MISO earns Edelman honors

Non-profit employs O.R. to efficiently manage one of the world’s largest energy markets.

The Edelman-winning team, including Midwest ISO CEO and President John Bear (fifth from right).

The Edelman-winning team, including Midwest ISO CEO and President John Bear (fifth from right).

By Peter Horner

Moments after MISO won the 2011 Franz Edelman Award for Achievement in Operations Research and the Management Sciences, company CEO and President John Bear was asked how many people comprise his operations research group.

“That’s a trick question,” Bear said of MISO, which manages one of the world’s largest energy markets. “In theory, there are 850 of us involved with O.R. All of us – everyone who works for the company – try to focus every day on how can we continuously improve, how can we do things better, how can we move ourselves forward, whether it’s incrementally or fundamentally.”

INFORMS President Rina Schneur announced the Edelman winner in dramatic style during an Oscar-like dinner gala held in conjunction with the INFORMS Conference on Business Analytics & Operations Research in Chicago in April. The announcement capped a nearly yearlong competition in which nominated organizations were vetted and their work and results were verified before six finalists were selected to formally present their case before a panel of judges at the Chicago conference. Following a daylong series of presentations in Chicago, the judges met to vote on the winner. Edelman Competition Chairperson Stephen Graves handed the envelope with the winner’s name to Schneur.

This year marked the 40th year of the Edelman Competition, considered the “Super Bowl” of operations research applications.

Midwest ISO earns Edelman honors

The Edelman-winning team, including Midwest ISO CEO and President John Bear (fifth from right).

Push to Boost Efficiency

MISO was the nation’s first regional transmission organization (RTO) to emerge following the Federal Energy Regulation Commission’s push in the 1990s to restructure and boost efficiency throughout the power industry. Headquartered in Carmel, Ind., MISO has operational control over more than 1,500 power plants and 55,000 miles of transmission lines throughout the Midwest and Manitoba, Canada.

Driven by the goal of minimizing delivered wholesale energy costs reliably, MISO, with the support of Alstom Grid, The Glarus Group, Paragon Decision Technology and Utilicast, used operations research and analytics to design and launch its energy-only market on April 1, 2005, and to introduce its energy and ancillary services market on Jan. 6, 2009.

MISO’s energy and ancillary services market is a commodities market that facilitates real-time and day-ahead trade transactions. Through market bids and offers, MISO notifies power plants every five minutes of the amount of energy required to meet demand. The power plants providing the energy are the lowest-cost producers that satisfy demand while respecting the physical constraints of the electrical system. Running the markets over a large region further maximizes efficiencies due to economies in scale.

“The complexity of the problem is staggering,” Bear said during the Edelman ceremony. “The optimization problem can contain up to 3 million continuous variables, 450,000 binary variable and nearly 4 million constraints.”

MISO used linear programming to set energy output levels and to establish the prices at which electricity trades, and then employed mixed integer programming to determine when each power plant should be on or off.

“Operations research is the heart of our operation,” Bear said. “O.R. determines prices that energy is bought and sold, and perhaps most importantly, O.R. ensures that electricity is delivered when it’s needed, where it’s need, reliably, for much of the Midwest.”

Billions in Savings

Using O.R., MISO realized between $2.1 and $3.0 billion in cumulative savings from 2007 through 2010. MISO estimates an additional $6.1 to $8.1 billion of value will be achieved through 2020. The savings translate into lower energy bills for millions of customers throughout the region.

“MISO is able to provide this value by applying new, complex analysis and optimization techniques on a broad regional scale,” Bear added. “This enables both improved use of existing electrified system assets, as well as a reduced need for future assets.”

MISO has been essential in the deregulation of the wholesale electricity industry in the Midwest. Initially formed to facilitate unbiased access to the electric transmission lines, non-profit MISO quickly undertook the development and implementation of robust, centrally administered energy and ancillary services markets.
MISO, whose members include 35 transmission owners and 100 non-transmission owners operating in 13 U.S. states and Manitoba, Canada, cleared $24 billion in energy transactions in 2009.

Based on interviews with Edelman judges, the competition was first-rate and determining a winner was difficult. Along with MISO, the other 2011 Edelman finalists included CSAV (Chilean shipping company), Fluor Corporation, Industrial and Commercial Bank of China, InterContinental Hotels Group and the New York State Department of Taxation and Finance.

“We did not have an easy time,” said Randy Robinson, an Edelman judge. “All six finalists were excellent. We focused on the benefit impact, the originality and complexity of the technical work and the support of the project from the top managerial level. MISO was strong in all three respects. They had the CEO here leading the presentation. The evidence of the O.R. influence and impact was outstanding. The technical work was complex and original. The organization really revolves around this project. Put it all together and you have a very strong, winning entry.”

“One of things that impressed me was that the presentation was made by the practitioners,” Graham Rand, another judge, said of MISO’s performance in Chicago. “That demonstrated to me MISO’s commitment to the project, led by their CEO. Of course, the technical work was very impressive. As Edelman judges, we’re always going to have a tough decision. We have very good presentations, very good O.R. work, and it’s a wonderful competition.”

Vendors’ Critical Role

Vendors Alstom Grid (see accompany story on page 36) and Paragon Decision Technology played critical roles on the award-winning project team, along with the Glarus Group and Utilicast. Alstom Grid is a supplier of advanced energy management software and systems. Paragon Decision Technology is the developer of AIMMS, a mathematical optimization platform. The Glarus Group delivers strategic advisory services, develops advanced technology solutions and provides support services across the electric energy industry. Utilicast provides professional services and industry expertise to regional transmission organizations, independent system operators and electric utilities.

“We were all thrilled,” Bear concluded, summing up the Edelman competition, the awards gala and his company’s ultimate triumph. “I think you’re always surprised to win such a prestigious award. You work hard, you try to accomplish something that’s not only beneficial for your organization and your customers, but something that benefits society as well, but you’re never sure if anyone notices. That’s what makes this award so special.

“Hopefully it inspires us to go on to the next challenge,” he continued. “Operations research supports everything our company does, so now it’s a matter of just how well we can do it. Now that we’ve focused on this project, we’ll try to figure out what else we can focus on to move ourselves and our company forward.”

Peter Horner (horner@lionhrtpub.com) is the editor of OR/MS Today and Analytics (www.analytics-magazine.com). Barry List (Barry.List@informs.org), director of communications for INFORMS, contributed to this article.

Sasol wins INFORMS Prize

The 2011 INFORMS Prize was presented to Sasol, a South African company. Team members include (l-r): Michele Fisher, Johan de Bruyn, Karin Kleynhans, Flip de Wet, Willem Louw, Hylton Robinson, Ester Vermaak, Patrick Veldhuizen and Marlize Meyer.

The 2011 INFORMS Prize was presented to Sasol, a South African company. Team members include (l-r): Michele Fisher, Johan de Bruyn, Karin Kleynhans, Flip de Wet, Willem Louw, Hylton Robinson, Ester Vermaak, Patrick Veldhuizen and Marlize Meyer.

While the Edelman Award each year honors an outstanding example of operations research practice, the INFORMS Prize salutes organizations for “sustained integration of operations research.” The INFORMS Prize Committee looks for a variety of applications of O.R. in a single organization that provides the organization with a competitive advantage through high-impact work. The committee is particularly impressed with organizations that “repeatedly apply O.R. in pioneering, varied, novel and lasting ways.”

Sasol, a global petrochemical company based in South Africa and a finalist for the Edelman Award in 2010, was named the 2011 recipient of the INFORMS Prize at the awards gala held in conjunction with the INFORMS Conference on Business Analytics & Operations Research in Chicago. Sasol Technology Managing Director Willem Louw accepted the award from Prize Committee Chair Erica Klampfl.

The INFORMS Prize Committee cited Sasol for “demonstrating sustained, effective and creative use of operations research to improve decision-making and impact the company’s bottom-line.”

The citation went on to note that “for 60 years, Sasol has demonstrated its innovative spirit in the energy and chemicals sectors in South Africa and has grown to become the country’s leading fuel provider and an international player. Ensuring Sasol’s success requires that complex operations be managed across value chains, business units and sites.

“Sasol Technology’s Value Chain Optimisation Group applies operations research across the business for a wide range of topics such as improving polymer production processes, minimizing the cost of stricter fuel specifications, and studying the reliability and sustainability of key units in the production process,” the citation continued. “The group has grown from a few analysts to a multidisciplinary team of more than 30 specialists who are Sasol’s experts in linear programming, simulation, supply chain modeling, process integration and human resource modeling.”

“Though the contributions made my our splendid team of O.R. experts, we are currently in a position to very elegantly manage a range of activities across the entire Sasol value chain while significantly improving our bottom line,” Louw said in his acceptance remarks. “Indeed, it would be difficult to manage and imagine how we would continue into the future without their contributions.”

Sasol submitted a long list of O.R.-oriented projects in its prize-winning application, including: 1. stochastic modeling of production, refining and blending of fuels; 2. process modeling of the liquid factory value chain within the Sasol Group; and 3. global tank planning model for the Solvents Business Unit within the Sasol Group.

“To be recognized by this illustrious committee in such a fiercely contested competition confirms the position of Sasol's operations research team as a world-class player in the OR/MS field,” Louw added.

Past recipients of the award include Intel, UPS, HP, IBM, Procter & Gamble and GE Research.