1. GHG, Renewables, and Reliability IEP ANNUAL MEETING SEPTEMBER 29, 2015 Carrie Bentley Resero Consulting Cbentley@Resero.com

2. It’s not about reliability- it’s about reliability through markets  The ISO can maintain grid reliability through manual dispatch and procurement  Energy: exceptional dispatch, pro-rata curtailments  Capacity: risk-of-retirement backstop mechanisms  Manual intervention is only a short-term solution  In the long-term the ISO must adapt the market to transparently and competitively price all resource capabilities needed for grid reliability

3. State policy green goals affect the energy and resource adequacy markets  Energy market:  Directly increase the variable costs of thermal generation  Indirectly lower the variable costs of renewable resources  Resource Adequacy:  Lower demand for thermal generation  Increase in demand for renewable resources

4. Energy and reserves are not the only products needed to maintain grid reliability  The grid can no longer take for granted that the bulk of the fleet will provide sufficient:  Ramping capabilities – upward and downward  Frequency response  Voltage support  Short start-up and shut-down capabilities  These needed grid attributes are not currently priced in the energy market

5. Markets and planning must change to account for state policy green goals  ISO has many initiatives/processes that are in response to grid reliability challenges:  Frequency response, Reactive power, FRAC MOO II, Flexible Ramping Product, EIM and Pac integration initiatives, LTPP, Interconnection enhancements…  If you are only going to follow two ISO initiatives;  FRAC MOO – flexible resource adequacy capacity requirement  Flexible Ramping Product – energy market enhancement to compensate for flexible ramping

6. What does the grid look like in 10 - 15 years?  There is a need to question big assumptions and let the little assumptions go  Are all new wind and solar resources built between now and 2030 going to self-schedule?  Is economic curtailment of renewables a bad thing?  How much can the grid rely on imports and exports for balancing and flexible ramping, i.e. what are the physical constraints?  How much should the grid rely on imports and exports for balancing and flexible ramping?