1. Long Term Study Transmission Results May 21 st, 2013

2. 2 Objectives: ERCOT and ERCOT stakeholders, with the support of a Department of Energy Grant, improved and expanded the existing Long Term Study (LTS) processes. Specifically, the Transmission Analysis component of the LTS seeks to: Create a repeatable process to identify intra-regional system needs for both reliability and economic efficiency. Study a full spectrum of scenarios to identify similar and contrasting transmission system needs to facilitate various resource portfolios. Inform shorter-term study horizons with “least regrets” solutions as study assumptions become more certain. Procure and customize a tool to identify ancillary service needs for increasing amounts of non-traditional resources. May 21, 2013

3. 3 Agenda Process Review Scenario Selection – Transmission Analysis Base Case Development Reliability Import Expansion Analysis Base Case Overloads Economic Themes / Observed Congestion Major Findings Integrating Renewable Energy / KERMIT Analysis May 21, 2013

4. 4 Process Review

5. 5 Selected Cases for Transmission Analysis ERCOT chose to perform a full transmission analysis for each scenario that modified a resource build, load, or dispatch cost enough to modify transmission system needs. May 21, 2013

6. 6 Scenario Selection - Wind May 21, 2013 Complete In Progress Omitted from Trans Analysis

7. 7 Scenario Selection - Load May 21, 2013

8. 8 Scenario Selection – Resource Sites (2032) May 21, 2013 Business as usual Business as Usual / Retirements

9. 9 Scenario Selection – Resource Sites (2032) May 21, 2013 Business as Usual ‘All Technologies’ / Updated Wind Business as Usual – High Nat Gas Price

10. 10 Scenario Selection - Resource Sites (2032) May 21, 2013 Drought – No PTC or emission costs Drought – No PTC, emission costs, low gas price

11. 11 Resource Sites (2032) May 21, 2013 Drought – PTC, Water Costs, Emissions cost

12. 12 Base Case Reliability Upgrades (2032) May 21, 2013

13. 13 Transformer Base Case Reliability Upgrades: 2022 May 13 th 2013

14. 14 May 13 th 2013 Transformer Base Case Reliability Upgrades: 2032

15. 15 Economic Studies Each economic project selected for analysis targeted scenario- specific opportunities for production cost savings. Reoccurring themes included: May 21, 2013 Expanded imports into Houston Expanded imports into Dallas Expanded connectivity to the San Antonio 345kV ring

16. 16 Economic Studies Continued Each economic project selected for analysis targeted scenario- specific opportunities for production cost savings. Reoccurring themes included: May 21, 2013 Expanded connectivity to the Texas Panhandle Expanded Access to Coastal Wind

17. 17 Major Findings: Retirements The retirement of legacy gas-fired resources within ERCOT’s urban load centers: Greatly increases the need for reliability upgrades in and around urban load centers Accelerates the need for new import paths (most notably in Houston; a new import is required within the ten-year study horizon) Creates economic opportunities in Houston, Dallas, and San Antonio for transmission expansion. May 21, 2013

18. 18 Major Findings: Beyond 345kV Expanding the ERCOT system beyond 345kV was cost-effective for select scenarios. If high gas prices and/or continuation of the production tax credit for wind persist, then 500kV solutions are cost- effective for the delivery of concentrated renewable energy to major load centers. Select Drought Scenarios yielded similar results. May 21, 2013

19. 19 Major Findings: Extended Drought / Extreme Load Increased system loading coupled with water availability issues threatened the economic viability of existing and potential future thermal units. The net effect accelerated the need and quantity of expanded imports into Houston, Dallas, and San Antonio. May 21, 2013

20. 20 May 13 th 2013 Major Findings: Extended Drought / Extreme Load

21. 21 Note: If municipal utilities operating in a vertically integrated structure repower or expand existing urban resources, then transmission import needs will be largely offset. May 13 th 2013 Major Findings: Extended Drought / Extreme Load

22. 22 Major Findings: Beyond CREZ Wind-dominated resource expansion scenarios sited wind in the Texas panhandle beyond the current design capacity of the CREZ System. May 21, 2013

23. 23 Major Findings: Beyond CREZ Multiple scenarios in the Long Term Study suggested that expansive wind development in the Texas Panhandle may threaten steady state stability under certain conditions. Based upon this assessment, the ERCOT Dynamic Studies performed a detailed assessment of LTS findings. If wind development in the Texas Panhandle is comparable or higher than what was modeled in the LTS, then additional exports from the region are needed for steady-state stability. Numerous projects return production cost savings commensurate with their costs for high gas price and environmental scenarios. May 21, 2013

24. 24 Integrating Renewables / KERMIT analysis ERCOT procured a time-series simulation model to assess the adequacy of ancillary services needed to balance portfolios with increasing proportions of renewables. May 21, 2013

25. 25 Integrating Renewables / KERMIT Analysis DNV KEMA’s KERMIT model was modified to represent the ERCOT market, complete with existing and probable future resources. May 21, 2013

26. 26 Integrating Renewables / KERMIT Study Increased wind penetration and diversity of wind sites decreased the frequency of small magnitude net load ramps on a five-minute basis. May 21, 2013

27. 27 Integrating Renewables / KERMIT Study May 21, 2013 Increased wind penetration greatly increased the magnitude and frequency of 15-min net load ramps

28. 28 Integrating Renewables / KERMIT Study May 21, 2013 Seldom-occurring high-magnitude net load ramps required a significant increase in seasonal deployment of quick-start / non- spin capacity.

29. 29 Integrating Renewables / KERMIT Observations With increasing penetration of wind; Large magnitude ramps occurred more frequently. Small magnitude ramps occurred less frequently. Based upon these observations, ERCOT modeled new ancillary products with complementary ramping characteristics. These products: Represent online resources or resources with zero-startup time Include only resources capable of ramping to full load within 5 minutes, and Are technology neutral. May 13 th 2013

30. 30 Integrating Renewables / KERMIT Study: Scenario 3/8 Results ERCOT calculated a portfolio of ancillaries to maintain equal or better than actual frequency performance. May 21, 2013 Actual Reserves 2012 Initial KERMIT Run Scenario 3Scenario 8 Total Nameplate Renewables 10 GW 20 GW50 GW MinMax Regulation Reserves 240940600 Responsive Reserves (Gen)1400 1050 Responsive Reserves (Load)1400 New 5-min product in SCED–– – 8001300 Non Spin QS* 4702000 1650 Non Spin 30-min product **––– Total35105740470055006000 * 15-min product – 5-min start, 10-min ramp ** Cold Start

31. 31 Integrating Renewables / KERMIT Study: 20 GW Results May 21, 2013

32. 32 Integrating Renewables / KERMIT Study: 50 GW Results May 21, 2013

33. 33 Review: ERCOT and ERCOT Stakeholders developed a repeatable process to determine: Reliability-driven transmission system upgrades and economic alternatives across a spectrum of probable resource builds. Document major findings for use in shorter-term study horizons as resource assumptions become more certain. Implement a tool and study framework for identifying complementary ancillary service needs for increasing proportions of non-traditional resources May 21, 2013