DNV KEMA KERMIT Overview

1. DNV KEMA KERMIT Overview ERCOT Joint Regional Planning Group / Long Term Study Task Force Austin, TX July 13, 2012

2. Agenda • Introduction to DNV KEMA • Overview of Moment to Moment Balancing • Introduction to KERMIT • Review of ERCOT KERMIT Project • Details of KERMIT and Demo • Discussion

3. Agenda • Introduction to DNV KEMA • Overview of Moment to Moment Balancing • Introduction to KERMIT • Review of ERCOT KERMIT Project • Details of KERMIT and Demo • Discussion

4. The DNV Group 300 offices 100 countries 10,400 employees

5. DNV KEMA Energy & Sustainability • DNV KEMA Energy & Sustainability offers innovative solutions to customers across the energy value chain, ensuring reliable, efficient and sustainable energy supply, now and in the future. • 2,300+ experts across all continents • KEMA and DNV combined: a heritage of nearly 150 years • Headquartered in Arnhem, the Netherlands • Offices and agents in over 30 countries around the globe

6. One company serving the needs of the energy market place • Business and technical consultancy, expert advice, operational services • Testing, inspections, certification, verification • Risk, performance, and quality management • Research & innovation

7. Service Offerings Providing unique insight leveraging cross regional experience • Lead in network design and cyber security services to drive OT within a smart grid • Provide thought leadership in wholesale and retail convergence, and micro-grid modeling Networks 3.0 Markets 3.0 • Operational Telecommunications • Utility Network Development • Communication Network Architecture and Design  • Communication Protocol testing • Communication Protocol test software • Integrated Network Management Systems Development • Systems Security Planning, Architecture, & Testing • Market Entry and Evaluation • Smart Technology Deployment (Smart Grid) • Utility AMI Development • Home Area Networks Consumer Development • Interoperability Testing of Systems Security Planning Architecture • Markets and Regulation • Renewables Services and integration Analysis • Carbon Services • Wholesale Energy Market Design • Retail Energy Market Services and Competitive Design • Regulatory and Energy Policy Management • Strategic and Analytical Services • Operational Excellence • Trading, Retail and Market Processes • Meter-to-Bill-Operations   • Organizational Consulting • IT Advisory • Power Systems and Operations • Control System Operations • System expertise in SCADA, EMS, DMS, OMS • Power Delivery Operations Analysis • Operations benchmarking, best practices, • Control Room design • Lead in SG Technology optimization, business case and interoperability (2.0-3.0) • Identify business improvement and process optimization across utility business lines Smart Grid 3.0 Excellence 3.0 • Lead in future design of energy planning and delivery with DR/DG multi-d. power flow Operations 3.0

8. DNV KEMA Markets and Regulation Consulting • Renewables Services • Market opportunities in growing solar market (DG and utility scale solar PV and CST) • Financial and technical due diligence capabilities • Wholesale Energy Markets • ISO/RTO Services around Markets 3.0 • Focus on Renewables Integration studies leveraging KEMA’s KERMIT model • Strategic and Analytical Services capabilities in US • Modeling tools and capabilities, i.e. PLEXOS • Retail Energy Markets • REM strategic services • Multi – Client projects • Forum - Provides executives a knowledge sharing forum • Customized analytically and benchmarking services • Business Strategy Consulting • Regulatory Services • Regulatory Strategy Development • Compliance Services, Legislative Policy Analysis • Financial Modeling & Business Case Preparation • Testimony Support, Expert Testimony, Position Papers • Evaluation of RPS Requirements / Renewables Strategy • Feed-In-Tariff Designs • Federal Information Collection Requests (ICRs)

9. Agenda • Introduction to DNV KEMA • Overview of Moment to Moment Balancing • Introduction to KERMIT • Review of ERCOT KERMIT Project • Details of KERMIT and Demo • Discussion

10. Introduction to Moment to Moment Balancing Systems use generators to compensate for variability in a system to keep it stable • For any period of time, the amount of electricity produced must be the same as the electricity consumed • Necessary to keep the frequency at 60 Hz • If more power is generated than is being consumed, then frequency increases above 60 Hz • If less power is generated, the system frequency decreases below 60 Hz • Loads are not constant • System operators can not control when a homeowner will turn lights on or off • As a result, system operators vary the output of generators to “balance” a system • Generation is not constant, either – • Variable energy resources (wind, solar) fluctuate • Plants can have outages or variations • Generation providing regulation and balancing services must account for the difference • System operators use generators to compensate for variability in their system • Governors provide automatic “primary” response, regulation provides controlled “secondary” response

11. What is AGC? • Regulation is provided by Automatic Generation Control (AGC) • AGC makes use of Reg Up and Reg Down services to control system frequency • AGC is designed to control system frequency within operational limits • Signals are sent every 4 seconds to generators based on ACE • AGC measures a system deviations from: • System frequency (60 Hz) • In a control area that is interconnected as in a control area within WECC, interchange schedules are also part of Area Control Error - ERCOT controls frequency (only) • The goal is to minimize frequency error to be within a given deadband • Ideally regulation up / down is a net zero energy product. The Real-time Market is used to reset the regulation market every 5 minutes. • In ERCOT, regulation is provided on a capacity bases and regulation providers are paid to reserve capacity on their Resources to provide this service

12. Regulation Up/Down Service Shaded portion is what must be met by Regulation Regulation helps ERCOT deal with second-to-second demand changes

13. Agenda • Introduction to DNV KEMA • Overview of Moment to Moment Balancing • Introduction to KERMIT • Review of ERCOT KERMIT Project • Details of KERMIT and Demo • Discussion

14. Overview of KERMIT • Developed using two software platforms: • Matlab / Simulink for performing simulations • Microsoft Excel for entering data and post processing / analysis of results • What is KERMIT? • KEMA’s Renewable Market Integration Tool • Originally developed to study how integrating large penetrations of renewable power affects sub-hourly operations • KERMIT has expanded in scope and is now a tool for systems to examine operational strategies for handling variability in their system • This includes: • Renewable integration studies • Automatic generation control design and development • Evaluating the benefits of increased storage deployment • Analysis support for federal and ISO/RTO policy development

15. KERMIT Time Scales of Focus

16. Wind power forecast versus actual Load rejection Volatility in renewable resources Generator trip Inputs: Load Plant Schedules Generation Portfolio Grid Parameters Market/Balancing KERMIT 24h Simulation Outputs: Power Plant MW Outputs Area Interchange Frequency Deviation • Generation • Conventional • Renewable Frequency Response Scenarios: Increasing Wind Adding Reserves Storage Parameters Test AGC Parameters Trip Events Inter- connection Real Time Market Overview of KERMIT Architecture

17. Key Elements of KERMIT • Detailed IEEE standard dynamic models of a variety of generation types including: • Steam (coal or gas fired) • Combined cycle gas turbine • Combustion turbine • Wind, • Storage • Hydro, and • General distributed generation resources. • Representation of generator governors, combustion and turbine controls – especially for primary frequency response and response to dispatch/regulation controls • Models of generation company portfolio dispatch and scheduling • Models of ISO real-time dispatch and AGC systems. It is also possible (and has been done) to precisely represent specific ISO AGC algorithms. • Representation of the dynamic frequency response of system load and second by second load and variable energy resource volatility.

18. Key Elements of KERMIT (2) Our goal was to include and model all sources of variability and uncertainty in a system • Power system inertial response to generation-load imbalance including load dynamic response and generator primary frequency response • Simulation of system frequency • Models of the interconnected control areas (when such exist) including a DC change to AC losses and models of inter-area regions with transmission constraints • Load flow and swing angle simulation • The load flow dynamically simulates transmission path flows among control areas as the relative phase angles of the interconnected control areas respond to local and system generation–load imbalance caused by load variations, wind/solar variation, outages, etc. • KERMIT has also been used successfully in island systems that do not have synchronous interconnections. • Representation of day-ahead hourly interchange and generation scheduling, load forecasting, and forecast errors. Hourly ramping behavior is also captured. • And many more modules…

19. Agenda • Introduction to DNV KEMA • Overview of Moment to Moment Balancing • Introduction to KERMIT • Review of ERCOT KERMIT Project • Details of KERMIT and Demo • Discussion

20. Overview of Project Requirements • Deliver a tool to ERCOT capable of analyzing ERCOT’s system resources to: • Ensure adequate grid reliability; • Maintain system frequency within current NERC standards; • Provide for timely replacement of lost resources due to unit outages or unit variability; • Adequate control for risks due to unforeseen future occurrences in the real-time operations time-frame • Study future scenarios of renewable and conventional generation portfolio development and assess the ability of the market and system to manage inherent variability in renewables • Study hypothetical changes in scheduling and market time frames, for example • DNV KEMA will develop: • A calibrated version of KERMIT for ERCOT’s system, market configuration, • Two future scenarios that ERCOT can use for the Long Term Study • New demand response modules for KERMIT to reflect potential future market participants • In addition, DNV KEMA will help support ERCOT in their KERMIT analyses to help ensure the objectives of ERCOT’s Long Term Study are met • DNV KEMA will train ERCOT staff and provide knowledge transfer to enable ERCOT to utilize KERMIT independently if desired, or to enable ERCOT own development of enhanced models, control algorithms, etc.

21. Study Benefits of Utilizing KERMIT • The primary benefit will be to support the long term resource planning/assessment process especially around adequacy of reserves and regulation capacity. • This includes: • The ability to examine and verify adequate ancillary service requirements • Ensuring real time dispatch solutions and use of regulation products are feasible and reliable • Testing future alternative market products or policy requirements for their effect on transmission flows • The results of KERMIT analyses help ensure that future resource portfolios will provide sufficient flexibility for system dispatch and operations, including reserves and regulation, especially wrt managing renewable variability.

22. Project Team • Principal in Charge – Ralph Masiello / Jeff Bladen • Project Manager / Technical Expert – Dr. Warren Katzenstein • KERMIT Technical Expert – Dr. Khoi Vu • System Modeling Expert – Alan Roark • System Modelers / KERMIT Experts • James Hansell • Sudipta Lahiri • Andrew Stryker

23. Agenda • Introduction to DNV KEMA • Overview of Moment to Moment Balancing • Introduction to KERMIT • Review of ERCOT KERMIT Project • Details of KERMIT and Demo • Discussion

24. Agenda • Introduction to DNV KEMA • Overview of Moment to Moment Balancing • Introduction to KERMIT • Review of ERCOT KERMIT Project • Details of KERMIT • Demo • Discussion

25. Global presence DNV KEMA HEAD OFFICE Arnhem, The Netherlands