1. Raine Cotton rainecotton@serenew.com

2.  Registered DG settlement is in accordance with Protocol Section 6.6.3.2 as Real-Time Energy Imbalance at a Load Zone  Compensated at the Load Zone Settlement Point Price (SPP). ◦ Average of Real-Time LMPs at Electrical Buses in the Load Zone for which the DG is located  Less than 10MW and connected below 60KV

3.  6.6.3.2 Real-Time Energy Imbalance Payment or Charge at a Load Zone ◦ The payment or charge to each QSE for Energy Imbalance Service is calculated based on the Real- Time Settlement Point Price for the following amounts at a particular Load Zone Settlement Point: ◦ (h) The aggregated generation of its Non-Modeled Generators in the Load Zone.  The payment or charge to each QSE for Energy Imbalance Service at a Load Zone for a given 15-minute Settlement Interval…

4.  Minor Protocol modification would allow DG to participate in a more market based approach  Specifically, if DG were guided by a Market approach then DG may be able to play a larger role in relieving congestion

5.  Change DG’s compensation to the LMP that is the most logically connected existing LMP

6.  DG can provide generation much faster than larger Resources (construction and ramp)  Interconnection is typically far shorter and more straight forward ◦ Interconnection process is directly between the TDSP and generator with less involvement with ERCOT ◦ Compared with the cost to interconnect at Distribution Voltage, interconnection cost per MW at Transmission Voltage can be prohibitive for DG.

7.  Investments do not have to be as long term compared to typical “larger plants” because there is a fluid secondary market of smaller equipment  Project development time is shorter ◦ Permitting ◦ Land ◦ Funding  Could provide bridge to more permanent and/or larger installation

8. 5.2 MW

9. *This example would exceed 10MW threshold

11. West Texas Oil and Gas growth causes congestion

12. We ship Gas behind the congestion to Power Plants

13. And then struggle to get power back

14. There is only so much generation that distribution lines can accommodate; however, just because a node is congestion it does not mean that there is only one downstream distribution line for DG

15. Example: Congested Node

16. Nodes having “congestion” pricing signals because of upstream congestion Congested Node

17.  While DG cannot solve all congestion issues it can play a role.  We have a market structure in place that is currently sending pricing signals so why not allow the market to help determine when DG is feasible?

18.  Current DG players may not want to change their pricing structure ◦ Allow changes going forward ◦ Make it an opt-in program  Increase of staff time “studying logical nodes” ◦ Set minimum size for program (i.e. >1MW) ◦ Charge fee to offset cost ◦ The reality is that the logical node will be evident without much effort

19.  What about REPs? ◦ Contract price based on applicable LMP ◦ If a generator is going to be exporting energy (not just net metering) is direct to QSE an option?  Startup and Ancillary Energy? If DG is being compensated for production at the LMP price should energy consumption be priced the same Blackbox (no import of energy)

20.  Having DG LMPs assigned to existing Nodes may help the modeling of DG  There is currently no incentive for a moderately sized DG to help relieve congestion even though it is often moderate and small loads that ultimately cause congestion  We are already settling at the Load Zone SPP so perhaps changing to a Logical LMP will not be a difficult Protocol tweak

21.  This idea will produce actual electrons flowing to a physical location that is in need of power as determined by the market ◦ Physical, not paper solution

22. Raine Cotton rainecotton@serenew.com