Å·²©ÓéÀÖ

This ICF International white paper examines how Å·²©ÓéÀÖ Midcontinent Independent System Operator's (MISO) 2015–2016 capacity auction resulted in some significant shifts in pricing. Key discussion topics include:

• MISO capacity market background
• 2015–2016 auction results
• Key price drivers
• Looking ahead

Substantially lower clearing prices occurred across almost all of Å·²©ÓéÀÖ system's nine zones, with Å·²©ÓéÀÖ most notable exception of Zone 4 that saw a dramatic tenfold year-over-year increase. In Å·²©ÓéÀÖ most basic terms, Å·²©ÓéÀÖse results were driven by relatively simple factors: higher opportunity cost-based bids in Zone 4, lower bids elsewhere, and more uncontracted competitive retail load. But at a more detailed level, several related dynamics underlaid bidding behavior.

Going into Å·²©ÓéÀÖ next auction, several factors will tighten Å·²©ÓéÀÖ supply and demand balance. However, given inefficiencies in Å·²©ÓéÀÖ current MISO capacity market structure and because Å·²©ÓéÀÖ majority of Å·²©ÓéÀÖ capacity in MISO already is contracted, we do not expect a major recovery in capacity prices. This combination of factors may require eventual reform in Å·²©ÓéÀÖ capacity market. In Å·²©ÓéÀÖ interim, state intervention could translate into more opportunity for new assets to enter into power purchase agreements (PPA) with utilities.