How did MISO create $3 billion in value in 2017? Hint: Think Bourbon St. and flannel shirts

It’s more than 1,000 miles from the quiet lake country of northern Minnesota to bustling Bourbon Street in New Orleans. And on hot and humid days when folks in the Big Easy are partying with their air conditioners cranked to the max, mild-mannered Minnesotans might be donning their flannel shirts as they … [insert your own Scandinavian-themed, cold-weather joke here!]

All joking aside, the point is that America’s midsection—where MISO plays a key role in managing the high-voltage electrical system in all or parts of 15 states—is a very large region. It’s also a very diverse region in terms of weather, population density and industrial development, among other things.

Of course, it’s common knowledge that the Great Lakes are a long ways from the Gulf of Mexico, and that it can be chilly in Michigan when it’s sweltering in Mississippi. But it may surprise you to learn that MISO leverages the region’s large size, variable temperatures and other diverse characteristics to create billions of dollars’ worth of economic benefits every year.

In 2017, those benefits totaled $3 billion to $3.7 billion, according to the newly released version of MISO’s Value Proposition study, which MISO performs every year to quantify the aggregate value that MISO creates for the millions of homes and businesses across the region. The benefits that MISO created in 2017 increased by $366 million, or 12 percent, compared to 2016, with a cumulative value of nearly $21 billion over the course of the last decade.

MISO creates value by managing its members’ power plants and high-voltage transmission lines in a pooled, region-wide manner, which is more efficient and cost-effective than operating the area’s resources independently, regardless of need. MISO’s regional approach also reduces capital costs because utilities and states do not need to build as much generation and transmission infrastructure as they would if they were operating without MISO to meet their daily electricity demand and emergency reserve requirements.

Leveraging ‘Footprint Diversity’

The single biggest chunk of the total value that MISO created in 2017 is in a category that MISO calls  “Footprint Diversity,” which is a fancy way of describing how MISO leverages the region’s large size and variable weather patterns to help utilities meet electricity demand at the lowest-possible costs. These cost savings stem from several interrelated factors, including:

  • Demand does not “peak” everywhere at the same time: Weather plays a huge role in driving electricity demand—i.e., people crank the air conditioning during heat waves. But because the MISO footprint is so large, when it’s sweltering in one part of the region, other areas often have more moderate temperatures. This allows MISO to move relatively inexpensive power from one part of the region to a high-load area, which both reduces costs and enhances system reliability.
  • Utilities need fewer reserves: Prior to MISO, all utilities that served load in the area had to maintain reserves based on the monthly peak-load forecasts in their service areas. Today, reserve requirements are based on a utility’s load at the time of the MISO system-wide peak, which creates significant savings by reducing the amount of spare generation capacity utilities must build or otherwise acquire.

In addition to footprint diversity, another big chunk of the value that MISO created last year stemmed from various actions that MISO took to enhance the reliability of the high-voltage electricity system. Reliability-related actions are especially crucial these days, given that the region is shifting away from its historical reliance on coal-fired power generation towards greater use of natural gas, intermittent renewables and other emerging technologies.

In geographical terms, MISO is the largest Regional Transmission Organization, or RTO, in North America. And the wholesale markets that MISO manages are among the largest in the world as measured by transactional value, with more than $25 billion in annual gross market charges. And with the help of our stakeholders—including flannel-wearing Scandinavians in our northern states!—we will continue to achieve our vision of being the most reliable, value-creating RTO.

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