Fixes to Reliability Deployment Price Adder (RDPA)

1. Fixes to Reliability Deployment Price Adder (RDPA) Shams Siddiqi, Ph.D. Representing Rainbow Energy Marketing Corporation (512) 619-3532 shams@crescentpower.net WMWG Meeting February 25, 2019

2. Serious Flaws with Current RDPA • ERCOT presentation points out SERIOUS FLAWS with the current implementation of the Reliability Deployment Price Adder (RDPA) • Urgent need to fix these flaws – willing to hold NPRR904 if we move quickly to resolve flaws • The current RDPA is pretty much an arbitrary number since: • The LDL relaxation of all other resources can result in a high RDPA even if ERCOT-Directed Capacity (EDC) deployments have no impact. • The HDL relaxation of all other resources can result in a zero RDPA even if EDC deployments have huge impact. • RDPA is highly dependent on choice of Reference Bus (see 12/3/18 presentation to QMWG). • Since ERCOT and Stakeholders have identified these RDPA flaws, need to incorporate DC Tie related out-of-market actions, and need to address locational price signals (and not pay resources the same whether helping or hurting the critical local constraint): Preferably ERCOT should file a new NPRR to address all these issues

3. Proposed Solution • Proposed solution to fix these fatal flaws is as follows: • Relax the EDC as described in the Protocols, but DO NOT relax LDL for any resource at LDL and HDL for any resource that is at HDL [this is to address any ramping concerns if necessary]. • SCED Step 3: Except for offer curves for EDC which would be as described in the Protocols, use the Step 2 Mitigated Offer Curves (MOC) for all other resources and model all constraints as in Step 2. • SCED Step 4: For EDC only, cap their offers into Step 3 by the LMP at their Node from Step 3 (minus a small number) and rerun SCED with these new mitigated offers.

4. Proposed Solution - RLMP • Eliminate excessive payments to generators that hurt or do not help resolve the constraint while paying too little to generators resolving the constraint – which are then paid makewhole payments. • Thus, determine Reliability-adjusted LMP (RLMP) for each Settlement Point based on SCED Step 4 prices – this eliminates unnecessary excessive payments to most generators while likely eliminating any EDC related makewhole payment (more likely to result in credits to load from clawback) and sends strong local price signals.

5. Interval Prior to RUCAssume Constraint Shadow Price Cap of $500/MWh Ref. Bus Limit = 50MW L1=60MW G1 G2 L2=10000MW Constraint Shadow Price

6. Next Interval–RUC Current DesignAssume NG=$5/mmBtu i.e. MOC=$70/MWh Ref. Bus Limit = 50MW L1=80MW G1 G2 L2=10000MW RUC G1 MOC

7. Hogan Proposal Inefficient in Step 1-2; doesn’t do much in Step 3-4 in most cases Limit reduced by 30MW Ref. Bus Limit = 50MW RUC G1 MOC L1=80MW G1 G2 L2=10000MW Lowers LMPs elsewhere-uplift

8. Hogan Proposal (G1 HSL Reduced)Outcome depends on size of RUC unit; LMPs lowered elsewhere Limit reduced by 30MW Ref. Bus Limit = 50MW Constraint Shadow Price L1=80MW G1 G2 L2=10000MW Lowers LMPs elsewhere-uplift

9. RLMP ProposalConsistent Price Signal to Prior Interval; Prices not lowered elsewhere Ref. Bus Limit = 50MW MOC lowered by $1/MWh from Step 3 L1=80MW G1 G2 L2=10000MW

10. RLMP Proposal v. Current RDPA • RLMP provides accurate Local price signals (independent of choice of Ref. Bus) – consistent with prices just prior to RUC deployment or export curtailment • With RUC, there would likely be clawback of profit from G1 (credited to load) instead of current uplift of RUC makewhole • RLMP resolves all issues with current RDPA and doesn’t pay resources that help or hurt the constraint the same as in current RDPA (huge unnecessary payment from Load) • RLMP sends strong local scarcity price signals