ERCOT presents Dispatchable Reliability Reserve options

On June 26, 2023, ERCOT filed a letter to the Commission regarding Dispatchable Reliability Reserve Service (DRRS) implementation options. ERCOT identified two potential options for implementing DRRS, one that can be implemented on an expedited timeframe by modifying existing products ("Option A") and another that could be developed over a more extended timeframe that would result in an entirely new product ("Option B").

Option A would entail repurposing the current Non-Spinning Reserve (Non-Spin) ancillary service to serve as the new DRRS by allowing provision by longer lead-time Resources. Non-Spin currently requires participating Resources to be online or interruptible within 30 minutes. Go-live for Option A could be achieved by November 2024.

Under Option B, ERCOT would create a new ancillary service for off-line, dispatchable resources that can be available within two hours and able to run for at least four hours at their High Sustainable Limit (HSL). Go-live for Option B could be achieved by the third quarter of 2025.

Open Meeting Discussion

Chairman Jackson noted that HB 1500 required ERCOT to implement an ancillary service program to procure Dispatchable Reliability Reserve Service (DRRS) by December 1, 2024 and ERCOT has been evaluating options for development of a DRRS project.

Kenan Ögelman, ERCOT’s Vice President of Commercial Operations, noted that some design requirements are spelled out within the statute. Some of the key items are that ERCOT deliver the service by December 1, 2024, a relatively tight timeframe, but which helps define some of the feasible options. Mr. Ögelman noted that a resource must be available within two hours of receiving and instruction from ERCOT and capable of running at its High Sustainable Limit (HSL) for or at least four hours. There must also be a corresponding reduction in Reliability Unit Commitment (RUC) relative to the procured amount of DRRS.

Mr. Ögelman noted that RUC is used for local reliability issues, one of the backstops that lets ERCOT meet NERC requirements, but that is not the part of RUC that the Commission has been hearing complaints about, and RUC will likely remain in some form.

Noting that state and federal policy have to be harmonized, Commissioner McAdams asked if RUC capabilities for congestion are separate from the calculation to be applied to the DRRS equivalent reduction.

Mr. Ögelman noted that the statute doesn’t require complete elimination of RUC. He explained that ERCOT has found two potential paths they believe would comply with the requirements although the second does not meet the required timeline. He explained that ERCOT wanted to make clear that it looked at as many options as it could and are still working to see if any viable options were overlooked.

Option A is to: 1) use Non-Spinning Reserve Service (NSRS) as a replacement for DRRS, ceasing to procure NSRS while procuring DRRS in its place; or 2) add another segment into non-spin to meet the DRRS requirement.

Mr. Ögelman noted there are pros and cons to both of these approaches. Replacing Non-Spin with DRRS would require “leaning more” on ERCOT’s Contingency Reserve Service (ECRS), a very new service that the market is still adjusting to. On the other hand, adding another segment within Non-Spin would mean there are three products within Non-Spin but it would have to price out at one price, creating some market design inefficiencies.

Based on a high-level resource assessment, ERCOT believes it would not be able to implement Option B until the first or second quarter of 2025, which would not comply with the statute. In that instance, ERCOT would use experience with ECRS to cut-and-paste additional protocol language and requirements into its systems and deliver an additional ancillary service called DRRS.

Mr. Ögelman observed that whatever path is used with Non-Spin to align within a reduction in RUC, the service needs to be provided by off-line resources, not online resources. He noted that Non-Spin currently has an online component that kicks in at $75, allowing Qualified Scheduling Entities (QSEs) to move responsibilities around relative to Day-Ahead awards within their portfolio. Mr. Ögelman explained that this feature would have to be limited or eliminated to ensure a reduction in RUC.

In addition, Mr. Ögelman noted that using those reserves make less energy available to ERCOT’s Security Constrained Economic Dispatch (SCED) engine until ERCOT releases them. He noted that Real-Time Co-optimization of Energy and Ancillary Services (RTC) solves this but there would be an interim period where less energy is available to SCED.

Mr. Ögelman suggested that these would be some of the themes the Commission would hear as ERCOT engages stakeholders, preferring one option over another, and tries to move forward.

Finally, Mr. Ögelman discussed the timeline, noting that ERCOT’s goal is to continue discussions and then work on protocol development in August, at which time protocols would work through the stakeholder process through October 2023, with a goal of delivering a set of recommended protocols to be approved by the ERCOT Board in October 2023. This would give the PUCT time to do its review and due diligence, leading to potential approval of the protocols in November 2023. After approval, the protocols would be turned into requirements, which would become system changes to be implemented prior to December 1, 2024.

Commissioner McAdams noted that Option A1, repurposing Non-Spin to DRRS and moving the associated megawatts to ECRS, would effectively eliminate the 30-minute online. While 30-minute would qualify for DRRS you would be paying for really efficient units the same way you’d be paying for less efficient units.

Mr. Ögelman informed the Commission that ERCOT believes Option A2 could be accomplished within the statutory deadline but reserved the right to come back and update the Commission on that.

Mr. Ögelman informed the Commission that there is a 1.5 to 2 year lag between the December 1, 2024 statutory deadline for DRRS and the delivery of real-time co-optimization, with RTC being implemented approximately 2 years after DRRS.

Commissioner Glotfelty asked if ERCOT is comfortable with how these ancillary services are working together and whether they will be able to identify any gaps.

Mr. Ögelman explained that there is a learning process with every new ancillary service, including a market-side adjustment. For example, the market is just getting comfortable with ECRS. He noted he would be reluctant to say he was comfortable until they have gone through the shakedown.

Commissioner Glotfelty expressed hope that ERCOT and the IMM would keep the Commission informed about problems with and between the various ancillary services. Noting that the market needs certainty, he hoped there would be a time when all of these things would be locked down.

Chairman Jackson requested that ERCOT come to the open meeting on July 20, 2023 with a roadmap for accomplishing the remaining market design work that lies ahead.