Cleantech Market Intelligence
In Midwest Heat Wave, a Red Alert
July 5 was another scorching hot day in the midwestern United States. Although I can empathize with our central states – Washington, D.C. has been experiencing temperatures over 100 degrees for several weeks, typical for this time of year – I suspect it’s more difficult to cope with weather that’s unseasonably warm. Hot days like these provide insight into the resilience (or fragility) of a grid system. Midwest ISO (MISO, the grid operator for several Midwest states) provides a map of the Locational Marginal Pricing in its service territory. In the afternoon of July 5, the map changed a great deal from hour to hour.
Around mid-day on Thursday, the map went red. This indicates that the marginal price for a megawatt-hour (MWh) of energy is above $1,000. Only an hour later, prices dropped significantly. Some areas actually experienced a negative marginal price. The fact that the LMP was negative is not in itself remarkable; this happens whenever there is congestion on a node and MISO uses negative pricing to rein in a bottleneck. Typical LMP prices range from $50 to $75 for 1 MWh during peak hours in the summer. In this case, not only was the sharp increase in the marginal price alarming, but so was the volatilty on the system. Grid operators work hard to avoid volatility in order to provide secure, reliable, and cost-effective energy via transparent markets. In this case, the market came as close to failing as we are likely to see.
In order to cope with the tremendous imbalance on the system, MISO issued a maximum generation warning, instructing that from 2 p.m. to 8 p.m. Central time any extra generation capacity that had been withheld should be released. This includes generation from nearby ISOs like PJM Interconnection and NY Independent System Operator, in addition to any additional generation on the MISO footprint. Essentially, the grid operator was required to call on very expensive resources to meet the grid demands—at wildly inefficient prices.
Locational Marginal Pricing Map, July 5, 2012, 2:05 pm
Locational Marginal Pricing Map, July 5, 2012, 3:05 pm
There are obvious lessons here for energy storage providers. For the right price, energy storage systems or energy storage services (in the vein of what AES Energy Storage provides) could serve very well as insurance policies against this sort of event. It’s important to keep in mind, however, that these events are exceptional, not typical, and that MISO rescinded the maximum generation warning early. MISO has not released any details on what caused the incident.
Alex Lauderbaugh contributed to this report.