Planning for an Uncertain Future

Clair Moeller, Executive Vice-President

October 11, 2016

Great Plains & EmPower ND

Energy Conference

MISO Vision – The most reliable, value-creating RTO

1

MISO’s strategic objectives reflect our broad response to the nation’s changing energy landscape

Strategy Initiatives

Strategic Competencies

Strategic Objectives

• Portfolio Evolution

(Environmental Policy and

Economics)

• Electric – Gas Coordination

• Seams Optimization

• Grid Technology

Advancement

• Infrastructure

Development Enablement

• Serve Existing Members –

North/Central

• Serve Existing Members –

South

• Strategic Member

Expansion

• Regional Modeling &

Analytics

• Policy-Level

Relationships,

Reputation & Visibility

• Platform Provider for

Policy Implementation

Market and

Grid Positioning

Serve & Grow

Membership

Provide

Independent

Thought Leadership

People Process Technology

2

1996 2001

19991996

2011

2011

2013

2002 2003

2005

2009

2007

Discussions

begin to

form MISO

FERC

issues

orders

888/889

FERC

approval as

an RTO

FERC

issues

order

2000

Joint Operating

Agreement

with PJM

Energy Markets

Implemented

Tariff

Administration

under MISO’s Open

Access Transmission

Tariff

Ancillary

Services

Implemented

FERC

issues

order

890

Value-based

Transmission

Planning

FERC

issues

order

1000

Reliability

Coordination

Resource

AdequacySouth

Region

Integration

Legislative Timeline

CPP Rule

Issued and

Stayed2017

Stay Lifted??

2009 2010 2011 2012 2013 2014 2015 20161

Value Proposition ($M) $789 $761 $2,429 $2,169 $2,043 $2,680 $2,585 $2,600

Natural Gas ($/MMBtu) $3.95 $4.39 $4.00 $2.75 $3.73 $4.39 $2.70 $2.45

Wind Installed (MW) 5,467 MW 8,161 MW 10,219 MW 11,809 MW 12,539 MW 13,521 MW 14,552 MW 15,890 MW

Installed Multi Value

Projects ($)$512M $863M $1,331M $2,377M

Reliability Coordination &

Tariff Administration

Market Implementation Energy & Ancillary Services

MarketsValue Expansion Portfolio Evolution

Efficient

Environmental

Implementation

2018+

2015-

2016

1Indicative estimate of Value Proposition for 2016

MISO has gained experience with uncertainty while its focus has expanded from reliability and open access to value creation

Footprint Diversity

Transmission Needs

Economics

A key conduit of value creation is our transmission planning process, which we have advanced over time to account for a growing set of project drivers and future uncertainty

Objective is to take a holistic look at multiple drivers to maximize the value of regional transmission

– Changes in resource mix

– North/Central and South footprint diversity

– Reliability to address generation retirements

– Low cost energy delivery across footprint

– Federal and state energy policy compliance planning

3

Reliability

Transmission Needs

Changing Resource

Mix

Public Policies

4

Four years of executing that process culminated in a $5.6 billion Multi-Value Project portfolio being approved in 2011

Tra

nsm

issio

n

Lin

e L

osses*

4

Pla

nnin

g

Reserv

e

Marg

in*

3

Opera

ting

Reserv

es*

2

Co

ng

estio

n &

Fu

el S

avi

ng

s

1T

ota

l Benefits

Increased Market Efficiency

Deferred Generation Investment

Other Capital BenefitsT

ota

l Costs

(S

um

of A

nnual

Reve

nue

Requirem

ents

)

Net B

enefits

Benefit by Value Driver (20 to 40 year present values; in 2016$, millions)

$33,400 $0

$2,400

$1,900 $700

$800 $39,200 $16,000

$23,200

Win

d T

urb

ine

Inve

stm

ent*

5

Futu

re

Tra

nsm

issio

n

Inve

stm

ent*

6

MT

EP

2011

Net B

enefits

$19,900

* Value not updated for MTEP16 MVP Limited Review

Key parameters have changed since 2011, but portfolio reviews continue to project benefits that exceed original estimates

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Environmental / Regulatory

• Mercury & Air Toxics Standards (MATS)

• Air-quality standards for ozone, SO2, etc.

• Potential greenhouse gas regulations

Economics

• Low-cost natural gas

• Economic recovery

• Demand growth shift

• Infrastructure investment

State & Federal Policy• Renewable portfolio standards

• Energy efficiency/demand-side management programs

• Tax credits

• FERC orders addressing demand response participation in wholesale energy markets

Evolving Technologies

Electric Industry

While portions of that portfolio are still in progress additional change is occurring, with many factors pushing the industry towards a lower carbon future…

• Wind power • Energy storage • Load-modifying resources• Solar energy • Distributed

generation

6

7

…driving wind and gas generation, and forecasts for future utilization higher…

Gas Share (%) of Generation (MISO North/Central)

6%

11%

8% 7%

12%

16%

40%

0%

10%

20%

30%

40%

50%

2011 2012 2013 2014 2015 2016 2025

Historical Actuals

Regional CPP Planning Scenario Forecast

0

40,000

80,000

120,000

160,000

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

20

21

20

22

20

23

20

24

20

25

20

26

20

27

20

28

20

29

20

30

Actuals Projections

Wind was 9% of total generation in 2015; 15,000 MW Capacity

Growth Scenario(2-3X Wind Capacity of

Today)

States’ RPS requirements (existing)

GW

H

Actual Wind Generation

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…and spurring greater potential for emerging technologies in the MISO footprint.

Source:

2015 HIS

RTOs

Energy storage evolving rapidly but not yet cost competitive in MISO

HVDC technology is both in-use and being evaluated for expanded use in the MISO footprint

MISO’s use of synchrophasor technology will continue to evolve with technology maturation

Minimal solar penetration today, but economics and public policy are driving to higher penetration potential

Solar Generation Queue locations

Key:

• Active GI Queue

• Withdrawn GI

Queue

• Additional high

potential locations

9

Adding to the challenge is uncertainty around long-term gas prices, state renewable goals and load growth, which significantly impacts long-term capacity needs

* - Net Forecasts are the Gross Forecasts less economically selected energy efficiency programs; high and lowforecasts reflect LRZ 9 Industrial load being modeled low and high (respectively)

MTEP17 Gross and Net Peak Demand Forecasts*

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To ensure preparedness for an uncertain future we are evaluating system needs under a range of outcomes, for which the projected generation mix varies significantly

Existing Fleet

Policy Regulations

Accelerated Alternative

Technologies

No carbon regulations modeled but some reductions expected due to RPS and economics.

Carbon regulations targeting a 25% reduction across all aggregated unit outputs are enacted.

Increase in carbon emissions results in carbon regulations targeting a 35% reduction across all aggregated unit outputs to be enacted.

Coal, 51%

Gas, 22%

Renewables, 11%

Nuclear and Other*, 16%

2031 Energy Mix

Coal, 35%

Gas, 31%

Renewables, 16%

Nuclear and Other*, 16%

DSM, 2%

2031 Energy Mix

Coal, 28%

Gas, 26%

Renewables, 26%

Nuclear and Other*, 15%

DSM, 5%

2031 Energy Mix

Coal51%

Gas24%

Nuclear16%

Renewable8%

Other1%

2015 Actual Generation

Future Scenarios

* - other includes oil, pumped storage and interconnection ties

Policy

Technology

Fuels

Regulation

Many considerations remain to plan and position the region and industry for the changing energy landscape

Markets

Driver Implications

• Growing share of highly intermittent renewable energy

• Reducing share of stable carbon-intensive generation and capacity

• Increasing intermittent solar investment and production at distributed and bulk energy levels

• Increasing storage use and demand response

• Growing natural gas generation and, in turn, declining coal investment and generation

• Dropping nuclear generation potential

• Accelerating renewables growth, increasing coal generation costs, likely leading to coal retirements

• Increasing need to incorporate many more generating units into market algorithms

• Rising need for better forecasting at bulk and distributed levels and operating flexibility to handle inevitable forecast errors

Considerations to address

How do we maintain reliability and efficiency as our resource portfolio evolves?

How do we ensure sufficient capacity during this transition as resources are removed from the system faster than replacements are brought on-line?

How do we overcome the differences in philosophy and methods between neighbors so that interregional opportunities can be seized?

How do Load Modifying Resources fit into the equation?

How does energy efficiency fit into the equation?

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