ERCOT RTRDPA Study Observations

1. ERCOT RTRDPA Study Observations Shams Siddiqi, Ph.D. Representing Rainbow Energy Marketing Corporation (512) 619-3532 shams@crescentpower.net WMWG Meeting March 25, 2019

2. Serious Flaws with Current RDPA • Thanks to ERCOT for providing RTRDPA study results • ERCOT presentation clearly points out SERIOUS FLAWS with the current implementation of RTRDPA, e.g.: • On 10/4/18, there was 0 to very little RTRDPA even though ERCOT RUC-ed resources for capacity shortage – the correct answer is the system lambda plus RTRDPA should be at or close to $1,500/MWh for most of those RUC intervals • There are many intervals (e.g. 8/1/18 17:50-19:15) where RTRDPA should be close to 0 but posted positive adders • These observations point to the fact that current RTRDPA, as well as simply not relaxing LDL for resources at LDL and not running RTRDPA when RUC BP > LDL creates pretty much an arbitrary number since: • The LDL relaxation of all other resources can result in a high RTRDPA even if ERCOT-Directed Capacity (EDC) deployments have no impact (e.g. 8/1/18). • The HDL relaxation of all other resources can result in a zero RDPA even if EDC deployments have huge impact (e.g. 10/4/18).

3. Proposed Solution • REMC Proposed Solution (filed as 3/5/19 REMC Comments) 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 • For Resources not at LDL and HDL, relax their LDLs and HDLs up to LSL and HSL respectively using current formulas in Protocols.

4. Analysis of 10/4/18 Results • Sequential SCED may not be the best measure of accuracy of results but for 10/4/18 it at least shows that REMC Proposed Solution is far better than the current flawed RTRDPA • The first spike in sequential SCED is due to pricing run not taking into account RUC mitigation • Like REMC Proposed Solution, sequential SCED reaches appropriate $1,500/MWh prices during intervals of capacity scarcity (if this were an RMR resource, current RTRDPA would still have 0 adder whereas sequential SCED and REMC Proposed Solution would result in $9,000/MWh prices as should be the case for capacity shortages) • Sequential SCED results in a slightly lower price because it pre-positions those resources at HDL so that it makes slightly more capacity available from those resources with no such pre-positioning (which represents what actually happened during those intervals) – thus sequential SCED is good to get a “feel” but not the best measure of accuracy of results • Analysis clearly shows current RTRDPA and with BP=LDL trigger do not fix the current flaws whereas REMC Proposed Solution does produce RTRDPA that reflect system scarcity

5. Conclusion • Current RTRDPA and proposals that do not address the flawed BP=HDL relaxation maintain the current flaws and produce arbitrary adders, and more importantly, 0 to little adder during scarcity • With Real-Time Co-optimization and the elimination of the ORDC adder, RTRDPA will be the only mechanism to correct price reversal for EDC (RMR, RUC, DC Tie related actions, other Load Shed that needs to be added) – thus, critically important to fix RTRDPA flaws • Theoretically and now based on ERCOT analysis, REMC Proposed Solution fixes the RTRDPA and provides appropriate scarcity price signals when needed and 0 to little RTRDPA when appropriate and it’s the only proposed solution that actually fixes both flaws