Emerging Grid Issues Briefing

November 8, 2018

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Agenda

• ERCOT Forward Outlook• Bill Magness, President and Chief Executive Officer

• Future Resource Mix Changes– Solar Resources

• Dan Woodfin, Senior Director, System Operations

• Kenan Ögelman, Vice President, Commercial Operations

– Distributed Energy Resources• Bill Blevins, Director, Grid Coordination

• Kenan Ögelman, Vice President, Commercial Operations

– Energy Storage• Warren Lasher, Senior Director, System Planning

• Transmission Supporting Load Growth• Warren Lasher, Senior Director, System Planning

• Cyber Security • Cheryl Mele, Senior Vice President and Chief Operating Officer

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Solar Resources

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1,487

1,487

1,487

269

1,370

1,795

1,324

2,111

15

42

82

121

193

288

556

1,000

1,756

4,181

5,394

0 MW 1,000 MW 2,000 MW 3,000 MW 4,000 MW 5,000 MW 6,000 MW

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Cumulative MW Installed

IA Signed-Financial Security Posted

IA Signed-No Financial Security

Utility-Scale Solar Generation Capacity – October 2018

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Future outcomes uncertain

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Geographic Distribution of Solar Interconnection Requests

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• Total Interconnection Requests at

any stage of interconnection process

as of October 2018

• Future outcome of these requests is

uncertain

NREL Solar Irradiance Map

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Solar Forecast Accuracy and Output Variability

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• ERCOT has

already

implemented

solar forecasting.

• Increasing

geographic

diversity will

improve forecast

and intra-hour

variability.

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Pattern of Load, Wind and Solar on Peak Days

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0

5,000

10,000

15,000

20,000

25,000

0

10,000

20,000

30,000

40,000

50,000

60,000

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80,000

1 2 3 4 5 6 7 8 9 101112131415161718192021222324

Win

d a

nd

So

lar (M

W)

Lo

ad

(M

W)

Hour Ending

Summer Peak Day (7/19/2018)

H: Wind I: Solar F: Load

0

5,000

10,000

15,000

20,000

25,000

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1 2 3 4 5 6 7 8 9 101112131415161718192021222324

Win

d a

nd

So

lar (M

W)

Lo

ad

(M

W)

Hour Ending

Winter Peak Day (1/17/2018)

Wind Solar Load

• Daily pattern of wind and solar generation is generally complementary

• Solar is more coincident with demand in summer

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Congestion in the West: July 11, 2018

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07/11/2018 13:15

Transmission congestion drives large Locational Marginal Price (LMP)

differences in the region

07/11/2018 21:30

West Zone West Zone

Distributed Energy Resources (DERs)

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Distributed Energy Resources (DERs)

• DERs may include various technologies:

– Gas/diesel

– Wind/solar

– Storage

• Historically, generation resources were only connected to the

transmission system

• DERs are connected to the distribution system; ERCOT has limited

visibility and interaction with distribution systems

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Distributed Energy Resources in ERCOT

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DER growth rate for 2015-2017 is 62%

Current 2018 DER total is ~1,300 MWs and is expected to continue to grow

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Integrating Registered Distributed Energy Resources

• To reliably operate and plan the ERCOT system, ERCOT is

working on DER-related improvements:

– Visibility: Worked with regulated Transmission/Distribution

Service Providers to map some (93) of the existing registered

DERs; working to map all registered DERs to transmission

system load

– Reliability: Working to provide locational price signals to

registered DERs to support reliability and efficiency

– Planning: Need reporting to properly capture capabilities and

capacity from continued growth of DERs in planning processes

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Prices Received by Distributed Energy Resources

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• DERs currently receive the zonal price.

• The Load Zone price is a weighted average of

Locational Marginal Prices (LMPs) in the zone

and does not fully reflect the local reliability

need.

• Grid-scale resources that receive the

locational price may have to

overcompensate if nearby generation does

not respond to local price signals.

• A LMP represents the value of energy at a

specific location.

• Nodal prices better reflect the local reliability

need.

• Registered DERs should receive a LMP in

the future.

Current: Zonal Pricing

Future: Nodal Pricing

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07/11/2018 13:15 07/11/2018 21:30

-10

-8

-6

-4

-2

0

2

4

6

8

10

-350

-250

-150

-50

50

150

250

350

Ge

ne

ratio

n (M

W)

Price ($

/MW

h)

Prices and Output for Utility-Scale and Distributed Energy Resources

Load Zone Price Distributed Energy Resource

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-8

-6

-4

-2

0

2

4

6

8

10

-350

-250

-150

-50

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0:00 1:00 2:00 3:00 4:00 5:00 6:00 7:00 8:00 9:00 10: 00 11: 00 12: 00 13: 00 14: 00 15: 00 16: 00 17: 00 18: 00 19: 00 20: 00 21: 00 22: 00 23: 00

Ge

ne

ratio

n (

MW

)

Price ($/MWh)

Pric es and Output for Grid-Scale and Distributed Energy Resources

Locational Price Utility-Scale Generation Resource

Zonal Pricing of DERs Results in Inefficient Price Signals

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• In this instance, a DER solar facility does not receive negative locational prices;

instead, it receives the Load Zone price, which does not dip below zero.

Consequently, the DER solar facility does not lower its output.

• A grid-scale solar generation resource receives the LMP at its location, and in this

example, lowers output accordingly when LMPs go negative.

Energy Storage

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Why is Energy Storage of Interest?

• Energy storage (batteries) can be used for a variety of grid and customer

applications:

– Store energy at a resource

– Arbitrage energy prices

– Provide grid-level Ancillary Services

– Defer or eliminate the need for transmission/distribution upgrades

– Allow customers to reduce peak demand (to save on demand and/or transmission charges)

– Provide high reliability at customer location

– Enable micro-grid capability

– Provide fuel for electric transportation

• Energy storage is scalable

– A Tesla PowerWall has a maximum output of 5 to 7 kW

– Some battery facilities are greater than 200 MW

• Energy storage can take energy from variable generation (wind and solar) and

provide a dispatchable resource

• Costs of battery technologies are declining rapidly

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Current Storage Activity in ERCOT and Beyond

• Currently, ~89 MW of battery storage resources are registered with ERCOT

and participating in ERCOT Ancillary Services markets.

– There are smaller DER battery systems that are not registered with ERCOT.

– There also is a 4 MW battery in Presidio, TX, which was installed to improve

customer reliability at the end of a 60-mile radial transmission line.1

• Approximately 1,889 MW of battery storage capacity is being studied in the

ERCOT resource interconnection queue.

• In September 2016, American Electric Power applied to install batteries at

two distribution substations in lieu of more costly system upgrades. The

PUCT is reviewing the use of batteries as grid upgrades in Project No.

48023 (initial comments were submitted last week).

• FERC jurisdictional electric markets are subject to FERC Order No. 841,

which requires increased access to energy, Ancillary Services and capacity

markets for battery resources.

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1(Approved by the Public Utility Commission of Texas [PUCT] in April 2009 [Docket No. 35994].)

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Integrating Energy Storage

Focus on increasing visibility and decreasing barriers to entry

• Develop increased system awareness of storage device

operation and limitations in the control room

• Identify and reduce barriers to energy and Ancillary Services

markets

• Adapt ERCOT system models to facilitate integration of storage

technologies

Approach needs to be adaptable – we don’t know how the

technology will develop in our market

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Transmission Supporting Load Growth

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Transmission Development in West Texas

• Providing reliable electric service to meet the needs of oil and

gas development in West Texas is a challenge.

– Existing infrastructure was not designed for recent increases in

customer demand.

– Predicting the amount and location of future customer oil and gas

demand growth is difficult.

– Major transmission projects take five years to plan and build. Many

oil and gas development companies have 18-month planning

horizons.

– Transmission upgrades, line maintenance and connecting new

customers typically require line outages, which temporarily reduces

existing available transmission capacity.

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Culberson County Area Electricity Demand Growth

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Permian Basin Rig Count

Culberson area

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Transmission Development

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Future Transmission Development

• The ERCOT Board of

Directors recently

endorsed a major

transmission project

in West Texas to

ensure continued grid

reliability in the

region.

• This project should

be fully constructed

by April 2021.

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Cyber Security

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ERCOT Cyber & Physical Security Program

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• ERCOT has strong executive management

support for security.

• ERCOT has a dedicated and integrated

cyber/physical security organization and

established strategy.

• ERCOT uses layered cyber and physical

security architectures known as a defense-

in-depth strategy, along with careful

monitoring.

• ERCOT is committed to external

collaboration with relevant government

agencies, law enforcement, industry and

national labs to enhance its and the

industry’s security posture.

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Security Protection Approach

National Institute of Standards and Technology

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Grid Security Collaboration

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National LabsIndustry

• Critical Infrastructure Protection Working Group (CIPWG)

• Grid Resilience Working Group (GRWG)

Federal/National State