Value During Volatility

Minnkota and its members expect active off-peak season spurred by volatile energy markets

Midcontinent Independent System Operator
This image of the Midcontinent Independent System Operator (MISO) energy markets on Feb. 13, 2021, shows a swath of red, where market prices in our region climbed to about 25 times higher than recent averages. With natural gas prices high, any dip in intermittent resource generation – like wind – can send costs soaring.

Last winter, a polar vortex event sent energy market prices soaring. Fewer resources across the country were able to generate electricity in the historic cold, and demand was high for the few resources that were generating enough to sell into the electric grid.

Utilities are experiencing those high market prices again – but it’s not because of a single major weather event this time. It’s the climbing cost of natural gas.

“Natural gas is one of those resources that typically help manage the variability in electricity generation, and we’re seeing prices that are significantly higher than what we’ve seen in the past 10-15 years,” explained Todd Sailer, senior manager of power supply & resource planning for Minnkota Power Cooperative (Nodak Electric Cooperative’s wholesale power provider). “We’re seeing prices double and triple what they were last year, or even over the last couple of years.”

While the energy markets soared for only 7-10 days in February 2021’s polar vortex, Sailer says this volatility could last throughout the winter season, or longer. That’s good insight for cooperative members on the demand response – or off-peak – program, which allows the co-op to temporarily interrupt service to a participant’s off-peak loads (electric heating, large-capacity water heaters, electric vehicle chargers, etc.) in exchange for a lower electric rate.

“The projection is that these high prices will likely drive our demand response more than we’ve seen in the past years,” Sailer said.

Minnkota’s energy marketers are preparing for 200 hours of off-peak load control this winter, but Sailer says that could rise if natural gas prices continue to climb. He also notes that load control could be spread out over more days and not always coincide with major weather events. 

“If we have days of low intermittent resources in the region, like wind power, the expectation is that the markets will respond and you’ll see higher markets, which will result in more off-peak control,” he said.

Ultimately, the cooperative will deploy off-peak load control when it needs to protect itself from buying high-price energy from the market. This system was established years ago to avoid building more generation facilities for peak need that only arises a few days out of the year. That, in turn, keeps rates low for consumers. By being a part of the off-peak load control program, consumers can also take advantage of an even lower electric rate without any disruption in comfort.

Sailer urges those who are a part of the off-peak program to make sure they have adequate backup fuel supply. Confirm that all parts of your heating system are running smoothly.

“It’s not just natural gas – it’s propane, it’s all fuel sources that have seen an increase in cost. Which leads to people reliant on their off-peak system,” Sailer said. “Members should be making sure their system works.”