As MISO celebrates its 15th anniversary of becoming the nation’s first Regional Transmission Organization, it is timely—and a little shocking—to reflect on how much the electricity industry has changed since MISO began providing reliability coordination and other services on December 15, 2001.
For example, when MISO first got up and running 15 years ago, the business model that the U.S. electricity industry had utilized for decades was evolving in several major ways.
One aspect of this transformation, called “restructuring” or “deregulation,” was designed to introduce competition to the “retail” side of the industry by allowing end-use energy customers to choose their electricity supplier. Restructuring was a big departure from the industry’s long-time business model, under which all consumers in a given area were by default served by a designated “vertically integrated” utility that owned both the generating facilities as well as the transmission lines.
One of the catalysts of the restructuring movement was the Federal Energy Regulatory Commission (FERC), which in 1996 had issued an order that, among other things, required vertically integrated utilities to make their transmission systems available (for a fee) to competing entities such as stand-alone “merchant” generators.
Joe Gardner, one of MISO’s original operations employees, said the industry changed significantly as a result of FERC Order 888, as the 1996 mandate was known.
“What that led to was using the transmission system in ways it had never been used before, and moving power across distances that had never been done before,” Joe, who currently serves as MISO’s vice president of compliance, said in a videotaped interview conducted to mark MISO’s 15th anniversary.
In addition to spurring some states to restructure their retail electricity systems, FERC Order 888 also prompted many utilities and other industry players to undertake a second major structural change: forming and/or joining independent entities to manage the grid and administer “wholesale” electricity markets across broad, multi-state regions of the country.
According to Joe, these Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs) were needed because once multiple generating companies began using the same transmission lines to move energy over long distances, entities “in the middle” of the system did not always have good information about those power flows, increasing the risk of reliability problems.
“So utilities actually got together and decided, ‘We need somebody watching things at a higher level,’ ” Joe said. “And so that’s kind of where ISOs and RTOs came about.”
MISO was the first RTO to be approved by FERC, and today has the largest geographic footprint of the nine RTOs/ISOs on the North American continent. And while MISO has always operated at the wholesale level per its FERC-approved tariff, MISO has also put processes in place to serve the two states in the footprint—Illinois and Michigan—that have restructured/deregulated portions of their retail electricity systems.
Meanwhile, in addition to restructuring and the formation of RTOs, another major change that has occurred since 2001 is the industry’s ongoing shift away from coal-fired generation to lower-emitting natural gas resources and zero-emitting renewables such as wind and solar power. This shift is being driven by a number of factors, including stringent environmental regulations for coal plants, states’ renewable-energy policies, and advances in drilling technologies that have created an abundance of inexpensive shale gas.
The last 15 years have also seen rapid growth in distributed energy resources such as rooftop solar systems, residential wind turbines and microgrids that allow individual consumers to generate and manage power outside of the utility-centric bulk electric system.
Similarly, larger energy users such as factories, hospitals and universities are increasingly utilizing so-called “behind-the-meter” diesel generators and other demand-side resources that reduce the amount of energy they draw from the grid on extremely hot summer days, frigid winter events, and other “peak load” periods. The grid is also being transformed by the development of large-scale batteries, flywheels other advanced technologies that can “store” energy until it is needed. Such energy-storage technologies could fundamentally reshape the electricity industry, which has always operated under the premise that energy must be consumed immediately after it is generated.
Wayne Schug, MISO’s vice president of strategy and business development, said that in the last 30 years, the electricity has transformed from being “pretty stodgy and stale” to “very dynamic and very challenging.” And RTOs such as MISO are playing a key role in helping the industry to plan for and adapt to these changes, Wayne said.
“We all know the industry is undergoing rapid change right now,” Wayne said, noting the ongoing shift away from coal-fired generation to gas-fired resources and renewables. “That efficient transformation couldn’t happen but for the existence of RTOs and MISO in particular in our footprint, [as] the cost of the transformation would just be too high.
“Trying to meet those challenges and create value for the footprint gets me up in the morning and keeps me going,” Wayne added. “I love it.”