Electricity demand on the Midwest's grid is expected to be strong this summer, with hot weather and a growing economy sucking plenty of juice.

At the same time, electricity supplies are tightening. The upshot: The risk of rolling blackouts is elevated.

Underlying this vexing outlook is the grid's transition from fossil-fuel power to renewable energy. Power lost from retiring coal plants is exceeding the supply gained by new wind and solar farms.

"This is a harbinger of things to come," said David Sapper, director of intelligence for MISO markets at Philadelphia-based Customized Energy Solutions, which analyzes regional U.S. power grids. "These type of conditions could prevail for many years."

The Midcontinent Independent System Operator (MISO) — which operates the grid in Minnesota, all or parts of 14 other states and Manitoba, Canada — estimates that about 33 gigawatts of coal-power capacity will be retired by 2041.

That includes four large Xcel Energy coal generators in Minnesota that together can kick out 2.39 gigawatts of electricity. They are slated to close between 2023 and 2030.

On paper, lost coal-fired capacity through 2041 will be more than made up by new renewables in MISO: 39 gigawatts of solar power and 21 gigawatts of wind. (A gigawatt is 1 billion watts.)

But renewable power doesn't have the constancy of fossil fuel or nuclear plants. So, power generating capacity gained by renewables isn't a one-for-one replacement for what's lost from coal plants.

"It's a new era," said Scott Wright, MISO's executive director for resource planning.

While the generation mix is changing, severe weather is increasingly toying with the delicate electricity supply-and-demand balance in MISO and other regional U.S. electric grids.

A brutal storm all but knocked out the Texas power grid in February 2021, and led to natural gas shortages in Minnesota and electricity outages in North Dakota. A heat wave led to widespread rolling blackouts in California in August 2020.

In MISO, "max generation events" — grid emergencies when power is tight — have become more common in the past six years.

"We are seeing an increased importance of having resilience across our system and that is being driven by more weather events with greater severity — and I think that is attributable to climate change," said Christopher Clark, Xcel's president for Minnesota and the Dakota.

Climate change affects variables

MISO's summer power demand outlook is based partly on forecasts for higher than normal temperatures, elevated storm risk and an active hurricane season in the grid's southern region.

"Part of this is a climate story, and we don't want to lose sight of that," said Allen Gleckner, lead director for clean electricity at research and advocacy group Fresh Energy in St. Paul. "This isn't a simple story of coal plants retiring."

Forestalling climate change has been a key driver for closing carbon dioxide-spewing coal plants. But economics have also played a big role in coal's decline.

Natural gas has become the fossil fuel of choice for power companies: Its carbon dioxide emissions are half that of coal, and it is generally less expensive. New wind and solar farms, already subsidized with tax credits, became increasingly cheaper to build — and their fuel is free.

Coal and natural gas are still the largest sources of electricity production in MISO, though wind has built a significant share, often producing more power than nuclear plants. Scores of solar projects are waiting to be connected to MISO's grid.

Fossil fuels plants are what's called "dispatchable." They can be ramped up or down on demand. So coal plants in MISO are generally credited for 90% generating capacity on MISO's scale.

Wind farms, by contrast, generally have 15.5% capacity by MISO's calculations. Solar's capacity score is higher than wind's because the sun shines when power demand peaks, but it's still considerably lower than coal's rating.

The question for MISO and other regional grids: "Are we maintaining the right balance of dispatchable and intermittent power?" said Sapper, the analyst with Customized Energy Solutions. "We know how much [dispatchable power] we need when problems start happening — that is the cruel truth of the situation."

Summer could be volatile

MISO runs the electricity grid from Louisiana in the south to Michigan in the east and a sliver on Montana in the west. Based in Indiana with an operations center in Eagan, MISO is a nonprofit that counts utilities and other energy stakeholders among its members.

In its recent summer forecast, MISO projected peak demand — when air conditioners are blasting — of 124 gigawatts of power. The projected regularly available generation capacity is 119 gigawatts, hence a shortfall.

"We will have to be vigilant this summer with extraordinary conditions," said MISO's Wright.

The summer forecast wasn't necessarily a surprise given the outcome of MISO's annual "planning resource" or "capacity auction" in mid-April.

Generation capacity is essentially auctioned off to power providers in MISO. Many — including all investor-owned utilities in Minnesota — are sellers. Buyers are utilities that are short of capacity.

This year's capacity auction price in MISO, except in its southern region, hit a record $237 per megawatt per day, up from $5 a year ago. Not only were generation capacity estimates lower than expected, but power demand forecasts were up 1.7%.

Xcel and Great River Energy — Minnesota's largest electricity providers — benefit from those higher prices since they're long on supply. Xcel estimates about $100 million in MISO capacity auction sales will be credited to Minnesota customers.

Still, due to the shortfall, Minnesota and all of MISO's north and central territory are at an increased risk of temporary, controlled power outages, MISO warned. While widespread rolling blackouts haven't happened in northern MISO, they occurred in southern MISO during the February 2021 storm.

MISO can import power from other regional grids during emergencies.

Other states' policies affect Minnesota

In most of MISO, including Minnesota, electric utilities are vertically integrated monopolies, regulated by states. Power providers must prove to regulators they will have adequate generating capacity over the long term.

"Where it is not regulated, that is the Achilles' heel," said Jon Brekke, Great River's chief power supply officer.

Illinois is the primary state in MISO where "retail choice" prevails. Power providers there tend to be buyers of electricity capacity, relying on MISO's auctions. It's a strategy that works when capacity prices are low.

MISO has minimal power over coal plant retirements. Electricity providers and public utility commissions "ultimately have the responsibility" on when to build and when to close power plants, said MISO's Wright.

Still, MISO is taking several steps to remedy power capacity shortfalls. That includes improving its capacity auctions so that traditional power plants would get more credit for constant availability when demand peaks.

Also, MISO has proposed reducing the risk of electricity shortfalls by preventing power providers from unduly relying on its capacity auctions.

This summer MISO's board will consider approving over $10 billion in new transmission projects. It's a move that would reduce growing congestion on the grid and help get power to where it's needed most.

Transmission projects take years to complete, and utility ratepayers will likely foot at least part of the bill. But transmission improvements allow MISO to more efficiently move electricity across its giant footprint, said Fresh Energy's Gleckner.

"Transmission plays a massive role," he said.

Correction: An earlier version of the story had the wrong amount of electricity that the four large Xcel coal plants generate.