2016 Ancillary Service Methodology Comments

Title / ERCOT Methodologies for Determining Ancillary Service Requirements
Date / October 6, 2015
Submitter’s Information
Name / Amanda J. Frazier
E-mail Address /
Company / Luminant Energy Company LLC
Phone Number / (512) 349-6442
Cell Number / (512) 364-3275
Market Segment / Investor-Owned Utility
Comments

Luminant Energy Company LLC (Luminant) appreciates the opportunity to provide comments on ERCOT’s recommended changes to the 2016 Ancillary Services Requirements Methodology (2016 A/S Methodology). Luminant’s comments focus on the proposed changes to the section entitled Non-Spinning Reserve Service (Non-Spin) Requirements Details.

Luminant agrees with several of the changes that ERCOT has proposed in the 2016 A/S Methodology regarding Non-Spin procurements. First, the proposal to base the Non-Spin requirements on data from the same month for the previous three years rather than on data from 30 days prior to the study and from the same month in one previous year makes a lot of sense. Especially during seasonal transitions, the 30 days prior to the study may not be meaningfully similar to the month for which the requirement is set. Using historical data will also allow ERCOT to prepare its analysis and publish requirements a year in advance. Second, Luminant agrees with ERCOT’s proposal to analyze only the net load forecast error on the under-forecast hours. Including over-forecast hours in the analysis can tend to distort the analysis to the extent ERCOT’s load forecast tends to be higher than actual.

Luminant’s primary concern with ERCOT’s recommended changes is with ERCOT’s proposal to apply a dynamic percentile for net load uncertainty to discount the Non-Spin requirement in hours when ERCOT determines that there is less net load variability risk. Although it seems logical that a lower percentile could be applied when net load variability is lower, it ignores the fact that Non-Spin is purchased not only for unexpected net load changes but also for unexpected unit trips. It is also used to meet ERCOT’s NERC requirements [BAL-002-1] to replenish contingency reserves within ninety minutes after a frequency event. These types of events cannot be predicted, so applying a lower percentile for Net Load uncertainty may cause ERCOT to under-procure Non-Spin when it is needed. ERCOT’s proposal is essentially saying that ERCOT is willing to take more risk during periods when the net load change from one hour to the next was low in the previous three years. This additional risk is proposed even though ERCOT has not shown why a 70th percentile coverage is more appropriate than a 95th percentile coverage especially when considering the randomness of unit outages.

Luminant also questions ERCOT’s proposal to change its analysis from using a 6-hour ahead net load forecast error to a 3-hour ahead net load forecast error. One use for Non-Spin is a market tool for managing unexpected net load changes/errors. The other tool ERCOT has to manage the net load forecast error is the out-of-market Reliability Unit Commitment (RUC) process; however, this process is limited to selecting units whose start time will allow them to be on-line to cover a missed load forecast. Because the Non-Spin requirements are set in advance based on historical data, ERCOT should use the load forecast that best represents the point in time where, on average, ERCOT has sufficient capacity that can start in time to cover the average load forecast error at that same point in time. In 2015, ERCOT changed from using the midnight day-ahead forecast to using the 6-hour ahead forecast, because it was recognized that ERCOT likely has sufficient capacity with less than a 6-hour start time to cover the average load forecast error 6 hours out. ERCOT may also have sufficient capacity with a 3-hour start time to cover the average load forecast error 3 hours out, but Luminant asked for this data at QMWG and ERCOT has not yet provided it for review. Luminant believes that the 2016 A/S Methodology should not change which load forecast is used until ERCOT shows with empirical data that it makes sense to do. Using a 3-hour ahead load forecast rather than a 6-hour ahead load forecast will cause a reduction in the net load error calculation, which may result in ERCOT having less Non-Spin than it needs when those errors occur in Real-Time.

Finally, Luminant would like to address the idea expressed in the stakeholder process that Non-Spin should be reduced or eliminated in order to increase ORDC adders. First, Ancillary Services requirements should be driven by reliability requirements, and ERCOT should not rely upon the over-supply of spinning capacity that may or may not be available when needed. Second, Luminant strongly disagrees that the purchase of Ancillary Services is causing excess On-Line capacity – any excess spinning capacity is most likely a result of over-hedging to protect against ORDC risk. Therefore, reducing Non-Spin requirements will not create a significant increase to the Real-Time ORDC adders, but will expose ERCOT to greater risk. The Non-Spin requirements need to be evaluated from a reliability perspective rather than a specific pricing outcome.

Luminant looks forward to discussing these comments at the upcoming WMS, ROS, and TAC meetings.

Revised Proposed Protocol Language

Non-Spinning Reserve Service (Non-Spin) Requirement Details

Introduction

Non-Spinning Reserve Service (Non-Spin) consists of Generation Resources capable of being ramped to a specified output level within 30 minutes or Load Resources that are capable of being interrupted within 30 minutes and that are capable of running (or being interrupted) at a specified output level for at least one hour. Non-Spin may be deployed to replace loss of generating capacity, to compensate for Load forecast and/or forecast uncertainty on days in which large amounts of reserve are not available online, to address the risk of net load ramp, or when there is a limited amount of capacity available for Security-Constrained Economic Dispatch (SCED).

Historically, the need for Non-Spin has occurred during hot weather, during cold weather, during unexpected changes in weather or following large unit trips to replenish reserves.

The periods when load is increasing and wind is decreasing requires other generation resources to increase output or come online quickly to compensate for the sudden net load increases. As a result, net load ramp risk should be accounted for in the determination of Non-Spin requirements.

While net load analysis may cover reserves required for forecast uncertainty, it may not necessarily cover exposure to the loss of generation and net load ramp risk. Due to this risk, it may be necessary for ERCOT to have additional reserves available during high risk using a variable percentile to protect against forecast uncertainty.

Examples of circumstances when Non-Spin has been used are:

·  Across peak hours during spring and fall months when hotter than expected weather with large amounts of capacity offline resulted in Energy Emergency Alert (EEA) events;

·  Afternoons during summer seasons when high loads and unit outages outstripped the capability of base load and normal cyclic units;

·  Cold weather events when early morning load pickup outpaced the ability of generation to follow;

·  Major unit trips when large amounts of spinning reserve were not online; and

·  During periods when the wind decreased and load demand increased.

Summary

Analysis for Non-Spin requirements are conducted using data from the same month of previous three years. For the purpose of determining the amount of Non-Spin to purchase for each hour of the day, hours will be placed into four hour blocks. The net load uncertainty for the analyzed days for all hours which are considered to be part of a four hour block will be calculated and a percentile will be assigned to this block of hours based on the risk of net load ramp. The same calculation will be done separately for each block. The Non-Spin requirement for the month for each block is calculated using the assigned95th percentile (based on risk of net load rampuncertainty) for each block minus the average Reg-Up requirement during the same block of hours.

After this analysis has been completed, ERCOT will apply a floor on the final Non-Spin requirement equal to the largest unit. This floor will only be applied to On-Peak Hours, which are hour ending 7 through 22. ERCOT will post the monthly amounts for Non-Spin requirements for the upcoming year on the MIS.

ERCOT will determine the 95th percentile of the observed hourly Net Load uncertainty from the previous 30 days from when the study is performed and from the same month of the previous year. Net Load is defined as the ERCOT load minus the estimated total output from Wind-powered Generation Resources (WGRs). The estimated total output from WGRs considers what the total WGR output most likely would have been if the Qualified Scheduling Entities (QSEs) had not been given deployments to move their resources down. The forecast of Net Load is computed by subtracting the aggregate WGR High Sustained Limits (HSLs) in the Current Operating Plans (COPs) from the Mid-Term Load Forecast (MTLF). The COPs and MTLF used are the updated values as of six hours prior to each Operating Hour. The Net Load uncertainty is then defined as the difference between the Net Load and the forecasted Net Load.

Through May 31 2015, ERCOT will subtract 500 MW and the Reg-Up requirement from the calculated 95th percentile value to determine the amount Non-Spin to purchase during each hour of the day for the upcoming month. This 500 MW corresponds to 500 MW of the RRS requirement.

ERCOT will purchase Non-Spin such that the combination of Non-Spin, 500 MW of RRS, and Reg-Up Services cover 95% of the calculated uncertainties from the Net Load performance analysis. For on-peak hours (hours ending 7 through 22), ERCOT will also set a floor on the Non-Spin requirement equal to the largest unit minus 500 MW.

After May 31 2015; ERCOT will purchase Non-Spin such that the combination of Non-Spin and Reg-Up Services cover 95% of the calculated uncertainties from the Net Load performance analysis. For on-peak hours (hours ending 7 through 22), ERCOT will also set a floor on the Non-Spin requirement equal to the largest unit.

Procedure

Through May 31, 2015, the days that are used for analysis are the last 30 days prior to the study and the days from the same month in the previous year. For the purpose of determining the amount of Non-Spin to purchase for each hour of the day during the upcoming month, hours will be placed into four hour blocks. The 95th percentile of the Net Load uncertainty for the analyzed days for all hours which are considered to be part of a four hour block will be calculated. The same calculation will be done separately for each block. ERCOT will then calculate the average Reg-Up requirement for each four block, separately, for the upcoming month. The Non-Spin requirement for the upcoming month for each block is calculated as the 95th percentile calculation for that block minus 500 MW and minus the average Reg-Up requirement during the same block of hours.

Additionally, the average uncertainty in the net Load forecast will be calculated using the same days of study and four hour blocks. If it is determined that the net Load forecast on average over-forecasted the observed Net Load for a four hour block, then the average uncertainty will be added back to the Non-Spin requirement value calculated using just the percentile method described in the paragraph above. The calculated average uncertainty value for each block will be adjusted such that the sum of the two values does not exceed 1,500 and ERCOT will place a cap of 1,500 MW on the Non-Spin requirement. The adjusted average uncertainty value will not be set to a value less than 0. The adjusted average uncertainty value shall not be used by the ERCOT Operator to select a Load forecast, and shall not be included in ERCOT-published Load forecasts.

After this analysis has been completed, ERCOT will apply a floor on the final Non-Spin requirement equal to the largest unit minus 500 MW. This floor will only be applied to on-peak hours, which are hour ending 7 through 22.

After May 31 2015, the days that are used forERCOT will determine the Non-Spinning reserve requirement using the 70th to 95th percentile of hourly net load uncertainty from the same month of the previous three years. Net load is defined as the ERCOT load minus the estimated un-curtailed total output from Wind-powered Generation Resources (WGRs) at a point in time. The forecast of net load is computed by subtracting the aggregate WGR High Sustained Limits (HSLs) in the Current Operating Plans (COPs) from the Mid-Term Load Forecast (MTLF). The COPs and MTLF used are the updated values as of threesix hours prior to each Operating Hour. The net load uncertainty is then defined as the difference between the net load and the forecasted net load.

The risk of net load ramp is determined based on the change in net load over an hour divided by highest observed net load for the season. The fixed value of percentile ranging between 70th percentile and 95th percentile will be assigned to the net load forecast uncertainty calculated previously. Periods where the risk of net load ramp is highest will use 95th percentile compared to 70th percentile for periods with lowest risks.

ERCOT will purchase Non-Spin such that the combination of Non-Spin and Reg-Up Services cover the uncertainties of net load forecast errors depending on the net load ramp risk. For On-Peak Hours (hours ending 7 through 22), ERCOT will also set a floor on the Non-Spin requirement equal to the capacity of the single largest contingency.analysis are the last 30 days prior to the study and the days from the same month in the previous year. For the purpose of determining the amount of Non-Spin to purchase for each hour of the day during the upcoming month, hours will be placed into four hour blocks. The 95th percentile of the Net Load uncertainty for the analyzed days for all hours which are considered to be part of a four hour block will be calculated. The same calculation will be done separately for each block. ERCOT will then calculate the average Reg-Up requirement for each four block, separately, for the upcoming month. The Non-Spin requirement for the upcoming month for each block is calculated as the 95th percentile calculation for that block minus the average Reg-Up requirement during the same block of hours.