ERCOT OVERVIEW

TEXAS WATER CONSERVATION ASSOCIATIONMARCH 9, 2012MARCH 9, 2012

Trip DoggettPresident & CEOERCOT

CONTENTS

• What is ERCOT?– ERCOT as a North American Electric Reliability

Corporation (NERC) interconnectCorporation (NERC) interconnect– ERCOT as an Independent System Operator

• Challengesg– Demand Growth– Resource Adequacy

D ht– Drought• Options

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ERCOT

The ERCOT Region:The interconnected electrical system serving most of Texas, with limited external connections

ERCOT Inc.:A non-profit corporation designated the “Independent Organization” under state law and assigned these responsibilities [Texas P bli Utilit R l t A t (PURA) 39 151]• 75% of Texas land; 85% of Texas load

• More than 40,000 miles of transmission lines• 550+ generation units• 68,294 MW peak demand (set August 3, 2011)

Public Utility Regulatory Act (PURA) 39.151]:• Maintaining System Reliability• Ensuring Open Access to Transmission• Facilitating the Competitive Wholesale

MarketMarket• Facilitating the Competitive Retail Market

Regulatory Characteristics:• ERCOT is regulated by the Texas

Public Utility Commission with oversight by the Texas Legislature

• ERCOT is not a market participant and does not own generation or transmission/distribution wires

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ERCOT AS INDEPENDENT SYSTEM OPERATOR

ERCOT IS ONE OF 10 NORTH AMERICAN ISOS/RTOS

• ISOs/RTOs serve 67% of U.S. population

• Goal: Reliability, y,Efficiency, Transparency & ImpartialityImpartiality

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PRE-2002

E tilit ti ll i t t dEvery utility was vertically integrated, from generation to customer service.

Integrated electric utility Customer

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TEXAS COMPETITIVE MODEL

Generation T&D (“Wires”) End UsersRetailers

REP

REPREP

CompetitiveProduction

RegulatedOpen Access

Competitive Sales

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ELECTRIC GRID OPERATIONS

ERCOT ‘directs traffic’ on the grid to maintain reliability and ensure supply of electricity: • Coordinates scheduling of power by market participants

• Analyzes grid conditions continuously in real-time

• Dispatches generation to ensure power production matches load at all timesall times

• Secures available generation capacity to meet reliability requirements including contingencies

• Coordinates planned outages of generators and transmission lines

• Relieves transmission system congestion

• Coordinates emergency actions & recovery• Coordinates emergency actions & recovery

• Operates markets to meet regional energy & capacity requirements not met through bilateral arrangements

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ERCOT CAPACITY AND ENERGY BY FUEL TYPE

Installed Capacity, January 2012

80 000 MW

Energy Produced, 2011

335 billi kil tt h

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~ 80,000 MW 335 billion kilowatt-hours

CHALLENGES

NEW RECORDS IN USAGE

New Peak Demand Record: 68 379 megawattsNew Peak Demand Record: 68,379 megawatts 68,379 megawatts (MW), Aug. 3, 2011 The 2010 peak demand – 65,776 MW, Aug. 23, 2010 – was broken 3 consecutive days:

- Aug. 1, 2011 66,867 MWg , ,- Aug. 2, 2011 67,929 MW- Aug. 3, 2011 68,379 MW

New Weekend Record 65,159 MW, Sunday, Aug. 28

- 5 percent increase over 2010 previous record – 62,320 MWWinter Peak Record 57 282 MW (February 10 2011) 57,282 MW (February 10, 2011)

- 3 percent increase over 2010 previous record - 55,878 MW

Wind Record A new instantaneous wind record of 7,599 MW occurred on March 7 at 20:41.

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CREZ

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RESERVE MARGINS: PROJECTING ADEQUACY OF SUPPLY

• Target reserve margin for the ERCOT Region is 13.75%Target reserve margin for the ERCOT Region is 13.75%• Defined as:

– Percentage difference between available generating capacity and forecasted peak system load

• Ensures (but does not guarantee) adequate electric supply will be available in case of contingency need– Unexpected weather extremes or loss of major generation units

• Available capacity includes:

– Gas, coal and nuclear fuel units accounted at their season operating limit level (unless scheduled to retire or mothball)

– Hydro plants and wind farms at their “high confidence summer peak” level

– Planned units (with signed transmission interconnection agreements and required permits)

– Loads Acting as Resources - Large customers registered and bidding to provide capacity services in market-based load participation programs

– DC Ties - capacity that can be imported through DC links from

12

p y p gneighboring grids

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DECEMBER 2011 CAPACITY, DEMAND AND RESERVES (CDR) REPORT

20 00%

25.00%

Installed Capacity Planned Units Uncommitted Projects 13.75% Target

15 00%

20.00%

Reserve margin target 13.75%As of January 2012, reserve margin at 13.86% due to CSAPR stay

10.00%

15.00%

5.00%

0.00%

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

2012 CDR – LOAD FORECAST

U d t d i f t f M d ’• Updated economic forecast from Moody’s – Slower growth in near-term

• Updated assessment of normal weather profileUpdated assessment of normal weather profile

12,000

90,000

95,000

100,000

10,000

11,000

75,000

80,000

85,000

mploymen

t (x000)

emand (M

W)

8,000

9,000

60,000

65,000

70,000

Non

‐Farm Em

Peak De

7,00050,000

55,000

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

2011 Peak Demand Forecast 2012 Peak Demand Forecast

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2011 Non‐Farm Employment  Forecast 2012 Non‐Farm Employment  Forecast

SUMMER PEAK SCENARIOS

Normal Weather – 63,898 MW

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GENERATION OUTAGES: 08/01 – 08/07

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DROUGHT

THE 2011 TEXAS DROUGHT

Excerpts from Oct 2011 Report by Office of State Climatologist:

• Large portion of Texas will likely endure a second summer of drought.

• 2011-12 La Niña is forecasted to be less intense than 2010-11.

• It is impossible to determine at this point whether the drought will last beyond a g ysecond year. – On rare occasions in the past, La Niña conditions were observed for

3 consecutive years.

• Texas precipitation is also influenced by Pacific Decadal Oscillation & Atlantic Multidecadal Oscillation. – During the past decade, both patterns have been in an unfavorable state.

• Global patterns tend to reverse themselves over time, possibly leading to an extended period of wetter weather for Texas, though this may not happen for another 3-15 years.

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SURFACE WATER SUPPLIES AT 10 YEAR LOWS (OCT 2011)

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ERCOT ACTIONS TO MANAGE DROUGHT IMPACT

• Surveyed generation entities in the state and reviewed drought concerns and possible mitigations

• Identified surface water most impacted and projected impacts to generation for 2012

• Reviewed public sources regarding state and regional water• Reviewed public sources regarding state and regional water plans

• Met with TCEQ staff and drought response teams

• Facilitated a workshop with generation and transmission entities to share best practices relevant to drought conditions

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MANAGING DROUGHT IMPACT – GENERATION SECTOR ACTIONS INCLUDE …

• Generators are designed to – Conserve – minimize water usage– Reuse – Reuse water from one process for another– Recycle – Return clean water to the source after usage

• Generators regularly account for all water withdrawn to regulatory authorities

• Many generators utilize salt water or effluent, where practical

• Generators regularly maintain equipment to avoid water leakage/wastage

A l f t h i t ll d i li t l t d• A couple of generators have installed pipelines to access accumulated (from rain & seepage) water at mine sites

• Some generator resources are re-engineering their water intake structures t ll f d i t k l l ditito allow for deeper intake level conditions

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MANAGING DROUGHT IMPACT – TRANSMISSION SECTOR CONCERNS INCLUDE …

• Increased insulator contamination incidents (salt, smoke, bird excrement, etc.)

• Fires, smoke implications, vegetation management, and risks to wooden h-frame infrastructure

• Potential issues associated with transmission system planning• Potential issues associated with transmission system planning if there are significant generator de-rations

• Coordination with the local authorities (police, fire, etc.) requesting de-energizing of transmission facilities for safety to allow for aerial firefighting.

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DROUGHT CONCLUSIONS

• Persistent drought conditions are impacting electric generation resources, but are unlikely to cause significant

ti h tf ll i 2012generation shortfalls in 2012

• If the drought continues into 2013, consequences to electric ti il bilit lik l t bgeneration availability are likely to become more severe

• ERCOT will continue to analyze survey results and will ti t k l t th iti ll i f dcontinue to keep regulatory authorities well-informed

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OPTIONS FOR HANDING THESE CHALLENGES

SUMMER PEAK DAY LOAD SHAPE WITH FUEL MIX

August 3, 2011 Natural Gas Wind Nuclear Hydro

$3,500

70,000

80,000

August 3, 2011Other DC Imports Coal Energy Price

$3001

$2,500

$3,000

60,000

70,000

Natural Gas

$2,000

40,000

50,000

MW

$/M

Wh

Nuclear

Wind$1,000

$1,500

20,000

30,000

Coal

DC Imports$500

10,000

$25 - $75

25

$00

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

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OFF-PEAK VS. ON-PEAK LOAD BY CUSTOMER TYPE

Wed., Aug. 3, 20115:00 PMERCOT Load: 68,416 MWTemperat re in Dallas 109°

Residential51.2%

( 35 000 MW)

Temperature in Dallas: 109°WednesdayMarch 9, 20115:15 PMERCOT Load: 31,262 MWTemperature in Dallas: 64° (~35,000 MW)Temperature in Dallas: 64

• Customer class breakdown is for competitive choice areas; percentages are

Residential 27.4% (~8,500 MW) Small Commercial

25.2%Small Commercial

28.9% ; p gextrapolated for munis and co-ops to achieve region-wide estimate

• Large C&I are IDR Meter Required (>700kW)

Large C&I23.7%Large C&I

43.7%

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8/3/2011 IE 17:003/9/2011 IE 17:15

EMERGENCY RESPONSE SERVICE

• Emergency Interruptible Load Service is transitioning to ERS– PUC Rule and ERCOT Protocol revisions in process– June 1 effective date for new provisionsp

• Service provided by electricity customers willing to reduce load or unregistered generators willing to supply energy during grid emergencies in exchange for paymentg g p y

• An additional tool for ERCOT Operations to manage grid reliability, deployed only in declared emergencies (EEA)– Designed to help avoid rotating blackoutsDesigned to help avoid rotating blackouts

• ERS Resources may be individual or aggregated loads or unregistered generators

• Procured 24/7/365• Procured 24/7/365– Not just a peak reduction program– Offers may vary by Time Period (different business & non-business

h bl k )

27

hour blocks)

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EMERGENCY RESPONSE SERVICE

• Qualifications/requirements:– Relationship with QSE that can receive Verbal Dispatch

Instruction over the ERCOT Hotline– 15-minute interval metering– Capability reducing load or providing generation – minimum

obligation of 100 kW -- within 10 minutes of ERCOT dispatchobligation of 100 kW within 10 minutes of ERCOT dispatch• Payment to EILS Resources is subject to contractual agreement

between the QSE and the EILS resource owner• Participants are paid as bid if procured• Participants are paid as-bid if procured• Historically, reservation payments have ranged from

approximately $6 to $11 per MW per Hour430 MW d t t d i 2011 k h• 430 MW under contract during 2011 summer peak hours– For 2012, estimating between 560 and 630 MW for peak

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FOLLOW ERCOT

Facebook: Electric Reliability Council of

Texas

Twitter: http://twitter.com/ercot_isop _

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