Brattle Economists Outline Framework for MISO Market Vision and Roadmap to Improve Wholesale Electricity Markets

CAMBRIDGE, Mass., Feb. 4, 2014 /PRNewswire/ -- Economists at The Brattle Group have authored a report that provides a foundation for the Midcontinent Independent System Operator's (MISO) newly-codified Market Vision and for the Market Development Roadmap that MISO and stakeholders will develop between now and June. 

The Brattle report identifies the "Core Services" that MISO must continue to provide to support a well-functioning market, and it proposes a set of principles for enhancing those services.  In addition, the authors worked with stakeholders, MISO staff, and the independent market monitor to identify seven Focus Areas offering the greatest opportunities for improving MISO's electricity market over the next two to five years: 

1. Enhance unit commitment and economic dispatch processes
2. Maximize economic utilization of existing and planned transmission infrastructure
3. Improve efficiency of prices under all operating conditions
4. Facilitate efficient transactions across seams with neighboring regions
5. Streamline market administrative processes to reduce transaction costs
6. Maximize availability of non-confidential and non-competitive market information
7. Support efficient development of resources consistent with long-term reliability and public policy objectives

The report evaluates each Focus Area by identifying the types of initiatives it could encompass, providing initial indicators of their potential net benefits to the region, and suggesting next steps for pursuing them as part of the Roadmap. The authors suggest prioritizing the three Focus Areas with the highest potential value, each with on the order of $100 million per year in potential system cost savings:

• Transmission Utilization – The transmission utilization Focus Area would implement new transmission management technologies, such as: (a) adaptive post-contingency line ratings to allow higher contingency limits based on actual system conditions rather than static conservative estimates of time to re-dispatch and unload the line post contingency; (b) dynamic line ratings to account for ambient conditions; and (c) topology control algorithms to optimally open circuits to protect them when doing so is cheaper than re-dispatching.  These cutting-edge technologies may greatly reduce system congestion costs with minimal physical system upgrades.
• Seams Management – The seams management Focus Area would aim to better optimize scheduled interchange and loopflows along MISO's various seams, an area with significant room for improvement and large potential savings.  The authors recommend focusing on modest improvements to seams management that are realistically achievable given software and organizational challenges in coordinating with neighbors. 
• Resource Development – The resource development Focus Area would address providing better information to facilitate the efficient siting of renewables and enabling efficient investments for resource adequacy.  Developing an effective and efficient region-wide resource adequacy construct has been difficult in the MISO region due to the inherent challenge of accommodating both traditionally-regulated and restructured states in the footprint.  The authors suggest several options to consider for addressing concerns with the current construct, while accommodating the needs of both types of states and their respective business models for supporting investments for resource adequacy.

The four other Focus Areas also offer promising market enhancement opportunities that may improve market efficiency, price formation, or transparency.  The report outlines an approach to selecting and sequencing among these initiatives that will prioritize initiatives with the highest potential value that is realistically achievable given constraints on software infrastructure, staff availability, and stakeholder time.

"With a Roadmap establishing a concrete plan to pursue these Focus Areas, MISO can substantially enhance its electricity markets over the coming two to five years," said Dr. Samuel Newell, a Brattle Principal and co-author of the report. "Monitoring and refinement should be built into the final Roadmap to track how initiatives are progressing and to take into account any major developments to system conditions."

The report, "Developing a Market Vision for MISO – Supporting a Reliable and Efficiency Electricity System in the Midcontinent," is authored by Brattle Principal Samuel Newell and Senior Associates Kathleen Spees and Nicholas Powers. It is available for download at www.brattle.com.

The Brattle Group analyzes complex economic, finance, and regulatory questions for corporations, law firms, and governments around the world.  We are distinguished by the clarity of our insights and the credibility of our experts, which include leading international academics and industry specialists.  For more information, please visit www.brattle.com.

SOURCE The Brattle Group