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Independent Market Monitor: MISO Reserve Margins Lower Than Most Think

July 11, 2013

After adjusting MISO’s reserve margin for this summer to account for more “realistic” assumptions, the ISO has a significantly lower planning reserve margin than most people think, its independent market monitor said. Potomac Economics President David Patton said the ISO this summer reports a 28.1 percent capacity reserve margin, which is about twice MISO’s target of 14.2 percent. 
But that number includes certain assumptions he called into question. For example, the resource total includes the ability to import 4,497 MW on a non-firm basis. It also assumes that all 4,661 MW of demand response will perform on demand, when the experience is closer to 50 percent. Another unrealistic number, he added, is 3,394 MW of wind generation, when it would be more appropriate to consider the wind fleet’s effective load-carrying capacity as 2,021 MW. 
 Taking these factors into account and assuming summer weather within a normal range, the reserve margin would fall to 18.7 percent. But MISO has experienced three straight years of hotter-than-normal summers, and during extreme heat, generators’ capacity is derated. Patton said extreme heat could add 5,748 MW more demand and derate capacity by 4,900 MW, which could drop the capacity reserve margin to 6.9 percent. “This doesn't necessarily mean that we are at risk of a reliability problem,” he explained, “but what I think this indicates is that we do not have as big of a margin as now is commonly thought.”