Future Ancillary Services Team (FAST)

1. Future Ancillary Services Team (FAST) Floyd Trefny June 13, 2014

2. What are the new Ancillary Services? Current Future Regulation Up Regulation Down 600 MW Regulation Up Regulation Down • DAM • Regulation - current • Fast Responding Reg 600 MW • DAM – 16 second Product • Provided by Generators • New Technology Devices Primary Frequency Response 1400 MW Generation • DAM -Two Groups • FFR1 – 10 min max deploy • FFR2 – LRRS • MCPC set as part of PFR 1400 MW Responsive Reserve 2800 MW Fast Frequency Response Load Resources Contingency Reserve • DAM – 10 minute Product • On and Off Line Gen • Load Resources 1375 + Net Load Change Supplemental Reserve Non-Spin Reserve 1200 MW 1200 MW • DAM – 30 Minute Product • From Off-Line Gen • Load Resources • RUC Action • ERCOT to Monitor Need • Likely Future Action Total Reservation for AS 4600 MW Synchronous Inertial Response Total Reservation 6000+ MW

3. Alternate Proposal for New Ancillary Services Current Future • DAM • Regulation - current • Fast Responding Reg Regulation Up Regulation Down Regulation Up Regulation Down 600 MW 600 MW • DAM – 16 second Product • Provided by Generators • New Technology Devices • No reservation of Resource Capacity Primary Frequency Response 0 MW • DAM – 10 Minute Product • FFR1 – 10 min max deploy • FFR2 – LRRS • On and Off Line Gen • LR without Frequency Rsp • One MCPC for all types of technology 2800 MW Responsive Reserve 2800 MW Contingency Reserve • DAM – 30 Minute Product • From Off-Line Gen • Load Resources Supplemental Reserve Non-Spin Reserve 1200 MW 1200 MW • RUC Action • ERCOT to Monitor Need • Likely Future Action Synchronous Inertial Response

4. PFR Issues of Concern • Do not Reserve SCED capacity for PFR • Can lead to reservation of more capacity for AS than needed • PFR capacity is only used for a very short term function (16 seconds) • PFR reserve will keep ORDC low all the time • In no case should it be held in reserve if Firm Load has been shed in the EEA • Use a different method of managing capacity needs for PFR • The amount of PRF required to manage the system is not easy to determine and may be very difficult to estimate • Procure PFR in DAM with limits on provision based on actual performance • Judge providers of PFR by their actual performance during frequency events • Allow Resources to set their own HSLs to provide PFR as they feel necessary to maintain their PFR performance • “Failure to Provide” that results in a disallowance of participation in DAM, is a very powerful incentive

5. FFR Issues of Concern • FFR is more like Contingency Reserves than PFR • ERCOT must procure a minimum amount of FFR to manage frequency for large disturbances • FFR2 must stay off until recalled and frequency is stable; can be purposely forced off for many hours (occurred in the past) • Always occurs when any firm load is forced off • Must keep FFR providers in the marketplace • Likely there will not always be an individual stable market for FFR because of limited Load Resource providers • Must set clearing prices in a larger market that can be understood by providers • Load Resources are not mitigated • Use Contingency Reserve procurement process for all FFR • Use DAM Contingency Reserve procurement to provide access to Ancillary Services markets for new Technology facilities

6. CR/SR Issues of Concern • Contingency Reserves should not include any facility that is not already on-line (able to begin loading immediately) • Failure to start and fully load an off-line facility in 10 minutes could be significant during emergencies caused by poor weather conditions etc. • Need a complete description of deployment of each type of CR technology for several different operating scenarios including extreme EEA events • Allow portions of CR to be provided by non-frequency sensitive technologies • Remove any doubt that Supplemental Reserve will be required to manage Load Forecast Error • LF errors can be projected several hours ahead of time • Deployment and Recall policies must be established to minimize interference in the market • Supplemental Reserve will be less expensive than just increasing the amount of Contingency Reserve

7. Overall Issues of Concern • Need a single document describing the reliability justification for new Ancillary Services • Must contain the complete AS descriptions/deployment/procurement mechanisms • Must have implementation cost justification, including costs to loads for new or increased amounts of AS and software/hardware/labor costs • NPRR language now will only cloud the issues more as Protocols for AS do not describe why particular services are justified. Too much detail before consensus on the larger concepts • EEA Issues; sum of (HSL – HASL) to sum of Reg-Up, PFR, FFR, CR, then EEA it called at 600+1400+1400+1400 = 4800; way too much • ERCOT stated that increasing the total amount of capacity in AS service may be necessary • To 6000+ Mw from 4600 Mw; Justification for new expense ($85M/yr) • Transition Planning • Retail consumers and Retail Electric Providers have purchased capacity/energy needs as much as 5 years into the future • Need to be able to start one new AS at a time, for example, PFR first, then SIR; Need at least two year notice

8. Alternate Proposal for New Ancillary Services Current Future • DAM • Regulation - current • Fast Responding Reg Regulation Up Regulation Down Regulation Up Regulation Down 600 MW 600 MW • DAM – 16 second Product • Provided by Generators • New Technology Devices • No reservation of Resource Capacity Primary Frequency Response 0 MW • DAM – 10 Minute Product • FFR1 – 10 min max deploy • FFR2 – LRRS • On and Off Line Gen • LR without Frequency Rsp • One MCPC for all types of technology 2800 MW Responsive Reserve 2800 MW Contingency Reserve • DAM – 30 Minute Product • From Off-Line Gen • Load Resources Supplemental Reserve Non-Spin Reserve 1200 MW 1200 MW • RUC Action • ERCOT to Monitor Need • Likely Future Action Synchronous Inertial Response

9. Questions