ERCOT Ancillary Services Workshop

1. ERCOT Ancillary Services Workshop

2. Legal Disclaimers and Admonitions • ANTITRUST ADMONITION • ERCOT strictly prohibits market participants and their employees, who are participating in ERCOT activities, from using their participation in ERCOT activities as a forum for engaging in practices or communications that violate antitrust laws. The ERCOT Board has approved Guidelines for Members of ERCOT Committees, subcommittees, and working Groups to be reviewed and followed by each market participant attending ERCOT meetings. If you have not received a copy of these Guidelines, please take one now, review it at this time, and remember your ongoing obligation to comply with all applicable laws, including antitrust laws.

3. Legal Disclaimers and Admonitions • PROTOCOL DISCLAIMER • This presentation provides a general overview of the Texas Nodal Market Implementation and is not intended to be a substitute for the ERCOT Nodal Protocols (available at http://nodal.ercot.com/protocols/index.html), as amended from time to time. If any conflict exists between this presentation and the ERCOT Nodal Protocols, the ERCOT Nodal Protocols shall control in all respects. The presentation materials, including any statements by ERCOT, its employees or contractors is intended for the general education of its audience and should not be considered a recommendation of ERCOT, its employees or contractors of any particular operating strategy or statement of fact. All Market Participants and public consultants assisting Market Participants are encouraged to read and understand the approved protocols, ERCOT operating guides, interface and communication guides and any other ERCOT procedures which may be applicable to the topics presented. • .

4. Target Audience This presentation is intended for:Market Participants who intend to provide Ancillary Services to ERCOT for use in managing the reliability of the ERCOT System Including: • System Operators • Traders • QSE Operators • Resource Entities • TSPs • Load Serving Entities

5. Objectives • Using the information in this presentation… • …you will be able to • Understand the Ancillary Services (AS) ERCOT uses in the Nodal Market • Offer Ancillary Services in the Day Ahead Market • Manage AS Resource Responsibility in Real Time • Monitor System Reserve Postings in ERCOT • Respond to requests to deploy AS Capacity • Qualify Resources to provide Ancillary Services • Understand the two types of performance measures for providers of Ancillary Services

6. Agenda

7. Introduction: Ancillary Services Floyd Trefny

8. Introduction: Ancillary Services Nodal Ancillary Services A service necessary to support the transmission of energy to Loads while maintaining reliable operation of the Transmission Service Provider’s (TSP’s) transmission system using Good Utility Practice • Regulation Up • Regulation Down • Responsive Reserve • Non-Spin Reserve • Voltage Support Services • Black Start Service* • May be Self Provided, traded with other QSEs, or purchased in Day Ahead Market • May be provided by Generation or Qualified Load Resources Purchased by ERCOT and uplifted to all Load *- not covered in this presentation

9. Introduction: Ancillary Services Regulation Up and Down • Five Minute Service to increase or decrease energy production in response to control signals from ERCOT provided every 4 seconds • Used to manage changes in system frequency • On receipt of a new SCED Base Point, the energy deployment resets to the current actual generation or load being consumed DEFINITION

10. Introduction: Ancillary Services Reserve Services Provides capacity reserves to ERCOT to use during shortages; energy dispatched by SCED or automatic action Responsive Reserve (RRS) • Ten minute reserve product • Arrest frequency decay using governor response and interruptible Load • Must be provided by on-line Generation or Load Resources Non-Spin Reserve (Non-Spin) • Thirty minute reserve product • Provided by both on-line generation or load and by off-line generation such as fast start Gas Turbines 10

11. Introduction: Ancillary Services Voltage Support Services (VSS) Used to maintain transmission and distribution voltages on the ERCOT Transmission Grid within acceptable limits • All Generation Resources greater than 20 MVA injection to the Grid must provide VSS • Generation* must provide sufficient reactive power (up to 0.95 power factor) at max generation to meet Voltage Profile set by ERCOT; Establishes the Generator Unit Reactive Limit (URL) • If ERCOT issues a Verbal Dispatch Instruction (VDI) to reduce generation output to facilitate increases beyond the URL, then the Generator may be eligible for additional lost opportunity payments DEFINITION *- some exceptions for Renewable Generation 11

12. Introduction: Ancillary Services • QSE Settlements for Ancillary Services • Providers • Paid the MCPC of the DAM/SASM • Amount determined by DAM/SASM Awards, Trade Obligations • QSEs that fail to provide will be charged the max of DAM or SASM clearing prices • Loads • Charged a calculated price based on total payments to providers of the DAM/SASM • Amount determined by AS Obligation less self provision • Trades for AS considered as part of self-provision

13. 6:00 AM Market Notices and Reports Jake Jacobs

14. Day-Ahead Market Postings By 0600 ERCOT publishes • Ancillary Services (AS) Plan for the next Operating Day • Load Ratio Share (LRS) from 14 days prior • QSE AS Obligations (AS Plan * LRS) • Percentage Load Resources allowed to provide RRS • ERCOT also publishes: • Wind Forecasts and Production Potential – used by QSEs to estimate COP Resource limits for Wind Generation Resources • ERCOT System, Weather Zone, and Load Zone Load forecasts, by hour for the next seven days • Weather assumptions used by ERCOT to forecast ERCOT System conditions and Dynamic Ratings • Any weather-related changes to the transmission contingency list; • List of transmission constraints that have a high probability of binding in SCED or DAM • Competitive Constraints • Redacted Network Operations Model • Network Operations Model (not redacted) for TSPs • Differences between Redacted Network Operations Model and the previous day’s Model • Names and parameters of all Transmission Elements to Market Participants • Load forecast Electrical Bus distribution factors by hour for the next seven days; • Load Profiles for non-Interval metered Customers; • Distribution Loss Factors (DLFs) and forecasted ERCOT-wide Transmission Loss • Transmission Loss Factors (TLFs) for each Settlement Interval of the Operating Day; • List of all Settlement Points • Mapping of Settlement Points to Electrical Buses • Shift Factors by Resource Node

15. Day-Ahead Market Postings More information On AS Plan Calculation • Regulation- • 98.8 percentile of the amounts of deployed regulation up/down • During initial Nodal Operations, use adjusted historical requirements • May be different for each hour of the day • Non-Spin • 95th percentile of the observed hourly Net Load uncertainty from the previous 30 days from when the study is performed and from the same month of the previous year • Responsive Reserve • Minimum RRS requirement at 2300MW for all hours, can be increased according to hourly forecast temperatures • Load Resources procured fro RRS for any hour limited to 50% or less if specified by ERCOT

16. Day-Ahead Market Jake Jacobs

17. Day-Ahead Market • DAM is: • Financial market for Energy, Ancillary Services(AS), • and CRRs • Voluntary market for Energy and CRRs • ERCOT requires and procures Ancillary Services in DAM to meet daily AS Plan • DAM solution co-optimized between Energy, Ancillary Services, and CRRs

18. Day-Ahead Market All Day-Ahead Transactions • QSE submissions before 10 AM • AS Self-Arrangement • Three-part Supply Offer • AS Offer • Energy-Only Offers and Bids • Congestion Revenue Rights (CRR) Offer • Point-to-Point Obligation Bid • Trades (can be made during the Adjustment Period) • Capacity Trade • AS Capacity Trade • Current Operating Plan • Establishes LSL/HSL for use in DAM Awards

19. AS-related transactions by 10am • AS Self-Arrangement submitted to ERCOT by QSE • Sum of trades (purchased) and self-arranged from QSE Gen • Separate for Load Resources and Generation Resources • ERCOT procures amount needed in AS Plan requirement for each hour (Requirement – Self Arrangement = ERCOT Procured amount) • If self -arrangement is greater than the QSE obligation, then all self-arranged submissions are canceled

20. Day-Ahead Market • Three-part Supply Offer • Inclusive: both energy and ancillary services can be cleared simultaneously • Exclusive: either the energy can be cleared or ancillary services can be cleared, but not both

21. Day-Ahead Market AS Offers • On-Line Resources can be offered simultaneously (Reg-up, RRS, Non-Spin) • Reg-Down and Of-Line Non-Spin are individually offered • Fixed/Variable Quantity Block - Load Resources: Generators are only Variable • Multi-hour -Offer cleared for all hours of the multi-hour block or not cleared at all

22. Day-Ahead Market AS Trade • Subject to validation and confirmation process • Stored as individual one hour trades • AS type is specified • Specify Load Resource on UFR, Controllable Load Resource or Generation Resource

23. Day-Ahead Market = ERCOT AS Plan * QSE Load Ratio Share QSE AS Obligation in DAM = QSE AS Obligation - Self-Arranged AS submitted AS amount ERCOT buys in DAM for QSE = ERCOT AS Plan - SUM of Self- Arranged AS Submitted by QSEs Total AS ERCOT buys In DAM from AS Offers

24. Day-Ahead Market • Clearing Process – Co-optimization • DAM simultaneously clears Energy Offers and Bids, AS Offers, and CRR Offers/Point to Point (PTP) Obligation Bids. Energy Awards Energy Offers/Bids AS Offers AS Awards DAM Clearing Engine Co-Optimization CRR Offers/ PTP Bids Resource and Network Constraints CRR/PTP Awards

25. Co-Optimization of Ancillary Services • Assumptions • Generation Resources Offer Curves (below) • Total Energy Bid = 250 Mw • AS Offers = Gen A - $10.00/Mw, Gen B - $10.00/Mw; Gen C - $5.00/Mw; maximum offered 20 Mw each gen • AS Required = 25 Mw • Ramp rates not considered Gen A Gen B Gen C $/ Mw 140 • Solution Awards • Gen C - 100 energy; AS = 0 • Gen A - 55 energy; AS= 20 Mw • Gen B - 95 energy; AS= 5 Mw 100 60 • How/ Why? • Gen C must be 100 energy award since it is the lowest price for energy by more than ∆ in AS offers • Gen A awarded 55 energy; AS= 20, AS = 20% HSL • Gen B awarded balance of energy 95 Mw lowest price and AS same price as Gen A; AS= 5 Mw 20 Mw 20 100 Energy Offer Curves Example for only one hour, actual co-optimization occurs over all Day-Ahead Hours

26. Load Resource Grouping Grouping for Responsive Reserve* ERCOT shall post a list of Load Resources on the MIS Certified Area immediately following the DRUC for each QSE with a Responsive Reserve obligation provided from a Load Resource for the next Operating Day ERCOT procedures places Load Resources in Group 1 and Group 2 based on a random sampling of individual Load Resources approximately balancing the amount in each group Groups may be deployed individually or at ERCOT’s discretion, both Groups (all Load Resources) at any given time during EEA Level 2A. *Protocol 6.5.9.4.2 (4)

27. COP & AS Allocation Matt Mereness

28. COP & AS Allocation • Ancillary Service Resource Responsibility • The MW of an Ancillary Service that each Resource is obligated to provide in Real-Time • Ancillary Service Schedule • The MW of each Ancillary Service that each Resource is providing in Real-Time and the MW of each Ancillary Service for each Resource for each hour in the Current Operating Plan (COP) • Ancillary Service Supply Responsibility • The QSE TOTAL amount of Ancillary Service the QSE is obligated to deliver to ERCOT, by hour and service type, from Resources represented by the QSE DEFINITION • Example: • 100 Mw generator providing 20 Mw of RRS • QSE is providing total of 45 Mw of RRS • Before Deployment • Unit AS Resource Responsibility is 20 Mw • Unit AS Schedule is 20 Mw • AS Supply Responsibility is 45 Mw • After Deployment: 30 Mw of RRS for the QSE • Unit AS Resource Responsibility is 20 Mw • Unit AS Schedule is 0 Mw • AS Supply Responsibility is 45 Mw

29. COP & AS Allocation • Current Operating Plan • QSE’s means of notifying ERCOT of the specific Resource providing AS • Sum of AS Resource Responsibility must meet total QSE AS Supply Responsibility

30. COP & AS Allocation • Post-DAM Activities • After DAM, QSEs have at least one hour (by 2:30 pm) to: 2:30 • Update Current Operating Plans to reflect commitment of resources, AS capacity awarded • Submit additional Energy or Capacity Trades to be considered in time for the RUC process Note that Three-Part Supply Offers updates are not allowed during this period

31. COP & AS Allocation For each QSE and for each type of AS: If your QSE AS Supply Responsibility >0, ERCOT checks that the Sum of AS capacity in COPs for all QSE’s Resources = QSE AS Resource Responsibility = QSE AS Supply Responsibility Self-Arranged AS + AS sold in Trades - AS bought in Trades Total DAM AS Offer awards + + Total SASM AS Offer awards RUC Commitments For AS +

32. Ancillary Services in RUC Processes Jake Jacobs

33. Reliability Unit Commitment Reliability Unit Commitment Reviews Resource commitments and security constraints Ensures enough Capacity committed • In the right locations • To serve the Forecasted Load • In addition to Ancillary Services RUC Commitments are: • Physical, and • Financial • Make Whole Payments • Claw back Charges A/S Capacity Load Forecast ? System Capacity

34. AS procurement in DAM and DRUC • Ancillary Services • DAM awards AS as part of the co-optimized solution • If AS Insufficiency exists after DAM, • DRUC process is used to procure needed AS capacity • RUC instruction specifies commitment for AS (part of RUC instruction reason code) • QSE Supply Responsibility increased by the amount of RUC AS Capacity • RUC Resources show Resource Status “ONRUC” in COP and RT when committed generation is On-Line • Telemetry should reflect A/S Schedule • See COP Expectations Business Practices document for more details

35. Protecting AS Capacity on Proxy Energy Curve • AS Capacity is protected with cost penalties • RUC will only use the capacity reserved for AS if no other dispatch can be determined

36. Managing AS Resource Responsibility David Maggio

37. Managing AS Resource Responsibility Resource Status Telemetry • QSEs will select one of the statuses for Resources synchronized to the ERCOT System that best describes the Resource Status: Examples: • ONREG – On-Line Generation Resource with Energy Offer Curve providing Regulation Service • ON – On-Line Resource with Energy Offer Curve; • ONRL – Available for dispatch of Load Resource providing Responsive Reserve Service or Non-Spin, excluding Controllable Load Resources Resource Responsibility A QSE may not change the quantity provided of each type of Ancillary Services awarded through the ERCOT procurement process or the aggregate Self-Arranged Ancillary Service Quantity (by Ancillary Service type) from the DAM • A QSE notifies ERCOT of the specific Resources supplying Ancillary Services through telemetry and the COP

38. Managing AS Resource Responsibility • QSEs Telemeter to ERCOT • AS Resource Responsibility - MW of an AS to be provided in real-time • AS Schedule - MW of each AS that each Resource is providing in Real-Time and the MW of each AS for each Resource for each hour in the COP

39. Managing AS Resource Responsibility Validation of RT Telemetry of Resource Responsibility • For each Generation Resource and Load Resource, HSL must ≥ LSL plus ∑ of the Resource Responsibility for RRS, Reg-Up, Reg-Down and Non-Spin • For Non-Spin, HSL ≥ Resource Responsibility for Off-Line Generation Resources • For RRS Service Resource Responsibility: • For thermal Generation Resource must be ≤ 20% HSL • Must also be ≤ ten times the current Emergency Ramp Rate • From Emergency Ramp Rate Curve at actual generation levels • Hydro-powered Resources operating in the synchronous condenser fast-response mode may provide RRS up to the Resource’s proved 20-second response up to 100% HSL • For any hydro-powered Resource with a five percent droop setting operating as a generator, the Resource Responsibility must be ≤ 20% HSL • For a Load Resource, must be ≥ HSL minus ∑ LSL, Reg-Up, Reg-Down, and Non-Spin

40. Managing AS Resource Responsibility Validation of COP AS Quantities • The COP must identify sufficient Resource capacity to meet trades and Ancillary Service Supply Responsibility, calculated as sum of • Self-arranged AS • AS Trade obligations • DAM AS awards • Same validation as RT telemetry of Resource Responsibility • ERCOT validates for each hour, the balance of current day plus next operating day • ERCOT will notify a QSE if the sum of the AS capacity designated in the COP for each hour, by service type is less than the QSE's AS Supply Responsibility for each service type for that hour • SASM AS awards • RUC AS procurement QSEs must correct deficiencies in their COP within one hour after being notified by ERCOT

41. Ancillary Service Capacity Performance Measures • QSE Ancillary Service Capacity Monitor • QSEs representing Resources receive a summary of its Resource capacity every 5 minutes on the MIS Certified Area • Postings includes the following information: • RRRS Capacity from Generation, Non-Controllable and Controllable Load Resources • Non-Spin Capacity from On-Line Generation with EOCs, On-Line Generation with Output Schedules, Off-Line Generation, and undeployed Load Resources • Undeployed Reg-Up and undeployed Reg-Down • Capacity with EOCs to increase Base Points in SCED • Capacity with EOCs to decrease Base Points in SCED • Capacity without EOCs to increase Base Points in SCED • Capacity without EOCs to decrease Base Points in SCED • The QSE’s Physical Responsive Capability (PRC) • The MIS report compares the QSEs AS Supply Responsibility in the EMS system to the AS Supply Responsibility in the MMS system

42. Ancillary Service Capacity Performance Measures QSE AS Capacity Compliance Monitoring Notification • In addition to postings, ERCOT will supply a notification to QSEs when the comparison between the QSEs AS Supply Responsibility in the EMS system with the AS Supply Responsibility in the MMS system indicates that the QSE is not providing sufficient capacity • The notification will be via the MIS Certified Area • The notification will only be sent when there is a concern • Whereas the postings on the MIS will be sent every 5 minutes

43. Ancillary Service Capacity Performance Measures • Required Actions from the QSE • If the QSE identifies that they are unable to meet their total obligations to provide committed Ancillary Service capacity, the QSE must notify ERCOT immediately • If the QSE receives a QSE Ancillary Service Capacity Compliance Monitoring Notification, the QSE must: • Correct the telemetry for it’s Resources, if due to a telemetry issues; or • Provide justification and an acceptable correction plan to the ERCOT Operator • This must be done within 10 minutes of receiving the notification

44. Managing AS Resource Responsibility AS Insufficiency ERCOT evaluates AS requirements and capacity throughout the Adjustment Period and Operating Period and will procure AS in the Adjustment Period for: • increased need of AS capacity above that specified in the Day-Ahead • replacement of AS capacity that is undeliverable due to transmission constraints • replacement of AS capacity due to a QSE’s failure to provide

45. Managing AS Resource Responsibility • AS Insufficiency • If the ERCOT Operator determines in the Adjustment Period that more Ancillary Services are needed than were provided in the Day-Ahead AS Plan, the MMS shall recalculate a new AS Obligation for each QSE • The AS Obligation shall allocate additional AS Obligations to QSEs using the same percentages for each hour as the original Day-Ahead allocation • The MMS shall notify each QSE of its increased AS Supply Obligation for each service for each recalculated hour

46. Managing AS Resource Responsibility AS Undeliverable due to Transmission Constraints • ERCOT operator will provide to each affected QSE with two hours’ advance notice, if possible, of: • the amount of AS that must be reduced for each affected Resource • the start and stop times of the reduction • Within the two-hour advance notice, each affected QSE may do one or more of the following: • substitute capacity from other Resources represented by that QSE • substitute capacity for other QSEs using AS Trades, or • inform ERCOT that all or part of the AS capacity should be replaced • If a QSE is substituting capacity on other Resources, ERCOT will determine the feasibility • If deemed infeasible or if QSE is unable to replace, ERCOT may open a SASM

47. Managing AS Resource Responsibility • Failure to Provide • QSEs will receive hourly notifications and will have one hour to correct AS deficiencies by doing the following: • Substitute capacity from other Resources represented by that QSE • Substitute capacity for other QSEs using AS Trades, or • Inform ERCOT that all or part of the AS capacity needs to be replaced

48. Managing AS Resource Responsibility Unit Forced Out that was providing AS • Notify the ERCOT operator by phone • Inform the operator of the plan to cover AS Resource Responsibility • ERCOT must agree with the plan • Within a time frame acceptable to ERCOT based on system conditions, the QSE may either substitute capacity using its Resources, substitute capacity from other QSEs using AS Trades, or inform ERCOT that the Ancillary Services capacity needs to be replaced • For Trades, the substitution can only be effective in the next adjustment period hour • For capacity that needs to be replaced by ERCOT, a SASM can only be effective in the next adjustment period hour plus one hour • Changes in COP for Resources providing AS automatically notifies ERCOT to review AS deliverability 48

49. Supplemental Ancillary Services Markets (SASM) Mark Patterson

50. The Supplemental Ancillary Service Market • Supplemental Ancillary Services Market (SASM) • If insufficient AS capacity, ERCOT executes SASM during the Adjustment Period • If AS insufficiency exists after SASM, HRUC will be used to obtain needed capacity