1. Long Term Study Task Force Update to ETWG ERCOT Long-Term Study: Scenarios, New Software, and Emerging Technology Assumptions January 27, 2012

2. Introduction The Long Term Study Task Force (LTSTF) needs your assistance in developing scenarios –We would like to focus on scenarios that are likely to display different transmission system needs The LTSTF is issuing an RFP to have a new tool developed to assist us evaluating different system needs –We would like your assistance in identifying all the details that this tool needs to analyze The LTSTF has been working with vendors to get better understanding of their technology characteristics –We need your assistance in reviewing these assumptions January 13, 2012 2

3. Current Scenarios and Status Business as Usual (BAU) Scenario –Resource Expansion (based on economic analysis) – DONE –Analysis of transmission needs for system reliability – DONE –Analysis of economic transmission projects – In Progress BAU with Production Tax Credit (PTC) –Resource Expansion (based on economic analysis) – First Cut completed –We will not pursue further until we have new operational reliability tools available (discussed later) January 13, 2012 3

4. Extreme Drought Scenario January 13, 2012 ERCOT is working with Sandia National Labs to develop a scenario that reflects the impact of a prolonged drought Sandia is anticipating having a final list of potential resources at risk by June 2012 We are also working with Sandia to reflect impacts to system load from drought conditions in this scenario 4

5. Renewable Resources Scenario To bound the analysis of potential grid impacts from future resources, we would like to include a scenario with a significant build-out of renewable resources. Expansion of renewable resources would likely result from: –Continuation of Production Tax Credit –Higher natural gas prices –National CO 2 tax –Renewable Portfolio Standards (RPS) (state or national) –or a combination of these or other factors. ERCOT staff will incorporate stakeholder input, develop a proposal for this scenario and send to the LTSTF email list for comments. ERCOT has posted an RFP to obtain site specific, load correlated wind generation forecasts for existing and hypothetical sites (currently in contract negotiation) –It is expected we will use this data in wind modelling January 13, 2012 5

6. Additional Scenarios ERCOT is working with the Demand-Side Working Group (DSWG) and the Emerging Technologies Working Group (ETWG) to develop one or two scenarios with a significant build-out of other system resources, including: –Demand response –Energy efficiency –Distributed generation –Energy storage (Compressed Air Energy Storage, pumped storage, batteries, etc.) In addition to these scenarios, ERCOT will continue to work with stakeholders to develop sensitivities (changing one input assumption in any given scenario) for further analysis. ERCOT will work with transmission owners to develop sensitivities that will indicate potential costs and benefits of using emerging transmission technologies to meet system needs. January 13, 2012 6

7. Need for Ancillary Services Study Background LTS Certain scenarios studied as part of the LTS suggest the potential for dramatic changes to the future ERCOT resource mix. A complete evaluation of increasing proportions of non- traditional resources must consider the operational needs of the system to maintain adequate reliability. ERCOT is finalizing a Request for Proposal to procure one or more tools to determine the adequacy of a potential future resource mix to meet operational reliability requirements.

8. Divergent Resource Mixes by Scenario Future scenarios will include different mixes of resources –Some with specific availability profiles –With unique ramping capabilities –Each scenario must provide sufficient operator control to maintain adequate grid reliability LTS

9. Proposal Requirements ERCOT is seeking new tools to ensure that potential sets of resources can provide sufficient flexibility to meet the operational requirements to maintain grid reliability. ERCOT is open to considering a variety of potential solutions. However, the tool(s) must: –Allow the user to test scenarios with resource portfolios composed of increasing amounts of variable generation, energy storage devices, and demand side resources –Quantify the overall capability of the resources in each scenario to meet the reliability needs of grid operations –Quantify system needs and resource capabilities independent of the current set of ancillary service products LTSNovember 18 th, 2011

10. Schedule for Ancillary Services RFP Present concept to LTSF, DSWG, ETWG, and other stakeholders Finalize RFP document with stakeholder feedback by end of January, 2012 Post RFP on ERCOT.com Review proposals / select proposals LTSNovember 18 th, 2011

11. Emerging Resources ERCOT is compiling modeling data for: Demand Response resources Solar Wind Resources (including coastal wind) Storage Technologies (CAES, Battery, etc.) Energy Efficiency resources LTSTFJanuary 13, 2012

12. Modeling of Resources ERCOT has met with developers of various generation and storage technologies to discuss operational and financial characteristics –Wartsila (Spark Ignited Gas Engine) Currently operational in ERCOT at Pearall (STEC) and Steam (GEUS) –Compressed Air Energy Storage –Gravity Power (Underground Pump Storage) –Wind –Batteries –Solar We have yet to hear from solar generation developers Next slide contains a matrix of the modeling assumptions for these resources LTSTFJanuary 13, 2012

13. Matrix of Resources 13 January 13, 2012 ResourceWartsila 18.7 MW CAESGravity PowerWindSmall Solar PV Large Solar PV Capital Cost ($/kW in 2011$) $900 (vendor) $1,000 (vendor) $2,000 (EERE) $4,000 (2007$) (Austin Energy IRP Assumptions) $3,270 (2007$) (Austin Energy IRP Assumptions) PTC EligibleNo Yes Max Capacity (MW) 225235150100 Residential Varies Min Capacity (% of Max) 3.3%10%0% Heat Rate (btu/kWh) 8,0004,500N/A Variable O&M ($/MWh in 2011$) 6$4.00$0 Fixed O&M ($/kW- year in 2011$) 5$20.00$13.03$28.07$6.02 (2007$) OperationsQuickstart (5 minute to full load) Output for 16 hours and refill for 8 hours on a daily basis 4 hours of operation and then 5 hours to refill Intermittent Water UsageMinimal900 gallons per minute 26 million gallons for initial fill None

14. QUESTIONS? QUESTIONS/COMMENTS? January 13, 2012 14

15. Reference Materials U.S. Department of Energy Energy Efficiency and Renewable Energy (EERE) –http://www1.eere.energy.gov/wind/pdfs/51783.pdfhttp://www1.eere.energy.gov/wind/pdfs/51783.pdf Austin Energy IRP Assumptions –http://www.austinenergy.com/About%20Us/Newsroom/Reports/t askForce/docAssumptionsDocument2009-07-15.pdfhttp://www.austinenergy.com/About%20Us/Newsroom/Reports/t askForce/docAssumptionsDocument2009-07-15.pdf 15 January 13, 2012