2017 ERCOT Strategic Planning Sessions August 2016 ERCOT Public

Agenda Welcome and introductions Obtain feedback on draft 2017 ERCOT strategic goals and key areas of focus Approach to finalize 2017 ERCOT Key Performance Indicators (KPIs) Discuss future strategic planning process

2017 ERCOT Strategic Goals - Draft In support of its mission to serve the public by ensuring a reliable grid, efficient electricity markets, open access and retail choice, ERCOT’s goals are to: Strategically adapt to changing resource mix: Generation Resources Demand Response Distribution Level Resources Provide thought leadership in support of continued improvements to operational reliability and markets Deliver channels and tools to stakeholders for enhanced communication and increased transparency and access Continually enhance our cyber and physical security posture Develop ERCOT resources – people and technology

Draft Strategic Goals & Key Areas of Focus Strategically adapt to changing resource mix Inertia and Ancillary Service needs for changing Resources Reliability Must Run (RMR) process Switchable Generation Resources Distributed Energy Resources Forecasting: Load (short-term and mid-term) Solar Wind Evolve Market Participant and ERCOT staff training

Draft Strategic Goals & Key Areas of Focus Provide thought leadership in support of continued improvements to operational reliability and markets Complete Transmission Planning Review Phasor Measurement Units Real-Time Co-optimization Multi-Interval Real-Time Market Market Restart Sub-synchronous Oscillation Limited Participation Resources Visibility for planning and reliability of dynamic grid

Draft Strategic Goals & Key Areas of Focus Deliver channels and tools to stakeholders for enhanced communication and increased transparency and access Implement online improvements to ERCOT/Market Participant interfaces Outage Scheduler Enhancements Full Interconnection Study process changes Data strategy Data access improvements Report change management Maintain and develop effective Client Services team

Draft Strategic Goals & Key Areas of Focus Continually enhance our cyber and physical security posture Continue progress on Critical Infrastructure Security Roadmap implementation Participate in NERC Grid Ex IV 2017 planning and exercise Continue collaborative Industry/Government efforts on security issues Develop ERCOT resources – people and technology Financial investments and project execution on ERCOT Reliability and Market Systems DC4 Major system upgrades Hardening effort Initiatives to improve management training and employee development Recruit and retain top-flight technical talent

Discuss future strategic planning process Next Steps Review approach to finalize 2017 ERCOT Key Performance Indicators (KPIs) Discuss future strategic planning process Finalize 2017 ERCOT Strategic Goals Strategic planning in 2017

Appendix

Feedback Summary In 2015 and the first half 2016, what did ERCOT do well or what could ERCOT have done better? Well Done or Shown Improvement Including data transparency as a core pillar and allowing it to play a key role in strategic goals. Transmission planning. Support, reporting, and facilitation at Stakeholder meetings. Managing the grid –developing practical solutions to operational and market problems and communicating intentions for addressing challenges. Market training and education programs. Demand Response efforts. Forecasting with continued refinements. Settlements Seminar held on February 20, 2016.

Feedback Summary In 2015 and the first half 2016, what did ERCOT do well or what could ERCOT have done better? Opportunities for Improvement Proactively ensure the fidelity of information used to run the grid and markets; including load forecasts. Continually work to improve the efficiency of the Stakeholder process including Board presence to provide guidance and impart vision to committees and subcommittees. Seek ERCOT Board endorsement of some concepts prior to expending large efforts on them. Allow ERCOT staff to take items to the Board when stakeholders cannot reach consensus. Limit the number of significant market changes being proposed. Implementation of resource price nodes after temporary nodes are retired. Provide more notice to Stakeholders for changes – examples, new customer qualification requirements for new resources; ALDR process modifications; data extract changes affecting Stakeholders.

Feedback Summary Are there initiatives ERCOT should give higher priority? Reliability aspects of Ancillary Services. Real-time co-optimization. Better short term load forecasts with better price forecasts in the next 15-30 minutes. Address reliability services: payment for provision of inertia support, payment for frequency response, capacity market. Revisit the amount of Responsive Reserve Service that can be provided from Load Resources. Market impacts associated with Demand Response programs. Smart Meter Texas oversight. Replacement for the consumer impact test. Support for solutions to the monthly-read IDR DG and load meters that are not settled on actual volumes until Final Settlements. Continued…

Feedback Summary Are there initiatives ERCOT should give higher priority? New Black Start selection process. Grid Security. Clarify responsibilities for Under frequency Load Shed (UFLS) relative to Emergency Response Service and other distributed energy resources. SSR/SSO resolution. Term transmission rights. Economic planning for transmission projects. Longer planning horizons. More public data postings and more convenient formats for data accessibility.

Feedback Summary What initiatives should ERCOT focus less on? • Staff initiatives not related to a specific reliability concern – allow issues to develop through the stakeholder process. • Real-time co-optimization. • Multi-interval SCED. • Major market changes that have not had Board review.

Feedback Summary What are 3-5 key strategic issues ERCOT will experience in the next five years? Cyber security. Integration of intermittent resources. Less system inertia. Distributed generation, battery storage. Demand Response, Loads in SCED. Resource Adequacy. Loss of Fuel Diversity. Impact of potential federal environmental regulations. Retain and reward ERCOT’s top talent.

Feedback Summary Are there any additional Market Participant training/education or services ERCOT should consider providing (ex. IT forum, specific market training)? A second Settlements Seminar. Valley specific Operator training. Power operations seminars taught by recognized experts in the field. Face to face meetings with ERCOT client representatives. Cyber security. Training for new market issues or past issues that have become current again (example: RMR). Periodic Segment specific seminars.

KPI Feedback Add a forecasting metric for solar. With regards to compliance with NERC and ERCOT Protocols, what does “significant” mean? Review SCED Availability metric as 99.9%/99.95% SCED Availability metrics still allow for 105/53 - 5 minute intervals where SCED is not available. RG 4 Operations Load Forecast Performance – Day ahead load forecast error tolerance is high. Should be 2% rather than 4%. 4% is a significant error on a 60+ GW system. (Also noted last year). ERCOT should add a Real-Time Load Forecast performance measure in addition to those for Day Ahead and Wind. By applying an error tolerance of about 1% to the hourly forecasts going 4 hours into the future, ERCOT will ensure a much tighter response to their forecast need from generators, which would benefit the entire market. RG 10 Energy Management System Tier 2 Aggregate Availability – The 99% target for Energy Management System Tier 2 Aggregate Availability is low. That target can be met even with 87 hours of computer outages every year. The target should at a minimum be set at 99.9%.