Wind Management at MISO IWWG Annual Conference July 22, 2011

MISO Overview

Growth of MISO’s value creation Start-Up Reliability Coordination & Tariff Administration Energy Markets Energy and Ancillary Services Markets (ASM) 1996 Discussions begin to form MISO First Board of Directors elected FERC approval as an RTO Reliability Coordination Tariff Administration under MISO OATT Energy Markets Begin 2001 Ancillary Services Market Initiative begins Joint Operating Agreement with PJM Balancing Authority Alignment ASM Testing ASM begins 2002 2003 2005 2006 2007 2009 1999 FERC issues order 2000 FERC orders 888/889 FERC issues order 890 Legislative Timeline 1996 2007 1999 3

MISO Overview Independent Non-profit 2001 - Reliability Coordinator 2005 - Energy Markets 2009 – Ancillary Services Large Footprint Midwest ISO is an independent, non-profit reliability coordinator for the transmission of high voltage electricity via a security constrained economic dispatch across all or parts of 13 states and Manitoba MISO Reliability Coordination Area, June 2011

Scope of Operations as of June 1, 2011 5-minute dispatch 1,966 pricing nodes 5,774 generating units in the network model ~ $27.5 billion per year settled in energy markets (2010) 368 market participants serving 40+ million people Generation Capacity 134,850 MW (market) 146,497 MW (reliability) Historic Peak Load (set July 31, 2006) 116,030 MW (market) 136,520 MW (reliability) 53,203 miles of transmission 12 states, 1 Canadian province Scope of Operations • Generation Capacity 130,000 MW (market) 159,000 MW (reliability) • Peak Load (set July 31st, 2006) 109,157 MW (market) 129,647 MW (reliability) • 93,600 miles of transmission 500kV, 345kV, 230kV, 161kV, 138kV, 120kV, 115kV, 69kV • 15 states • One Canadian province • 920,000 square miles • Nearly $3 billion settled/month (Day Ahead /w virtuals,2007) • 1,896 pricing nodes • Five-minute dispatch • Offers locked in 30 minutes prior to the scheduling hour • Spot market prices calculated every five minutes • <15-minute ramp rate at 1,000 MW • 280 Market Participants who serve 40+million people Reliability Tools • State Estimator and Real Time Contingency Analysis - 257,000 real-time measurements, solving <90 seconds** - 8,300 “what-if” contingencies, solving <5 minutes** (**on average) • 13,600 one-line station diagrams

MISO Market Footprint As of June 2011

Benefit by Value Driver1 2010 Value Proposition $54-$68 ($254) Benefit by Value Driver1 (in $ millions) $259-$323 $12-$19 $1,253- $1,634 $280-$350 $34-$42 $68-$75 $121-$134 $136-$151 $648-$8743 $221-$244 $322-$482 Benefits Driven by Load / Supply Balance2 Improved Reliability 1 Dispatch of Energy 2 Unloaded Capacity 3 Regulation 4 Spinning Reserves 5 Wind Integration 6 Footprint Diversity 7 Generator Availability Improvement 8 Dynamic Pricing 9 Direct Load Control- Interruptibles 10 MISO Cost Structure 11 Total Net Benefits Adjusted Total Net Benefits3 Market – Commitment and Dispatch Generation Investment Deferral Demand Response 1Figures shown reflect annual benefits and costs expected for2010 2These benefits will be realized when the load / supply balance narrows 3Adjusted total net benefits exclude benefits driven by load / supply balance

Wind Development

Wind Generation in Midwest ISO Market

Transmission Congestion High penetration of wind generation in areas that have historically had little generation Rapid development of wind has outpaced the associated transmission development Who pays to expand the transmission system?

How Does this Impact Operations? Original market design classified wind as an ‘Intermittent Resource’ and could not economically dispatch In areas with high wind penetration, it is difficult for the Security Constrained Economic Dispatch (SCED) to manage congestion with only dispatchable resources Reliability Coordinators must resort to manual curtailment of wind resources adversely impacting constraints

No of Wind Curtailments 1,141 2,117 996 Estimated MWh Curtailed 2010 vs. 2011 2009 Total 2010 Total 2011 YTD No of Wind Curtailments 1,141 2,117 996 Estimated MWh Curtailed 292,000 824,000 289,000 Duration (Hours) 8,005 19,951 7,447

Operational Concerns While Manual Curtailment of Wind is effective as a constraint mitigation option, it has several drawbacks: Highly manual process, and extremely time consuming for the Reliability Coordinator Tracking of Resources with Firm vs. Non-Firm Transmission service is time consuming The Manual Curtailments can not be accounted for in the Security Constrained Economic Dispatch (SCED), therefore there is loss of price transparency Manual Curtailments are generally less economically optimal as the automated SCED

Intermittent Resource in MISO Market UDS will issue a Dispatch Target Equal to observed output at the time of the State Estimator snapshot for that case. Intermittent Resources - Cannot make RT economic offers Cannot set price Subject to RSG Not Eligible for Make Whole Payments

What is Dispatchable Intermittent Resource? DIRs are treated much the same as other Generation Resources with one exception: Instead of using an hourly Economic Max offer, DIRs must submit a ‘Forecast Limit’ for each 5-minute interval. The UDS will use this Forecast limit as the Economic Max for the given interval.

DIR Examples Nearby Congestion Unconstrained In this example the DIR submitted an offer price of -$40 Notice even in the unconstrained example, the forecast isn’t perfect. Some stakeholders have suggested this may be an optimistic illustration based upon the current state of forecasting technology. Nearby Congestion Unconstrained

Wind Management at MISO IWWG Annual Conference July 22, 2011