be reduced to less than 400 MW, and
Figure 5

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also allowed the requirement to be met
with less efficient units, freeing up the
most efficient units for energy
production the equivalent of four low
cost coal units. The result is an annual
savings of $176-‐$195 million.
9:00 AM:
Interpreted appropriately, Locational
Marginal Prices are markers pointing to
opportunities to lower cost and improve
reliability. Constraints, which are
indicated by price differences in the
region, should be examined for ways to
improve the cost efficiency of the
system. Detailed examination should
examine several options for each
constraint, looking for the most cost-‐
effective way to deal with the
constraint, options include: additional
generation, additional transmission, and
load-‐side resource participation
opportunities.
In high load areas that presently
experience constraints, blocking access
to low cost generation, demand
response options can be a very efficient
option. Currently in the MISO region,
most demand side resources are not
offered for use to the wholesale market
except in emergency situations
creating economic inefficiencies. Load-‐
side solutions are also inherently clean,
fast and do not suffer from NIMBY
issues. Several companies have now
adopted the Green Button a customer-‐
friendly means to view actual system
real-‐time costs, and a necessary step in
the direction of end-‐user cost control.
Of course not every nail needs one of
these hammers. It may be appropriate
to accept inefficiency in cases where
the cost of a constraint is small enough,
or the constraint may occur so
infrequently, that the best economic
decision is to accept the inefficiency
cost than any of the other options.
In most of the western portion of the
Eastern Interconnect, and the eastern
portion of the Western Interconnect,
customers only have the option of
wholesale market access through their
local energy company, based on retail
tariffs. Other areas of the country allow
aggregators to approach customers with
a wide variety of increasingly innovative
offers related to participation in
wholesale markets. State regulators
have to sort out the right approach for
customers.
oving to the MISO control room,
at 9:34 AM operators declare a
Maximum Generation Warning
as load is tracking ahead of forecast and
forced outages are exceeding
expectations. Models suggested the
warning four minutes ago as the
appropriate next step. At 9:35,
frequency dips to its low for the day at
59.964. Generation is falling a bit
behind the morning ramp up.
Among large customers, Shop-‐Mart
energy manager sends an e-‐mail to its
control center asking if everyone is
ready to shed 50 MW of load between
1:00 and 2:00 this afternoon as per
schedules with the Grid Operator. The
email was unnecessary; it was covered
on software-‐driven autopilot since
M

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orders were issued earlier in the day.
10:00 AM:
Things continue to heat up, and the
morning ramp the rate of load increase
is formidable. To further complicate
the ramp-‐up, wind is falling off a cliff
and wind-‐driven blades are slowing
across the region. Current forecasts are
for peak-‐wind to be a full 3 GW less than
the peak wind from yesterday;
about 3 nuclear plants worth of
generation missing in action.
Two other challenges are surfacing. The
weather pattern across the footprint
shown is unusually homogeneous, taking
away the innate ability to take
advantage of weather diversity in a
large footprint. That will cause more
resources to be committed later this
afternoon. And, finally imports from
some energy to take advantage of higher
prices in the eastern part of the MISO
footprint are drying up, as prices rise
substantially in the Mid-‐Atlantic States.
PJM is facing its peak day for the year.
Grid management software continues to
operate in the background of the Data
Center, which is redundantly connected
to the Control Room. The software has
been subtly altered over the past couple
of years from simply bringing on enough
generation to meet load changes to align
with a new approach to grid
management. The objective function
of the software is to run the grid as
efficiently as possible while maintaining
reliability, using any resources available.
revolutionary implications.
An efficient grid is a low cost and
reliable grid. To run an efficient grid,
system operators
need to direct the
flow of energy, and
to support that flow
with a suite of
ancillary services
e.g., frequency
regulation, spinning
reserves, non-‐
spinning reserves,
etc.
The grid operator is
legally agnostic as to
who provides these
services traditional generators or
equivalent actions on the customer side
of the equation.
Both traditional generators and
customer-‐side assets are offering their
capabilities into the market, and the
software is selecting whatever the most
efficient resources are resources that
provide the lowest cost delivered energy
Figure 6

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in a reliable fashion.
Every day more customer assets are
being offered into the market and
replacing traditional generation assets
that are higher cost. Even at this mid-‐
morning hour, Figure 6 shows and
increasing cost trend, a normal
very early in the
trend toward customer participation
but the trend is
there pushed by
technology
advances and
Smart Grid-‐
caused customer
education and
awakening.
At this moment,
thousands of
entrepreneurs are
dreaming up ways
to enable
customers to
participate in the
process and
leverage the still-‐evolving Smart Grid
system. The beneficiaries will be the
end-‐customers and just in time given
price pressure driven by aging
generation plant retirements and higher
plant replacement costs not to
mention sorely needed distribution
upgrades.
11:00 AM:
Very high prices in excess of 10
cents/kWh -‐start to surface in central
Illinois (Figure 7), as the Chicago area
draws energy from the southwest and
transmission lines are nearing their
capacity. While generators in the PJM
region had been selling into the MISO
market earlier in the day, MISO is now
exporting over 500 MW to PJM a trend
that will grow and continue through the
heat of the day.
The pattern of very high/very low prices
in a tight, adjacent geographical setting
efforts to achieve
low cost across the footprint in the face
of those constraints. Think of the
transmission grid as a system of pipes
with flowing water. A constraint
hampers the flow of cheap water. More
of the cheap water can get into the
network if someone will apply pressure
to the pipe discharging toward the
cheap water and distribute it to other
pipes. Grid operators do that by turning
on more expensive generation at the
other end of the constrained line
resulting in increased prices on one end
of the constraint. This causes less stress
on the constrained line and the lowest
cost possible in the footprint, given the
constraints and resources available.
Figure 7

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mathematically far more complicated
than that, of course.
12:00 noon:
Prices have soared above 10 cents/kWh
in the east more than a 400% increase
over the early morning hours. The
wholesale markets are a true reflection
of the actual cost
of electricity at
each of 1,975
locations every 5
minutes. At this
moment the real
cost of energy in
Illinois, Indiana,
Michigan, and Ohio
is well in excess of
the retail price
every customer is
actually charged.
The disparity
between the real
wholesale price and the retail price that
actually drives customer decision-‐
making leads to massive inefficiencies,
waste, and severe under-‐utilization of a
$1 trillion asset. Retail Time-‐Of-‐Use
pricing that at least roughly aligns with
the wholesale reality could help a lot
a tricky business as well.
At 12:45 PM, a plant in Indiana trips off
line and the loss of over 400 MW of
power ripples across the Interconnect at
60% of the speed of light, and frequency
in the entire interconnect dips to 59.967
hertz -‐ the second lowest for the day.
The dip is responding to the loss of
generation. Through a combination of
software-‐driven actions, frequency
recovers in less than 5 minutes.
Synchrophasors across the eastern half
of the continent log the event to within
one-‐millionth of a second the time it
takes electricity to travel two football
fields. (Synchrophasors measure voltage
and current at diverse locations on a
power grid and can output accurately
time-‐stamped voltage and current. In
the larger world of -‐h
minor occurrence. The grid is
always protected against any single
event and the only impact of the
instantaneous loss of over 400 MW is a
slight price increase as the supply curve
shifts left to recognize more expensive
generation coming on-‐line. (Figure 8.)
The grid is then immediately
reconfigured to protect against the next
potential event.
Figure 8

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1:00 PM (13:00hrs):
Average
temperatures in
the region are
nearing 100
degrees, and
wind has dropped
off to less than 1
GW. Effectively,
only 1,800 of the
30,000 wind
blades in the
region are
producing at
capacity. Grid
operators dispatch the next batch of
least-‐cost generation, which is almost
always the most expensive generation
on the system. Average prices in the
east are 300% higher than prices in the
west. Some rain and cloud cover
flattens the load growth at the 100.5
GW level, while the system peaks at 3.5
GW less than yesterday. Figure 9 shows
the condition of the network at 1 PM.
At 1:00 PM exactly, a signal goes out to
717 IP addresses from Shop-‐Mart s
control center freeing a 50 MW chunk of
the demand response
capability. Actions taken within 31
seconds include light dimming, a 3.7
degree rise in refrigeration units, and a
2.1 degree temperature rise in selected
stores. No store employee or customer
notices as the program automatically
grinds on for the next hour, reducing
system peak, saving over 50 MW of high-‐
cost, on-‐peak energy, and providing
substantial savings to Shop-‐Mart.
Among the consequences of Shop-‐
action are these:
$10,000 flows to Shop-‐
bottom line;
the bulk electric system is slightly
more reliable ;
a slightly lower price for all
customers in the interconnect;
saving of the cost to generate 4.3
MW that would have been lost in
transmission and distribution lines
and spread to customers;
a savings of the cost to carry
7.5MW of reserve margin that
would have been spread across all
customers,
a reduction of 70 tons of CO2
emissions for which Shop-‐Mart is
not paid,
slightly reduced earnings for a
traditional generator,
slightly less earnings for
distribution companies serving
Shop-‐Mart locations, and
slightly less future need for new
Figure 9

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transmission and generation
construction.
There are many pieces here for utilities,
customers, and regulators to consider.
In other action, the Alcoa smelter in
Newburgh on the southern Indiana
border has been providing frequency
regulation service to the grid since early
morning, reacting to a 4 second signal
just as it does every other day. Now
Alcoa drops its demand by 80 MW from
480MW to take
advantage of a
$200 per MWh
price. The
economic goal
simply switched
from making beer
cans to making
negawatts, while
as much of the
smelter capacity
as possible was
reduced for an
hour. For a typical
aluminum smelter, electric power costs
account for 30% to 40% of the total cost
of producing primary aluminum. In the
continental United States, Alcoa
currently owns and/or operates ten
aluminum smelters and many associated
fabricating facilities with a combined
average load of over 2,600 MW.
2:00 PM (14:00hrs):
The end-‐customer events in the last
hour highlight the beginning of a trend
toward more end-‐customer
participation. Huge decreases in
communication costs and advances in
digital technologies are enabling new
load side (customer-‐side-‐of-‐the-‐meter)
assets the flexibility to control their
power usage and their power costs.
Demand response resources have been
called upon east of MISO, lowering
prices for the Interconnect, but further
demand response by MISO member
customers are not needed. Reserve
margins are adequate for the day, with
the Shop-‐Mart and Alcoa actions noted
above.
Looking at the colors and changing
patterns shown in Figure 10, it is
impossible to infer anything about the
effect of state boundaries; the states
are all essentially in the same electrical
boat when it comes to operation of the
bulk electric system. ing
to look at the map and consider
incremental transmission construction
and who wins and who loses if it is built.
States with lower cost resources have
the benefit of economic stimulus
Figure 10

15

through increased
exports to higher
cost areas. States
gaining access to
lower cost
resources have
the economic
stimulus of lower
end-‐customer
bills, freeing up
cash for local
expenditures and
investment.
and publicly
available analysis shows that every sub-‐
region is a winner for the proposed
transmission builds.
3:00 PM (15:00hrs):
High prices in the east and central
portions of the footprint ease due to a
combination of a flattening demand and
an increase in power imported from
external suppliers that occurred during
the prior hour. A weather front moving
across the Midwest is lowering humidity
levels and causing increased cloud cover
in some areas, ending the escalating
temperatures. This relieves most of the
congestion on the transmission system
for now.
However, at 3:55 PM, another plant in
southern Indiana, with a capacity of
almost 500 MW, trips off-‐line. The grid
software, which runs a co-‐optimized
real-‐time energy and operating reserve
market, has procured and deployed
enough reserve capacity to protect the
system. Reserves represent another
ancillary services product for which end-‐
customer resources can be readily
configured via software and offered into
the market for payment. Again, the
event is easily handled by the software
which reconfigures the grid and gives
everyone new marching orders within a
few minutes.
4:00 PM (16:00hrs):
Load for the MISO region continues to
peak at 100.5 MW, down about 3 GW
change in weather for parts of the
region.
Current real time prices in the
Milwaukee area are some of the lowest
across the footprint (Figure 11), as
temperatures peaked there hours earlier
as a result of changing weather
conditions and transmission constraints
at the Wisconsin -‐ Illinois border.
Automatic five-‐minute dispatch
instructions and price signals are
incenting generators in the Milwaukee
area to reduce their output to mitigate
congestion, thus trapping low cost
Figure 11

16

power that could otherwise reduce costs
across the footprint. The short black
line connecting Wisconsin and Illinois
represents a proposed six-‐mile segment
of 345 KV transmission that would
alleviate this congestion, allowing
customers to the south and east access
to this low cost generation in Wisconsin.
ust to the east, PJM sets a new all-‐
time peak at 160 GW at the same
moment wind in PJM reaches its
lowest point for the day at 300 MW
down 1.3 GW from earlier in the day.
The west-‐to-‐east price pattern is
indicative of the normal relative price
arrangement teeing up the need for
west to east transmission to deliver
lower cost resources where prices are
higher.
5:00 PM (17:00hrs):
After several very hot days, customers
are demanding more energy for air
conditioning. Traditional generation
assets are stressed and many have had
to de-‐rate and reduce output due to
temperature. Grid operators are
immediately and automatically
software-‐notified of reduced capability.
Wholesale prices are between 10 cents
and 20 cents per kWh across the region.
Peak hours drive the need for new
construction in generation, transmission,
and distribution. At this moment, the
61 million people in this picture are all
making electricity decisions based on
average and at this moment far too
low retail electricity prices. Retail
prices across the footprint signal end
users that electricity is no more valuable
now than it was at 4:00 AM despite a
20 cent/kWh-‐plus cost difference. The
implications of low retail prices
artificially incenting excessive customer
demand, notably on-‐peak, include:
unneeded construction, higher bills,
unnecessary pollution, and increased
energy dependence.
Opportunities for customer demand
response and supply from distributed
generation still have a contribution to
make, however. Back at the data
center in White Fish Bay, with batteries
at full charge and three days of fuel on
hand for back-‐ up generators, data
center management decides to kick in
all five of its 2 MW generators and sell
power back into the grid. They have
access to the $200 MWh price, but their
incremental cost to generate is only $20
per MWh, thus they are able to make
$1,800 this hour lowering their total
monthly energy bill by 3% for this one
hour action alone.
There is an amazing 170 GW of this type
of customer side generation across the
US, with less than 1% of it being
maximized for the cu
through access to wholesale markets.
Alcoa returned to full beer can
production 3 hours ago but now prices
are at 45 cents/kWh and they happily
shed 80 MW of load again for the next
hour before returning to a standard
production schedule.
Organized markets and the ability to
profit from customer response to power
prices help make the economics of this
facility work. The United States, once
the leading aluminum producer,
J

17
has been surpassed by China, Russia,
and Canada. The long term viability of
these types of facilities within the US is
contingent upon cost reduction and cost
competitiveness.
6:00 PM (18:00hrs):
Things are starting to cool off in the
west and prices are less than half what
they were just an hour ago.
7:00 PM (19:00hrs):
Even as
temperatures cool
slightly, MISO
operators are still
faced with nine
binding constraints
in the region
three more than
last hour. Each
constraint means
that lower cost
powe On a day like
today, operators are never relieved of
this effort. During the cooler morning
hours they only had three to five
constraints to manage, but during the
day as many as thirteen were actively
being managed.
8:00 PM (20:00hrs):
The heat index along the Lake Michigan
shoreline in eastern Wisconsin has fallen
materially in the last hour. Demand
there continues to fall and prices
continue to signal for less generation.
Additional constraints, effectively a lack
of transmission capacity to transport
cheap energy out of this region, trap low
cost generation in the area.
9:00 PM (21:00hrs):
As street lights come on and households
increase power consumption, the steady
decline in demand over the last couple
of hours is momentarily slowed. The
continued removal of generating
capacity from the system combines with
this brief period of flattening demand to
cause the need for some short-‐term,
high-‐cost generation relief. Constraints
continue to trap generation in
Wisconsin. Although prices are higher
for this short
period, it is still the
least cost
deployment for the
region considering
what had to be
done in previous
hours, and the
needs ahead.
Economics for Alcoa
have again flipped from making beer
cans, so the company again sheds 80 MW
of load in exchange for the 34
cents/kWh price. Alcoa is a great
example of a large end-‐customer
actually changing its operation to
improve profitability and contribute to a
more efficient grid at the same time.
At the other extreme of size, a
residential electric hot water heater
or an aggregate arrangement of them
that can be controlled is pretty much
the same as a smelter and can provide
the same services to the grid.
Aggregated across many residential
customers of such an asset can function
as a low cost, highly reliable asset for
use in frequency regulation, reserves, or
An aggregation of residential electric hot
water heaters that can be controlled
has pretty much the same value
to the system as a smelter and can
provide the same services to the grid.

18
energy source or sink. Many
cooperatives and municipals are at the
leading edge of using residential hot
water management programs to cut
peaks and reduce their system cost.
Even if we undertake massive reforms to
better manage electricity, there will
always be locational price separation
and inter-‐minute price volatility. And
there will always be opportunities for
end-‐customers to participate in a
meaningful way.
10:00 PM (22:00hrs):
Load resumes its decrease across the
footprint as people go to bed and
temperatures drop. Prices also begin to
decrease (Figure 12) as the system has
more generation than needed to meet
demand. The only place prices have not
dropped is in southwest Indiana, where
the two large coal units had tripped off-‐
line earlier in the day as previously
reported. The transmission capacity in
the area is not enough to support low
cost imports into the area resulting in
high priced
generation to
meet the local
load.
11:00 PM
(23:00hrs):
Demand begins to
decrease more
rapidly as
temperatures
drop and more
people go to bed.
Congestion continues in
southwest Indiana.
The Shop-‐Mart energy manager went to
bed an hour ago, but wakes up suddenly
from a dream that she had saved her
company $10,000 earlier in the day. As
it turns out, all the enabling tariffs are
not in place yet and she still has work to
do on the regulatory front.
12:00 PM (24:00hrs):
The system becomes unconstrained as
load continues to drop. MISO operators
begin the cycle again driven, as always
by the goal of providing a low-‐cost,
reliable grid to the region, shedding
light on the real cost of electricity, and
assisting the region to plan for future
system improvements.
Published with permission from MISO.
Figure 12 Figure 12

A Day in the Life of the Grid

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