By Ray McCarty, president/CEO of Associated Industries of Missouri
July 18, 2024 - The regional electricity transmission grid that facilitates wholesale buying and selling of electricity between electric utilities in eastern Missouri from the northeast corner to the bootheel, including the St. Louis metro area, is keeping a close eye on reliable electricity transmission.
What in the world is MISO, and why should I care?
The Midcontinent Independent System Operator (MISO) is one of seven such organizations that the Federal Energy Regulatory Commission (FERC) has helped develop and oversee since the late 1990s in various parts of the country. The aim of these organizations is to ensure non-discriminatory access to the electricity grid, so that sellers and buyers of wholesale electricity are able to connect with ease and efficiency and achieve competitive, fair, market-based prices reflecting supply and demand.
MISO manages the flow of electricity across high-voltage, long-distance power lines. MISO is like the “air traffic controller” for the grid in its territory, meaning MISO seeks to resolve power congestion (traffic) issues in real-time through its control room and tries to anticipate and avoid emergencies that could lead to a loss of power. MISO has also developed various electricity markets, including electric energy markets, in which buyers and sellers bid to purchase or offer to sell wholesale electricity in auctions.
What's the problem?
We told you in April, 2022, MISO had issued a warning that electricity was predicted to be insufficient to support demand in the summer of 2022, leading to the potential for skyrocketing wholesale prices and perhaps even blackouts for the MISO grid. MISO notified everyone the clearing prices had surged to $236.66 per megawatt-day (MW-day) from $5 per MW-day the previous year.
The reason for this is simple supply and demand economics. The federal government and some state governments have made it cost prohibitive and nearly impossible to build new coal-fired power plants. Remember the January 2008 quote from future president Barack Obama: “If somebody wants to build a coal-fired power plant, they can. It’s just that it will bankrupt them.”
Coal yields the cheapest baseload electricity - electricity that may be relied upon at all hours and in all weather conditions - and remains a significant part of the electricity generation mix. At this particular moment, MISO reports the following breakdown of electricity generation sources in the MISO area: 40% natural gas, 32.2% coal, 13% nuclear, 6.2% solar, 1.3% wind, and the remainder from imports and other sources.
"While the government continues to push utilities to close coal-fired power plants and gas plants and move toward renewable energy, this is a reminder that baseload generation, primarily through the use of coal and natural gas, is critical for energy affordability and reliability," I said at the time. "Coal generation is best at hedging against weather because some coal may be stored onsite, but natural gas is extremely important also. The sun is not always shining and the wind is not always blowing and we do not yet have the battery technology necessary to rely on renewables as a primary source of electricity. As more and more coal plants close, this is the result: higher prices and less reliability. While we are all fanning ourselves this summer because electricity is not available to run our air conditioning, or our plants must close because of insufficient power, maybe then our government leaders will decide to do something about it."
Why are we talking about this now?
Well, on April 25, 2024, MISO again issued a warning of skyrocketing wholesale prices - this time $719.81 per MW-day for Fall 2024 and Spring 2025 in Zone 5 (including eastern Missouri), while utilities in other zones will pay $15 and $34.10 per MW-day respectively. Does this mean electricity rates will reflect this huge cost of wholesale power? Not necessarily.
Warren Wood, vice president of legislative and regulatory affairs at Ameren Missouri says the company is prepared to mitigate the impact of the boosted price of market energy. Wood says Ameren expects to have the energy capacity needed when the shortfall is anticipated in the market. However, he said additional generation is needed regionally to support rapidly increasing demand.
At Associated Industries, we are aware of potential economic development projects, including data centers, that have not located in Missouri because the electricity capacity is simply not available to support such large electricity users. And global need for increased energy as AI technologies continue to develop will only make electricity availability and reliability more important worldwide.
Associated Industries of Missouri, Ameren, Evergy, and the Energy Policy Network supported legislation in the 2024 Legislative Session designed to require a utility to have installed new reliable baseload electricity generation capacity before retiring existing baseload resources, such as coal and natural gas plants.
"Associated Industries of Missouri supports the spirit of this bill," I said in my testimony. "We believe the state should require replacement of generation capacity from the closure of plants with on-site fuel with other sources of generation from plants that are capable of providing electricity 24 hours/day, 7 days/week. When technological advances allow renewable generation to provide electricity on an uninterrupted basis, renewables could be used. But closing plants that are capable of full-time power generation without adequate replacement of full-time power generation places manufacturing operations, hospitals and all citizens at risk. When manufacturing plants lose electricity, consequences can extend beyond loss of production which is expensive, but could include damage to equipment, safety concerns, and risks to employees."
The federal government should reverse course and stop the premature closing of coal-fired plants and adopt the "replace before you retire" policy endorsed by the Missouri legislation, at least until battery technology exists that allows wind and solar to provide baseload generation at any hour and in any weather.
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