Adjusting the mechanics of the RTR (Renewable Technology Resource) Exemption

1. Adjusting the mechanics of the RTR • (Renewable Technology Resource) Exemption April 9, 2019 Markets Committee Meeting Ron Coutu, Boreas Renewables 1

2. About RENEW An association of the renewable energy industry and environmental advocates united to promote renewable energy in the Northeast.

3. Overview of Presentation • Current RTR implementation overview • First issue with current design • Second issue with current design • Additional design consideration still under review • Schedule for this proposal

4. Current Implementation of the Renewable Technology Resource (RTR) Exemption • A New Resource that meets the qualification requirements in Market Rule 1 Section III.13.1.1.1.7 and III.13.1.1.2.9. Renewable Technology Resources may participate in the Forward Capacity Auction (FCA) as an RTR • To qualify, an RTR receives an out-of-market revenue source and meets renewable or alternative energy portfolio standards as defined in III.13.1.1.1.7(a)&(b) • Only the portion of the FCA Qualified Capacity of the resource that meets the III.13.1.1.1.7 criteria is eligible for treatment as an RTR • The RTR designation currently allows (but does not require) a New Resource to remain in the FCA at prices below their Offer Review Trigger Price (all the way to $0/kW-mo)

5. Current Implementation of the RTR Exemption (continued) • The total RTR MW quantity is capped by the market rules and will cease to exist in any auction beyond FCA15. • The FCA14 cap will be about 336 MW • The FCA15 cap will be 336 MW minus the RTR MW that clear in FCA14 • RTR elections are made by the project sponsor no later than two Business Days after the date on which the ISO provides the New qualification determination notifications (October). • RTR elections may not be withdrawn after the election deadline. • Electing RTR treatment invalidates any multi-year CSO rate lock and minimum offer price elections previously made for the same resource.

6. Current Implementation of the RTR Exemption (continued) • If the total FCA Qualified Capacity (FCA QC) of those electing RTR exemptions exceeds the cap specified for that year, the qualified capacity value of each resource shall be prorated by the ratio of the cap divided by the total FCA QC. • The ISO, by rule, notifies those with RTR exemptions of any such proration no more than 5 business days after the RTR election submission deadline.

7. First Issue with the Current Design • The election and proration process is well ahead of the auction • Election takes place in October, FCA in February of following year • Proration being fixed as of October is not necessary for the auction and may cause unnecessarily high proration • New RTRs may not enter into the FCA due to FA requirements • New RTRs may choose to withdraw their offer during the auction based on other business reasons • A second chance at proration closer to the auction would allow some who originally chose RTR to withdraw that choice before the auction • This could allow other RTR eligible resources to receive a higher prorated amount

8. First Issue with the Current Design: Example • For FCA14 the RTR Cap is 336 MW • Let’s say 5 resources, all with FCA QC of 100 MW, elect RTR treatment in October • Under the current rules all resources would receive 336/500 times their QC • So each resource would get an RTR exemption of 67.2 MW • Assume that before the FCA one of the 5 resources did not post FA so they were removed from the Auction. • This means that only 400 MW of RTR resources are now remaining in the auction. • Under current rules only 67.2 MW x 4 or 268.8 MW of RTR MWs would be able to participate in the FCA, even though the cap is 336 MW

9. First Issue with the Current Design: Proposed Solution • Allow resource owners who requested RTR treatment in October to ‘remove’ that request until 10 Business Days before the FCA. • Would be best accomplished by having the ISO send out a reminder of this option prior to the 10 BD window • If the resource owner ‘removes’ the previously requested exemption or a resource with an RTR exemption will not participate in the auction for any reason (e.g., not posting FA) then this resource would be removed from the proration. • The proration would then be ‘rerun’ prior to the auction • If no RTRs have been removed, proration will be unchanged from October • If any RTRs have been removed, remaining resources will see proration levels reduced (i.e., they will be able to offer more MWs into the FCA) • Total RTR MWs participating in the FCA will still remain no higher than the cap

10. First Issue with the Current Design: Proposed Solution (continued) • The New Resources with RTR exemptions would be informed prior to the FCA if there were changes to their prorated amount. • ISO would also notify the market of the RTR MWs elected as of October and the RTR MWs to be offered into the auction in January • If a resource ‘removes’ the previously requested RTR exemption but remains in the auction, their multi-year CSO rate lock and minimum offer price elections would no longer be invalidated. • It is as if they never requested the RTR for that FCA purpose • Note: In the previous example (slide 8) with this solution the remaining 4 Resources would now be allocated 336/4 or 84 MW each compare to the 67.2 MW under current rules.

11. Second Issue with the Current Design • Currently, electing the RTR Exemption and then exiting the Auction at a high price comes without consequence for the exiting RTR Resource • A Resource that exits the FCA early has potentially impacted other RTR resources by causing them to be prorated unnecessarily • The 190 MW of Resources that qualified for RTR exemptions but did not remain in FCA 13 until the end are a potential example of this issue • The ISO does not publish at what prices those resources left FCA 13 • Need to balance • Ensuring that Resources selecting RTR Exemption will actually participate in the auction so they don’t cause unnecessary proration • Allowing these Resources to properly price the risk of taking on a CSO and exit the auction if the price gets too low

12. Second Issue with the Current Design: Proposed Solution • Those Resource that enter the FCA with an RTR Exemption will be required to stay in FCA until the Dynamic De-List Bid Threshold (DDBT) • At prices below the DDBT they can offer to stay through each round or put in offer that will remove them from the auction • This requires that the RTR Exempted Resource stay in the auction until the DDBT, but allows them to make an economic decision after that threshold so they are not required to take on a obligation at prices below their risk preference. • Because of the RTR Exemption they may stay in through all rounds of the auction but this may not be the correct risk based choice at very low price

13. Additional Design Concept Still Under Review • If proration occurs in FCA14 and some RTRs leave the auction below the DDBT, this will leave some MW for FCA15 • Could give first priority in FCA15 to those RTRs who did clear in full during FCA14 but still have New MW for FCA15 due to the FCA14 proration. • This outcome is most similar to updating the proration during FCA 14 or upon the close of FCA 14 (with a 1 year delay) • This would have been our preferred approach, but would be too difficult to implement • These MW would be the most likely to clear in FCA15 since the resource already has an FCA14 CSO • RTR MW would be allocated to these Resources first in FCA15 • If there are any remaining RTR MW after this, would be allocated prorata to the new FCA 15

14. Benefits of RENEW Proposal • More efficient usage of the remaining RTR Exemption cap • Design attempts to have no direct impacts on FCA software • Because proposal is all accomplished outside the auction, it is more likely to be implementable by the ISO in time for FCA14

15. Schedule for this Proposal • April 9-10 MC – 1st Presentation • May 7-8 MC – 2nd Presentation including Tariff language • June 11-12 MC – Vote on Proposal • June 25-27 PC – Vote • Early July Filing • FERC Ruling by October RTR window • Implementation impacts on ISO will be in January 2020

16. Questions Ron Coutu Senior Consultant, Boreas Renewables, LLC (Consultant to RENEW) coutu@boreasrenewables.com