ERCOT Public 1 Overview of ERCOT Concept Paper on Real-Time Co-optimization of Energy & Ancillary Services & Multi-Interval Real-Time Market

ERCOT Public 2 Multi-Interval Real-Time Market A.Enable the active participation of additional Resources in Real-Time price formation rather than passively responding Load Resources with “blocky” deployable MWs and temporal constraints are candidates B.The Multi-Interval RT Market is cleared (normally) every 5-minutes, in which, the market clearing process considers a set of consecutive 5-minute intervals, of up to a maximum of 30 minutes, starting with the current 5- minute interval.

ERCOT Public 3 Multi-Interval Real-Time Market 8:40 8:45 8:50 8:55 9:00 9:05 9:10 9:15 9:20 9:25 9:30 9:35 Intervals where ONLY Commitment Instructions are binding and the LMPs and MW awards (energy, AS) are indicative Interval where the LMPs, MW awards (energy, AS) and Commitment Instructions are ALL binding commitment instructions Sequence of Multi-Interval RT Markets Analysis window of rolling 30 minutes RT Market Execution: Depicts the start and end times of the clearing process and the length of symbol is indicative of maximum time allowed to clear market

ERCOT Public 4 Multi-Interval Real-Time Market C.Pricing run required to Treat “blocky” MW deployment as dispatchable and hence participate in price formation Pricing run also required to allow ramp constrained Resources to participate in price formation D.Settlements Make whole payments from: 1.Resources that are ramp-constrained and are awarded a binding Base Point that is uneconomical for them 2.Resources that are committed for a future interval and, after following the commitment instruction, the binding RT LMPs (and MCPCs) for that interval are uneconomical for them Uplift arises from the two above forms of make whole payment 1.Instead of directly going to the uplift mechanism, should the “shorts” be charged first?

ERCOT Public 5 Multi-Interval Real-Time Market E.Issues: Load Forecast is critical input. Improvements required Clearing Engine run time to solve within acceptable timeframe is a challenge

ERCOT Public 6 Real-Time energy and Ancillary Service Co-Optimization A.Full fledged Real-Time (RT) energy and Ancillary Service (AS) co-optimization utilizing Operating Reserve Demand Curve (ORDC) 1.Replaces the current approximation to RT energy and AS co- optimization using ORDC B.Enables appropriate scarcity pricing through the valuation of operating reserves 1.Current approximation to RT energy and AS co-optimization also enables scarcity pricing C.Allows Market participants to adjust their energy and AS portfolios in Real-Time

ERCOT Public 7 Real-Time energy and Ancillary Service Co-Optimization D.Real-Time Market nominally cleared every 5 minutes (same as current) 1.Energy Awards (Base Points) to meet ERCOT system wide demand – same as current 2.Energy Imbalance settlements unchanged – same as current 3.LMPs at every electrical bus and Settlement point – same as current NEW 4.AS (Reg-Up, Reg-Down, RRS, Non-Spin) awards to meet full AS requirements 5.AS Imbalance settlements – similar to current AS Imbalance settlements for ORDC, but each type of AS (Reg-Up, Reg-Down, RRS, Non-Spin) will have its own AS imbalance settlements 6.AS MCPCs for each AS type

ERCOT Public 8 Real-Time energy and Ancillary Service Co-Optimization E.“HASL – free” operation 1.Concept of HASL does not exist, i.e. no instruction from ERCOT to release HASL. This eliminates the current hand shaking procedure involved with the ERCOT instructed release of HASL 2.Resource Specific Offers for AS ($/MW price and MW quantity) can be updated at any time (or until very close to Real-Time) 3.Existence of Resource Specific AS Offers at time of market clearing is considered intenty to provide AS if awarded and be deployed potentially at the same time 1.Communication delays, or different pathways for information may lead to situations where QSE representing Resource is instructed to deploy AS before the QSE gets notification of AS award 4.Key performance metric is the ability to follow Base Point Instructions

ERCOT Public 9 Real-Time energy and Ancillary Service Co-Optimization E.“HASL – free” operation - continued 5.Different treatment for RRS from Load Resources with High Set Under Frequency Relay Treated as price takers in each 5 minutes clearing (cannot potentially arm/disarm relay if RRS awarded/not awarded?) Deployment of RRS from Load Resources will remain the same (local frequency relay operation, ERCOT instructed deployment of RRS) 6.Telemetry/XML submissions requirements from Resources will change Telemetered AS responsibility from QSE not required May require changes to AS Offer submission rules (deadline, etc.) 7.Pricing run will still be required to price out deployment of RRS from Load Resources, ERS deployment, LSL from RUC/RMR

ERCOT Public 10 Real-Time energy and Ancillary Service Co-Optimization F.Settlements –Does not introduce any NEW make whole or uplift –For Real-Time, AS Imbalance settlement concept (similar concept to Real-Time Energy Imbalance settlement) to settle the Real- Time AS awards G.Some Issues for further discussion F.Use of ORDC G.Coordination of values ($/MWh or $/MW/h) of VOLL, Power Balance Penalty, and AS demand curves