Future Ancillary Service Team (FAST) and Technical Advisory Committee (TAC) Workshop #2 ERCOT Staff August 25,

Recap and Overview of Schedule Review How AS Requirements are Determined Review Options on When Quantities are Finalized and Provided to the Market Discuss Specific Policy Cuts Update on RFP for CBA Review Synchronous Inertial Response (SIR) Next Steps Outline 2

1. Develop Request for Proposals (RFP) for Cost Benefit Analysis (CBA) 2. Specific Policy Questions and items to include in the base-line 8/15/14 3. FAST/TAC Workshop 8/25/14 4. TAC meeting 8/28/14 (policy cuts) 5. Comments on draft NPRR due to ERCOT 10/1/14 6. Post revised NPRR 11/1/14 7. CBA initiated on revised NPRR 11/1/14 From July 31 TAC Meeting 3

Summary of Proposed Future Ancillary Services Regulation Up Fast-Responding Regulation Up Current Proposed Fast Frequency Response 1 Primary Frequency Response Contingency Reserves 1 Synchronous Inertial Response Supplemental Reserves 1 Mostly unchanged 59.8 Hz, Limited duration 59.7 Hz, Longer duration Fast Frequency Response 2 Contingency Reserves 2 SCED-dispatched Manually dispatched Supplemental Reserves 2 SCED-dispatched Manually dispatched Ongoing development Non-Spin Responsive Regulation Down Fast-Responding Regulation Down Regulation Up Fast-Responding Regulation Up Regulation Down Fast-Responding Regulation Down 4

Determining AS Quantities AS Framework Technical Studies Regulatory Reqs AS Methodology Expected Operating Conditions Hourly AS Quantities Technical AS Reqs Defines AS Products, settlements, perf. Reqs, etc Implemented in NPRR Defines AS Products, settlements, perf. Reqs, etc Implemented in NPRR Studies of System performance under different conditions Updated as needed Studies of System performance under different conditions Updated as needed e.g. NERC BAL standard Defines AS requirements as a function of operating conditions Updated when studies or regulatory requirements are updated Defines AS requirements as a function of operating conditions Updated when studies or regulatory requirements are updated Documents AS technical requirements Defines how operating conditions will be used to determine procurement quantities Updated Annually Documents AS technical requirements Defines how operating conditions will be used to determine procurement quantities Updated Annually Determined at lead time(s) defined in AS Methodology 5

Determining AS Quantities AS Framework Technical Studies Regulatory Reqs AS Methodology Expected Operating Conditions Hourly AS Quantities Technical AS Reqs 6

Study results and proposed methods to determine AS Requirements

PFRS and FFRS  Criteria : Frequency nadir shall be equal to or above 59.4 Hz for loss of two largest units. (0.1 Hz margin for the first stage of UFLS at 59.3 Hz)  No angular and voltage instability  Will include  Minimum amount of PFRS  Minimum amount of PFRS and FFRS  Equivalency ratio between PFR and FFR  High Frequency Over-shoot 8

 Minimum Amount of PFR:  BAL-003-1: The ERCOT Interconnection Frequency Response Obligation (IFRO) is currently 413MW/0.1 Hz  No FFR Response is expected for 0.3 Hz band between 60 Hz and Hz assuming no FFR1 participation  PFR(min) = 413 MW/0.1 Hz * 3 (since FFR does not respond up to 0.3 Hz deviation) = 1,239 MW  Stability analysis is used to determine  Minimum Amount of PFRS and FFRS  Interdependence ratio between PFR and FFR  Minimum PFR can be changed based on annual review of IFRO by NERC PFRS and FFRS (Continued) 9

 Numerous frequency stability runs were conducted on multiple scenarios.  Key Assumption:  No wind dynamic models  Load Resources responded within 30 cycles  Governor response modeled only for Resources assigned PFRS in the simulation of a low frequency event  30% PFRS are provided by Coal units  70% PFRS are provided by NG units Minimum Amount of PFRS and FFRS 10

FFR1(59.8 Hz) Vs FFR2(59.7 Hz) PFR (MW) Equivalency Ratio (FFR2 v.s. FFR1) MW FFR1 ≈ 1 MW FFR2

Test: Twelve Study Cases case1 case2 case3 case4 case5 case6 case7 case8 case9 case10 case11 case12 Inertia=2*Kinetic Energy=2*H*MVA 12

An Example of Case Study Minimum amount of FFR and PFR is determined by preventing frequency from dropping below 59.4Hz for loss of 2 largest units (2750MW)

Preliminary FFR and PFR Study Results Case 1 Case 2 Case 3 Case 4 Case 5 Case 6 Case 7 Case 8 Case 9 Case 10 Case 11 Case 12 FFR/PFR 2.2:12.0:11.5:11.4:11.3:1 1.25: :1 1.08: 1 1:11.0:11:1 Net load Level(GW) Inertia (GW∙s) PFR needed (no FFR) Case 1 Case 2 Case 3 Case 4 Case 5 Case 6 Case 7 Case 8 Case 9 Case 10 Case 11 Case 12 FFR/PFR 2.2:12.0:11.5:11.4:11.3:1 1.25: :1 1.08: 1 1:1 PFR Min1240 FFR needed with PFR Min Combined Total

PFR vs FFR (59.7Hz) Result Summary Case1Case2Case3Case4Case5Case6Case7Case8Case9Case10Case11Case12 FFR/PFR Equivalence Ratio 2.2:12.0:11.5:11.4:11.3:11.25:11.13 :11.08:11:1 Net load (GW) Inertia (GW∙s) Conclusion: As system inertia increases, FFR/PFR ratio gradually decreases to about 1 where PFR and FFR are approximately same in terms of arresting system frequency Conclusion: As system inertia increases, FFR/PFR ratio gradually decreases to about 1 where PFR and FFR are approximately same in terms of arresting system frequency 15

 Maximum of : –98.8 percentile of the five minutes net load change and deployment during the 30 days period to the time of the study. –98.8 percentile of the five minutes net load change for the same month of the previous year –Additional adjustment based on CPS1 score for each hour REG-UP and REG-DOWN 16

Contingency Reserve Service (CRS)  Recover frequency from settling point to 60 Hz  Build in a margin based on the amount of CRS a single Resource can provide  CRS need will be dynamic based on system conditions just like PFRS and FFRS requirement 17

 95 Percentile 6-Hour-ahead net-load forecast error  SRS for any 4-hour block is equal to 95 percentile of 6-hour ahead net load forecast error less Reg-Up, Contingency Reserve and portion of combined PFRS/FFRS  For extreme weather condition, SRS requirement to be based on unit forced outage rate Supplemental Reserve 18 This is open to discussion

Determining AS Quantities AS Framework Technical Studies Regulatory Reqs AS Methodology Expected Operating Conditions Hourly AS Quantities Technical AS Reqs 19

Efficiency versus Certainty in Setting AS Quantities

Efficiency versus Certainty Max Certainty: –A fixed amount of a particular service could be procured for every hour based on the amount needed to cover worst case conditions –This would result in too much being procured for most hours Max Efficiency: –The amount to be procured for each hour of the next day could be set prior to the DA market, based on expected conditions for that next day –This would make it difficult to hedge requirements Need to determine an appropriate tradeoff –May vary by service 21

Options for PFRS/FFRS Procurement 1.ERCOT is offering five different options for procurement of PFRS and FFRS 2.The options differ based on how early market prefers to know the minimum quantities 3.Day-Ahead adjustment proposed is consistent with current protocol language and ERCOT does not anticipate performing the day-ahead adjustment routinely  Day-Ahead analysis look at projected net load conditions and unit commitments Please note : The Options discussed for PFRS and FFRS can be tailored for all AS products 22

Options for procurement of PFRS and FFRS DAMAYA Option 1 √ Option 2 √ Option 3 ∆√ Option 4 ∆∆√ Option 5 ∆√ DA: Day-Ahead, MA: Month-Ahead, YA: Year Ahead √: Determine the needs for the entire period ∆: Determine the “incremental” needs based on the system condition 23

Option I for PFRS and FFRS Requirements Determine a number based on the study performed to simulate extreme condition and procure that amount for all hours 24

Proposed Options for PFRS/FFRS Requirements Option II  Publish the minimum PFRS and FFRS requirement and FFR to PFR equivalence ratio by 6am for the next operating day  Posting will include minimum requirements for each hour of the operating day 25

Option II for PFRS and FFRS Requirements Time AS Requirement Publish the requirement in Day-Ahead. Real Time Needs Day-Ahead 26

Proposed Options for PFRS/FFRS Requirements Option III  Publish the 80% of calculated minimum PFRS and FFRS requirement, and FFR to PFR equivalence ratio by 20 th of each month for the upcoming month  Make any necessary Day-Ahead adjustment and post the adjustments by 6 am for the next operating day  Monthly and Day-Ahead posting to MIS will include requirements and equivalency ratio between FFRS and PFRS, for each 4-hour block of the operating day This percentage is open to discussion 27

Options III for PFRS and FFRS Requirements Time AS Requirement Publish the requirement using 80% of the need Month-Ahead Day-Ahead : determine incremental need Publish the requirement using 80% of the need Month-Ahead Day-Ahead : determine incremental need Real Time Needs 80% of Month-AheadDay-Ahead 28

Proposed Options for PFRS/FFRS Requirements Option IV  Publish 80% of calculated minimum PFRS and FFRS requirement, and FFRS to PFRS equivalency ratio by December 1 st, for each month of upcoming year  Perform monthly adjustments if needed and post it to MIS by 20th of each month for the upcoming month  Perform day-ahead adjustments and post it to MIS by 6 am for the next operating day  Annual, Monthly and Day-Ahead posting will include requirements and equivalency ratio between FFRS and PFRS, for each 4-hour block of the operating day This percentage is open to discussion 29

Options IV for PFRS and FFRS Requirements Time AS Requirement Real Time Needs 80% of Year-Ahead Month-Ahead Day-Ahead Publish the requirement using 80% of the need Month-Ahead Month-Ahead/Day- Ahead : determine incremental need Publish the requirement using 80% of the need Month-Ahead Month-Ahead/Day- Ahead : determine incremental need 30

Proposed Options for PFRS/FFRS Requirements Option V  Publish 80% of calculated minimum PFRS and FFRS requirement, and FFRS to PFRS equivalency ratio by December 1st, for each month of upcoming year  Perform day-ahead adjustments and post it to MIS by 6 am for the next operating day  Annual and Day-Ahead posting will include requirements and equivalency ratio between FFRS and PFRS, for each 4-hour block of the operating day This percentage is open to discussion 31

Options V for PFRS and FFRS Requirements Time AS Requirement Publish the requirement using 80% of the need annually Day-Ahead : determine incremental need Publish the requirement using 80% of the need annually Day-Ahead : determine incremental need Real Time Needs 80% of Year-AheadDay-Ahead 32

 Similar to PFRS and FFRS, Regulation, CRS and SRS requirements can be published day- ahead, monthly or annually Other Services 33

Policy Decisions

 Luminant  ERCOT Steel Companies  Energy Storage Association  Co-operative Segment  Summarize Specific Policy Cuts for TAC consideration at the TAC meeting Discuss Specific Policy Cuts 35

Cost/Benefit Assessment Status

Met with Segment Representatives on and discussed the draft “High Level Description of the Cost Benefit Analysis of the Future Ancillary Service Framework” ERCOT to revise the document and include more language on deliverables expected from the Contractor. Plan to send out revised document to the group for their review after the TAC meeting. The new target is to send out the RFP soon after the TAC meeting Draft timeline indicates that a Contractor could possibly start in November and the final report and presentations could possibly be expected in February Update on RFP for CBA 37

Synchronous Inertia Response Service

 SIR is stored kinetic energy that is extracted from the rotating mass of synchronous machines following a disturbance in a power system  SIR is not included in the proposed future AS framework and the draft NPRR. Synchronous Inertial Response 39

 SIR can be provided by synchronous machines, whenever in operation.  Quantity of inertia contribution is determined as kinetic energy that can be provided by a synchronous machine during system imbalance: 2·H·MVA where H is machine inertia constant in seconds, MVA is machine’s rated power  SIR is based on actual physical characteristics of a machine  SIR is independent of machine’s operating point. Synchronous Inertial Response 40

 Maintain minimum Rate of Change of Frequency (RoCoF)  Provide sufficient time from Point A to Point C, for the Ancillary Services to respond.  With increasing use of non-synchronous generation, changing load characteristics, increase in Combined Cycle units (lower inertia), the system SIR is reduced.  As a result, RoCoF increases, leaving less time for primary frequency response to deploy and arrest the system frequency excursion. SIR Need 41

42 SIR, Current Conditions CaseTime Generation (MW) Load (MW) WIND (MW) Wind Penetration Ratio Inertia (GW-Sec) A 3/31/2014 2:0024,82224,5349, B 3/26/ :0036,42335,82710, C 4/19/2014 2:0024,31324,8226, Case A: Highest Wind Penetration Case Case B: Highest Wind MW Case Case C: Lowest Inertia Case

Synchronous Inertia (June May 2014) Inertia=2*Kinetic Energy=2*H*MVA 43

 To date, RoCoF at HWLL conditions during frequency events is around 0.2 Hz/s and the average time to reach frequency nadir is 4- 6 seconds.  Analysis based on Jan-May 2014 system conditions indicated RoCoF of 0.65 Hz/s for two largest unit trip  SIR available under current operating conditions is still sufficient.  SIR will not be introduced as a new AS yet.  ERCOT started to monitor SIR in real-time since July  ERCOT will continue to analyze the need of SIR and value of emulated inertia* response from non-synchronous generation resources. * Emulated Inertia Response is super-fast (20ms), short duration ( s) active power injection in response to frequency decrease below pre-set threshold SIR, Summary and Future Work 44

ERCOT in collaboration with EPRI is conducting studies to verify value of wind generation resources providing EIR and/or PFR and associated uncertainty in the day ahead Two types of studies: −Dynamic studies: −EIR&PFR uncertainty: comparing Day Ahead wind power production forecast vs actual wind power production, DA wind turbine availability vs Real Time turbine availability and how that impacts EIR and/or PFR that wind generation resources can offer in the DA and deliver in RT. The results of these studies are expected by the end of this year Case Study: EIR & PFR from Wind Generation Resources 45 WGRs do not provide AS WGRs provide EIR WGRs provide PFR WGR provide EIR&PFR HWLL √√√√ MWML √√√√ LWHL √√√√