Future Ancillary Services (AS) Workshop

1. Future Ancillary Services (AS) Workshop Joel Mickey, Dan Woodfin, Julia Matevosyan, Sandip Sharma, Fred Huang, Sai Moorty Workshop on Future AS in ERCOT October 24, 2013

2. Agenda for Today’s Workshop • Introduction • Review the goal of today’s Workshop • Review proposed Structure and Process to discuss, explore and develop a new framework for Ancillary Services • ERCOT presents the Concept Paper • Overview of the Future Services (approximately 30 slides) • Preliminary Thoughts on Market and Transition Details (approximately 10 slides) • Summarize Today’s Highlights and Action Items • Request written comments be sent to ERCOT by COB November 1

3. Overview of Revised Ancillary Services (AS) Framework Proposal Dan Woodfin, Julia Matevosyan, Sandip Sharma, Fred Huang Workshop on Future AS in ERCOT October 24, 2013

4. Why “Ancillary” Services • One of the fundamental roles of system operations is to maintain frequency in a tight band around 60 Hz • Accomplished by constantly balancing generation and load • Important because many devices are designed to operate at a particular speed which is driven by the frequency of the power system • The balancing of generation and load is generally accomplished in ERCOT through the real-time energy market • Market participants bring generation online based on their expectations of revenues from the energy market • The market clears through the economic dispatch process every five minutes, thereby adjusting the output levels of online generators to balance system load

5. Frequency Control • However, this five-minute generation dispatch alone does not ensure that appropriate resources are available to acceptably balance generation with load • Additional mechanisms are needed which are “ancillary” to the energy market • These Ancillary Services ensure that sufficient resources with the appropriate characteristics are available to cover any additional variability and risk mitigation that is not covered by the energy market in order to meet reliability requirements Sources of Residual Variability: • Load varies constantly • Intermittent resource output varies constantly • Generating units do not immediately move to a new required output level, but “ramp” over several minutes • Generating units unexpectedly trip offline • Load and wind forecasts are not perfectly accurate • Transmission outages cause changes in transmission losses

6. Why is a change in the AS framework being proposed? • Current AS Framework has performed well but has issues • Current framework is based on inherent characteristics of steam generators • Several, distinct operational requirements are currently bundled as a single service (e.g. Responsive Reserve Service) • Awkward to fit capabilities of new technologies (e.g. CCGTs with duct firing, wind turbines) that could provide services efficiently • Need for changes has been highlighted in discussion of Fast Responding Regulation Service (FRRS), NPRR 524(Resource Limits in Providing Ancillary Service), etc.

7. Drivers for new AS framework • Resources could provide some services more efficiently if the requirements were decoupled (PFR/ FFR/ Contingency Reserve) • Requirements for services need to align with technical needs in order to allow technically-capable resources to provide services • Some new services are needed to ensure technical requirements are met that used to be provided, inherently, by generators (e.g. inertia) • Changes in market design and control systems(e.g. 5 minute dispatch, HRUC) have reduced the need for other services • New regulatory requirements (BAL-003)

8. Goal • Future AS Framework • Technology neutral • Market-based • Based on fundamental needs of the system, not resource characteristics • Unbundled services • Flexible for new technologies • Pay for performance, where practical • Co-optimized procurement • Will evolve over time • Current AS Framework • Based on capabilities of conventional steam generating units • Unique services bundled together due to inherent capabilities of conventional units • Mix of compensated and uncompensated services • New technologies are cobbled on, with difficulty Transition Plan TBD Now 5+ Years

9. Scope • Develop long-term Ancillary Services (AS) framework to guide: • Decisions on near-term changes to current AS • Requirements for changes to ERCOT systems (EMMS, etc.) • Investment in new resources and new resource types by the mkt. • Framework will be developed in phases, due to complexity of issues • Current Phase will only address frequency control services • Future Phases may address Voltage Support and other services • Framework should eventually include roadmap for transition from current AS to future framework • Prioritization of services to be transitioned • Inter-relationship of services that must transition concurrently • High-level consideration of ERCOT systems and market impacts

10. ERCOT Proposal • ERCOT proposes the transition to the following five AS products: • Synchronous Inertial Response Service (SIR), • Fast Frequency Response Service (FFR), • Primary Frequency Response Service (PFR), • Regulating Reserve Up (RRU) and Regulating Reserve Down (RRD) Service, and • Contingency Reserve Service (CR). • This revised AS set adds and/or redefines specific AS products currently used by the ERCOT System and • Subsumes different elements within the current Responsive Reserve Service into several of the newly defined services. • Recognizes during the transition period from today’s AS to the future AS set, there may be the need for a Supplemental Reserve Service that would be similar to today’s 30-minute Non-Spin Service.

11. Synchronous InertiaL Response(SIR) service

12. Synchronous Inertial Response (SIR) Service, Purpose • SIR is stored kinetic energy that is extracted from the rotating mass of a synchronous machine following a disturbance in a power system • Maintain minimum Rate of Change of Frequency (RoCoF) • Provide sufficient time from Point A to Point C, for Fast Frequency Response and Primary Frequency Response • No triggering RoCoF protection of synchronous generators (generally 0.5 Hz/s)

13. Synchronous Inertial Response Service, Need • SIR has significant implications on the RoCoF during power imbalances; • With increasing use of non-synchronous generation, changing load characteristics (less motor loads), increase in Combined Cycle units (lower inertia), the system SIR response is reduced: • RoCoF increases, leaving insufficient time for PFR to deploy and arrest the system frequency excursion. • High RoCoF may trigger generation RoCoF protection, tripping additional synchronous generators.

14. Synchronous Inertial Response Service, Need • So far, the RoCoF during high wind/low load condition was less than 0.2 Hz/s and the average time to reach frequency nadir during frequency events is 4 to 6 seconds. • The system inertia available in the real time operations under current conditions is still sufficient. • Studies based on 2012 system conditions indicated RoCoF as high as 0.4 Hz/s for two largest unit trip (2750 MW as per recently approved NERC BAL-003 standard).

15. SIR, Qualification and Resource Limit • 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: H·MVA 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.

16. SIR, Deployment / Performance Deployment • Instantaneous and continuous self-deployment Performance • SIR is the characteristic of a synchronous machine and is independent from external control or pre-disturbance power output • Resource performance will be evaluated based on machine parameters (H and rated MVA) and machine status (online/offline) • Every individual synchronous resource capable of providing this service will be required to provide ERCOT with machine specific data (via the RARF) and telemetry of its status.

17. SIR, Future work • Monitor and project the trend of ERCOT system inertial response and RoCoF • Identify the minimum needs of system inertia and duration between points A and C • Gather data to determine each generator’s RoCoF tolerance • Investigate capability and value of synthetic inertial response from renewable energy resources to contribute to system’s SIR

18. Fast frequency response (ffr) service

19. Fast Frequency Response (FFR) Service Need • To changing frequency to supplement the inherent inertial response from synchronous machines • To provide sufficient time for PFR to deploy and arrest fast frequency excursion in the event of sudden power imbalance Deployment and Performance • Self deployment • Provide full response within 30 cycles (0.5 secs.) at a specified frequency thresholds and sustained for at least 10 minutes • FFR service will require a high resolution measurement

20. Fast Frequency Response (FFR) Service Discussion • Presently there is no separate FFR Service in ERCOT, however up to 1400 MW of Responsive Reserve Service (RRS) procured from Load Resources (LR) satisfy FFR characteristics • In the proposed AS framework FFR and PFR are highly interdependent and the required quantity of each service can vary based on the system conditions • FFR and PFR work together to produce the desired system response • FFR service cannot completely replace the PFR service • A performance requirement needs to developed

21. Primary frequency response (Pfr) service

22. Definition of PFR Service Primary Frequency Response (PFR) is defined as the instantaneous proportional increase or decrease in real power output provided by a Resource in response to system frequency deviations. • This response is in the direction that stabilizes frequency. • Primary Frequency Response is attained due to Governor or Governor-like action • PFR is instantaneous response relative to the frequency deviation, • PFR is generally delivered completely within 12 to 14 seconds.

23. Primary Frequency Response (PFR) Service- Need ERCOT as a single Balancing Authority Interconnection with only limited interconnection to the other Interconnects is solely responsible for maintaining frequency to maintain reliability and meet NERC standard requirements. • All of ERCOT’s frequency response can only come from Resources within the ERCOT Interconnection. • On July 18th, 2013 FERC issued a Notice of Proposed Rule Making (NOPR) approving the BAL-003 NERC Frequency Response Standard • BAL-003 sets a Frequency Response Obligation (FRO) for each BA based on loss of two largest single units. • The minimum FRO for ERCOT is 286 MW/0.1 Hz

24. Primary Frequency Response (PFR) Service

25. Qualification and Resource Limit on PFR • Biennial Governor Tests • Capacity that can be deployed by a Resource’s Governor for 1% change in Frequency outside Governor Dead-band • The quantity of PFR that can be provided by a specific Resource, will be based on the median of actual performance of the Resource in last three measurable events measured at B point and B+30 seconds point

26. Determination of the Amount of FFR and PFR Reserves • The objective of Fast Frequency Response (FFR) and Primary Frequency Response (PFR) Reserves should be to ensure Frequency is arrested above UFLS threshold of 59.30 Hz and to meet NERC FRO Standard (BAL-003). • Frequency Response Obligation (FRO) for ERCOT is determined based on instantaneous loss of two largest units (2750 MW). • ERCOT must develop methodologies for the regular assessment of the needed concurrent amounts of both FFR and PFR.

27. Determination of the Amount of FFR and PFR Reserves • How much PFR is needed will be based on minimum requirement for FFR while maintaining minimum PFR capability within Generators (for example, in the current RRS, Load Resources can provide up to 50% of 2800 MW RRS).

28. Regulating Reserve (rr) service

29. Regulating Reserve (RR) Service – Up & Down • An amount of reserve responsive to Load Frequency Control, which is sufficient to provide normal regulating margin. • ERCOT generation is dispatched through Security Constrained Economic Dispatch (SCED) every five minutes to balance the generation and demand. The power imbalance between each SCED interval will cause frequency deviation that requires Regulating Reserve to compensate. This action will be provided by RR service.

30. Regulating Reserve (RR) Service – Up & Down While not substantially changing from todays Regulation Service ERCOT is proposing to implement the following: • LFC signals will be delivered by ERCOT specific for the Resource providing this service (i.e. the QSE fleet deployment of Regulation services will be discontinued). • The deployment instructions should be determined by taking into consideration ramp rates, HSLs etc. of each of the individual Resources. • Resources providing RR should be limited to min(NURR,NDRR)*5*0.70, where NURR and NDRR are Normal-Up Ramp Rate and Normal-Down Ramp Rate • The pay for performance approach should reward those Resources that closely follow the ERCOT LFC signal • ERCOT will re-visit its LFC and RLC to avoid deploying RR for more than 10 continuous minutes in one direction during normal operation.

31. Contingency reserve (cr) service

32. Contingency Reserve (CR) Service – Need & Purpose • CR is to ensure that the Balancing Authority is able to restore Interconnection frequency within defined limits following a DCS event within 15 minutes and restore its Primary Frequency and Regulating Reserve. • According to NERC BAL-002-1 Disturbance Control Standard (DCS), The minimum amount of CR required is equivalent to “Most Severe Single Largest Contingency”, in ERCOT’s case this is currently 1375 MW. • To ensure ERCOT can meet the standard, the CR must be fully deliverable within 10 minutes so that frequency can be restored to the pre-disturbance level within 15 minutes

33. Contingency Reserve Qualification • Resources providing CR should be qualified up to the MW value to which they are able to ramp within 10 minutes from the time of deployment. Deployment • ERCOT will deploy CR for a sizable generation trip. • Resources providing CR must telemeter their ramp-rates such that SCED can dispatch the full Resource CR responsibility within 10 minutes. Performance • Resources providing CR must be able to deliver and sustain the reserve deployments for the full hour it is carrying that obligation.

34. Preliminary Thoughts: Market and Transition to New Ancillary Services (AS) Products Sai Moorty Workshop on Future AS in ERCOT October 24, 2013

35. Market Topics • Market Based Procurement of AS • Energy & AS co-optimization for • Fast Frequency Response Service (FFR) • Primary Frequency Response Service (PFR) • Regulating Reserve Up & Down Service (RR) • Contingency Reserve Service (CR) • Synchronous Inertial Response Service (SIR) • Procurement process to be discussed • Markets Impacted • Day-Ahead Market (DAM) • Real-Time Market-RTM (more discussion required) • Settlements (Not covered in this presentation)

36. Procurement • Propose to setup a market procurement process similar to the existing AS procurement process: • Energy & AS co-optimization (FFR,PFR,RR, & CR – not SIR at present) • Continued use of the current market systems for the submission of linking AS offers and exclusive AS offers between each service and with energy (not SIR at present). • Incorporation of the new AS products in ERCOT’s daily AS Plan • Procurement of the required AS services (subject to self-provisions) in the Day Ahead Market • Market procurement (DAM & RTM) process can include the use of ORDC

37. Fast Frequency Response (FFR), Primary Frequency Response (PFR) & Contingency Reserve (CR) - Procurement • These three services are the unbundling of current Responsive Reserve Service (RRS) • Combined requirement (FFR + PFR requirement) with a maximum procurement cap for FFR • Single/Same MCPC for both FFR & PFR services • Similar mechanism as current procurement of RRS from Generation and Load Resources • The required procurements of FFR & PFR are related • If procured FFR is less than minimum FFR required, then DAM is rerun with increased requirement for PFR • Similar mechanism as current DAM AS insufficiency process • CR procurement is similar to current DAM procurement of Non-Spin

38. Regulation Reserve Up & Down (RR) - Procurement • Regulation Reserve Up & Down services are procured through the energy and AS co-optimization process • Very Similar to current methodology in DAM

39. Synchronous Inertial Response (SIR) - Procurement • Amount of SIR required determined from studies for each hour of the day • Quantity required depends on amount (inertia) and type of Resources typically planned to be committed ON for that hour • Procurement of SIR is via a commitment process – it is NOT procured through the dispatch process • SIR service cannot be co-optimized with energy or other AS • Function of status (OnLine) • There is no opportunity cost – this service is not provided instead of energy or other types of AS – not a share of the capacity (HSL)

40. Market Transition and Implementation Considerations • During some transition period a Supplemental Reserve Service could be implemented that would be similar to today’s 30-minute Non-Spin Service • This service is not included in the ultimate framework of the proposed new AS product set • The need for, and details of a Supplemental Reserve Service will be determined as part of the transition plan

41. Market Transition and Implementation Considerations • The Regulation Reserve Up & Down (RR) services provide the most flexibility with regard to an implementation schedule • RR service’s functionality is closely maintained between the current and proposed AS product sets • its commercial date can accommodate a timeline of its own with only minimal impacts by the remaining services implementation schedules • Concurrent go-live of FFR, PFR, and CR with the same commercial operation dateas they are basically the unbundling of the current Responsive Reserve Service (RRS)

42. Market Transition and Implementation Considerations • Current levels of SIR available are considered to be sufficient for the near future (next couple of years ?) • ERCOT suggests that this service be considered on a different time track and implementation sequence • In the transition period, ERCOT shall, for SIR • Develop methodologies to determine SIR requirements on an hourly basis (or block of hours) • Monitor available SIR and report on future trends • Develop via stakeholder process, market mechanisms to procure and price SIR service to meet SIR requirements • Consider modifying RUC to add constraint for SIR in order to procure SIR

43. Market Topics for Future Discussions • Real Time Market with Co-optimized Energy and AS • Separate vs. combined procurement for PFR & FFR? • Deliverability of AS (AS deliverability zones)? • Pay for Performance • Procurement Methodology for SIR • Role for DC ties providing AS • How AS Obligations are determined? • Timing of implementation of new AS Product set • Implementation of ORDC with revised AS

44. Discuss and Summarize Today’s Highlights • Submit written comments to jmickey@ercot.comby COB November 1, 2013 • Update to be provided at 11-7-13 TAC meeting • Review highlights of today’s workshop • Review Action Items …….

45. Appendix

46. Synthetic IR • Inverter based resources can have the capability to inject active power into the system initiated through control system action following a disturbance, e.g. generator trip. • This capability, so called synthetic inertia, is already available from several WTG manufacturers. • Synthetic inertia capability requires control action in response to falling system frequency and therefore is not equivalent to synchronous machine inertia • However synthetic inertia will improve RoCoF and help to arrest system frequency decay. More discussion and evaluation of synthetic inertia performance is required.

47. Synthetic IR, example from Hydro-Quebec