LRTP Informal Feedback: Sensitivity on Reduced Inflation Reduction Act (20231002)

• MidAmerican Energy appreciates the opportunity to provide feedback to sensitivity scenario for Inflation Reduction Act (IRA) assumptions that were incorporated by MISO in building the model
• MidAmerican Energy agrees with the IRA incentives MISO have assumed, provided that $31.99/kW for Fixed O&M and -$30/MWh for Variable O&M correctly incorporates Investment Tax Credit and not Production Tax Credit for batteries
• MidAmerican Energy agrees with MISO’s assumption that IRA incentives will not be phased out prior to 2050

North Dakota proposes the incentives for the Inflation Reduction Act could be reduced as a proxy for economic constraints the U.S. may experience in future decades. Possible economic constraints include the limitation of skilled labor to be readily available for future projects as well as limitations on materials used for construction. The IRA is a massive subsidy that will drive the demand for an enormous amount of future construction and coupled with the potential trend of onshoring U.S. manufacturing, it is reasonable to explore a scenario that models some degree of constraint that would reflect possible materials and labor limitations that at the very least may cause delays to future planning as well as increased diversity in generation resource choice.

North Dakota does not propose the degree of reduction or the timeframe due to unfamiliarity with the model and its sensitivity to inputs but would entrust that to be sufficiently assessed by MISO’s team. Gradualism in the reduction to the incentives would be necessary to reflect an increase in costs associated with the subsidized generation resources over the planning horizon. Depending on the model results, this scenario has the potential to serve as a bookend that incorporates increased levels of load growth as well as result in a conservative approach to the generation portfolio build out. 

A point of clarification would be how the model interacts with the unmodeled portion of the portfolio that was derived from stakeholder planning. The reduction timeframe and amount would have to take into consideration that a large portion of the portfolio is unmodeled and larger reduction amounts may be necessary to compensate for this, unless this is a misunderstanding of the process MISO has undertaken.

In addition, a reduction to the IRA is warranted to reflect the difficulty in predicting future technology. The IRA could overbuild current technology at the expense of a future technology that could come along and be better suited to achieving members’ goals. Such technology could even be subject to similar or more enhanced subsidies. Whatever subsidy may be applied, by only identifying attributes of an unknown technology, you run the risk of an overbuilt bookend with inferior infrastructure – resources and transmission. Technology is built at different speeds, and technology could come along that could accelerate decarbonization beyond what is currently achievable, questioning the value of long-lived transmission investments. Reducing the level of the IRA would shed light on how best to support the emergence of future technology and to capture the twists and turns in the investment cycle. Among other suggestions, MISO might start by reducing the period where the IRA incentives are in effect to 5 years to reflect this uncertainty and look at reducing other incentives to shed light on the least-regret solution.

The TDU Sector incorporates here our previous Tranche 2 comments submitted in September (https://www.misoenergy.org/stakeholder-engagement/stakeholder-feedback/2023/informal-feedback-202309/).  We also offer the following new comments regarding Tranche 2 study work and robustness testing:

Inflation Reduction Act Incentives

i.             MISO should assume that IRA incentives are available for a majority of the next 20 years (e.g., at least 15 years).  While there is a phaseout of credits when nationwide greenhouse emission targets established in the IRA are met, these targets are aggressive.  It currently appears reasonable to assume the phaseout will occur in the 2040s.

ii.            The IRA provides an Investment Tax Credit for stand-alone storage resources which creates an incentive for, and increases the viability of, storage resources.  The sector believes MISO should perform a sensitivity to account for the potential of higher storage and hybrid resource levels being connected than what MISO has assumed in the Future 2a expansion plan, for example, increasing current storage levels by 50%.  To add additional storage to existing models, MISO could leverage existing renewable resource locations and assume a larger amount of these locations have storage co-located.  The TDU Sector does not believe MISO needs to perform a new EGEAS expansion plan to perform such a sensitivity – LRTP is a transmission expansion plan, not a resource expansion plan.

Resource Expansion

iii.           When simulating resource expansion, it is important to appropriately model capacity values of different types of resources, recognizing that marginal capacity value may decline significantly for intermittent generation as penetration increases.

iv.           MISO should anticipate that longer-term storage technology will develop at a lower $/MWh cost than Lithium-ion batteries, and should include at least a proxy for this in expansion models.  As an example of other storage technologies, members of the sector are currently moving forward with a 20 MW 10-hour CO2 based long-duration storage project.

Reliability Analysis

v.            As MISO notes in its December 1 Reliability Analysis presentation, low voltages are widespread in the Tranche 2 power-flow models.  We anticipate that significant reactive-support additions will be required to accommodate the future resource mix, and believe it is appropriate for MISO to add reactive support as necessary to create more-realistic operating conditions that can provide a better basis for determining what additional upgrades may be appropriate.  MTEP23 Appendix A capacitor additions may be a good starting point, including projects 23883, 24457, 24785 & 24819.  We disagree with MISO that adding reactive support to bring system-intact voltages into realistic operating ranges amounts to “masking issues” that we are seeking to identify.  Large amounts of direct reactive support should be by far the lowest-cost way to address this issue, and will almost certainly be part of any actual 2032 or 2042 system.  Adding that support at the beginning of the process is thus more appropriate than planning new lines on the basis of unrealistic voltage profiles.  We are comfortable including reactive support explicitly as part of a Tranche 2 portfolio. 

vi.           Many of the overloaded branches identified in the reliability analysis have ratings well below what we would typically expect the corresponding conductor ratings to be.  We request that MISO perform some investigation into the extent to which ratings could be increased via relatively straightforward terminal-equipment upgrades or clearance upgrades for a small number of spans.  Ideally, MISO planning models would include conductor-rating information to facilitate this assessment.

vii.          MISO should assume that all or a large majority of future inverter-based resources are equipped with grid-forming inverters.

viii.         MISO should also test for frequency response for the loss of the largest unit in MISO for a high level of intermittent resource dispatch case.

Sensitivity Cases

ix.           The TDU Sector supports MISO continuing to use Future 2a in the LRTP tranche 2 analysis.  For the purpose of sensitivity analysis, the sector is simply looking for MISO to study how different resource-mix assumptions impact the LRTP portfolio.  In performing regional planning that looks out 20 years, and making investment decisions which will last longer than 20 years, MISO should not limit its analysis to only what is assumed or known today.  The sector is most interested in MISO performing sensitivities that involve the resource mix having a higher penetration of dispatchable resources (for reasons the sector has previously provided to MISO in past feedback).  The TDU Sector does not believe MISO needs to perform a new EGEAS expansion plan to perform such sensitivities—LRTP is a transmission expansion plan, not a resource expansion plan.

x.            MISO should perform a sensitivity with a resource mix that has higher levels of dispatchable resources, for example, increasing dispatchable resources by 25%. To add additional flexible resources to existing models, MISO could leverage existing generation locations by replacing certain resources such as wind with dispatchable resources.  This could be done by writing an automation program to add dispatchable generation to existing bus numbers.  The goal of this sensitivity would be to understand the impact on LRTP tranche 2 projects from MISO having access to more flexible resources to redispatch the system.

xi.           The sector expects the analysis on the models with the higher dispatchable resource mix would include MISO running the reliability models, evaluating contingencies and studying the results.  MISO could perform a generation shift-factor analysis to understand the generation that is impacting overloaded lines and look to redispatch generation to resolve overloads (similar to what MISO does in real time operations).  We would expect that MISO would focus on the most overloaded areas and where MISO has tranche 2 solutions proposed.

xii.          Our initial review of posted cases indicates that the two existing ND-MN HVDC lines are carrying power east in quantities corresponding to the output specified dedicated resources, that are in some cases far below the capability of these facilities.  The Sector understands that these facilities are modeled in the manner they have operated historically, and also that they are not transferred to MISO’s functional control.  And, while, we make no presumptions about what operating arrangement the owners might find acceptable, it seems clear that fuller use of these facilities should be considered alongside other proposals—particular where these include entirely new HVDC lines.

xiii.         The JTIQ projects are not included in the models.  We anticipate that these projects will be approved in due course, and in any case we expect that these projects or something similar would be identified as Generator Interconnection Network Upgrades and would be required to allow interconnection of new generation near the SPP seam.  Accordingly, we think that the Tranche 2 work should seriously consider the impact of the JTIQ projects.

xiv.          The sector also thinks that some consideration should be given to merchant HVDC projects currently seeking to interconnect within the MISO North-Central Subregion.  In particular, we see as potentially significant the Grain Belt Express Phase I project, to terminate in NE Missouri, and the SOO Green project to interconnect in the ComEd system.  MISO should study and understand the potential impacts of large merchant HVDC lines, which have shown increased viability.

GRE offers this feedback in response to the MISO request for informal feedback on the scope of the Reduced Inflation Reduction Act (IRA) Incentives and which sensitivities should be undertaken to properly evaluate bookends of the possible future electric grid. We are satisfied that MISO has developed a suitable 2042 future scenario through a diverse stakeholder process and the Long Range Transmission Plan will help assure an orderly and timely regional transmission expansion given the changing generator resource mix. We believe MISO is appropriately considering and analyzing the projected 2042 timeframe with Future 2A and then the four core models, screenings and six scenarios as shown on Slide 12 of the “20231115 PAC Item 08a Long Range Transmission Planning Update630864.pdf” as presented at the November 11^th Planning Advisory Committee meeting. It is not possible for MISO to study every possible scenario and undertake endless screenings and MISO has reached a reasonable balance of future assumptions and analyses. Thank you for this consideration.  

The Environmental Sector offers these comments in response to MISO’s October 2nd request for feedback regarding IRA Sensitivities to the LRTP Tranche 2 modeling. In sum, we believe that IRA assumptions are appropriate as currently written in MISO’s Future Series 1A Assumptions document. Applying a sensitivity where the ITC and PTC credits under the IRA are diminished before 2050 without any credible and specific underlying rationale does not lend additional credibility to MISO’s process. The Futures should be grounded on verifiable inputs such as existing state and federal laws and utility IRP’s as a lower bound, then built out to reflect reasonably credible forecasts of future conditions. The Environmental Sector does not believe a broad hypothetical of rollbacks to the IRA or early phaseouts of the clean energy incentives it contains as meeting this standard that would warrant a sensitivity to the LRTP modeling. 

The Environmental Sector believes Future 1A - with its assumptions of only 85 percent of non-binding goals being met - is an appropriate “lower bookend” for LRTP and a decent proxy for a range of possible difficulties in meeting state and utility carbon-reduction targets, including a hypothetical scaling back of clean energy incentives in the IRA. It could also represent a slower build out of clean energy resources that might result from supply chain issues and labor shortages. In Future 2A, the IRA incentives should be incorporated through 2050 because Future 2A does not reflect reaching a 75 percent decarbonized electricity sector (nationwide, from a 2022 base year) that, per the IRA, would trigger a rollback of incentives. 

In fact, we have concerns that MISO’s current Future 2A is not aggressive enough to reflect the pace of change across MISO’s system, and it is worth noting that MISO has consistently under-estimated the pace and scale of clean energy build out in its planning scenarios. The trends MISO seeks to be responsive to - most notably the ongoing transition to zero-carbon resources - have only accelerated since the Futures refresh process began. EPA has issued a suite of rules, including the final ‘Good Neighbor’ Rule to limit nitrogen oxide pollution and the proposed carbon pollution standards to limit greenhouse gas emissions from the power sector, that will further drive the transition to non-emitting resources. In the MISO Classic region, Michigan’s 100% Clean Energy Law will transition the state to carbon-free energy by 2040. Given the pace of change already underway, these new requirements may not significantly change the trajectory of fleet transition in MISO but they do reinforce the trend towards accelerated decarbonization and support LRTP sensitivities that accelerate, rather than slow, the fleet transition. 

The Environmental Sector is also concerned that the current LRTP Futures do not adequately reflect increasing demand on the MISO system. It is critical for MISO to capture the trend of increasing load growth. The LRTP Futures were developed with consideration of ongoing trends towards electrification and, at least arguably, reflect the likely impacts of IRA and IIJA incentives for electrification. However, recent trends have pointed towards significant load growth from factors that weren’t fully understood or anticipated when the LRTP Futures’ load assumptions were developed nearly five years ago, including increased load from data centers, virtual currency mining and the electrification of oilfields. The Wall Street Journal recognizes this trend in a recent article noting that  electrification of oilfields in North Dakota and new connections of bitcoin mining and data centers across the MISO territory are also adding significant load. In MISO South, recent projects identified through MTEP23 further reinforce the need for transmission investments to address accelerating load growth. All of this raises concerns that MISO’s current load forecasts in its LRTP Futures 1A Series may underestimate the pace and scale of load growth. 

In conclusion, we believe MISO provides a highly credible set of assumptions in Future 2A that should drive the identification of needs for Tranche 2, and that attempting to further limit Future 2A’s clean energy forecast through unlikely “IRA phaseout” sensitivities would undervalue transmission assets in the business case development and ultimately result in an undersized final Tranche 2 portfolio. Instead of pursuing marginally plausible sensitivities that are counter to the reality of ongoing demand for zero-emission resources, we encourage MISO to consider sensitivities that reflect our concerns articulated above regarding the robustness of Future 2A.  

ITC appreciates the opportunity to provide feedback. We have identified the following sensitivity ideas related to IRA parameters for consideration:

$30/MWh for Zero Carbon Energy
- Sensitivity Idea: 10 year PTC extension ($30/MWh to 2044)
- Sensitivity Idea: Reduction in full clean energy PTC (from 2034)

$15/MWh for Nuclear Energy
- Sensitivity Idea: Higher nuclear PTC (from $15)
- Sensitivity Idea: 10 year extension to nuclear tax credits (to 2042)

30% ITC for Residential PV and Battery Storage
- Sensitivity Idea: 10 year renewable ITC extension ($30/MWh to 2044)
- Sensitivity Idea: Reduction in full clean energy PTC (from 2034)

Thanks,
Ben

American Municipal Power (AMP) appreciates the opportunity to provide feedback on the LRTP Sensitivity on Inflation Reduction Act and offers the following comments.

 Please explain how MISO will be planning to operate the grid when more MWhs are being produced from resources that have a lower “capacity value.” It seems balancing could become very difficult.