31st USAEE/IAEE North American Conference Regulatory Developments and Impacts Involving Electricity Storage in Texas Elizabeth Drews 31st USAEE/IAEE North American Conference Austin TX, November 4-7, 2012

The usual disclaimers This is not legal advice or legal services This is no one’s opinion but mine, & might not stay mine This is a summary Laws & facts change

Why storage could especially benefit ERCOT ERCOT’s Electrical isolation from other grids > 11,000 MW wind (# 1 in US, # 6 in world, > 2,000 MW coastal) 12,277 MW by 2014 Growing demand Potential capacity shortfalls Nodal market design 3

Where would storage fit in ERCOT Where would storage fit in ERCOT? Capacity, Demand, Reserves Report (May 2012)

Generation under study in ERCOT * Peak demand 68,379 MW Wind record 8,368 MW (17.64% of 47,452 MW load) of which 7,381 non-coastal Fuel type Cancelled studies (MW) Suspended studies (MW) Active studies (MW) Gas 1,939 2,890 8,317 Nuclear 5,900 Coal 3,635 Wind + 394 1,092 1,560 Solar 236 353 856 Biomass 50 100 Storage 906 Other 700 1,480 Total 7,400 21,747 16,854 * No firm commitment to build + Calculated at 8.7% of nameplate capacity

Some IPP storage development in Texas Compressed Air Energy Storage Battery Apex: 275 MW AES: 40 MW Chamisa: 270 MW, expandable to 810 MW Xtreme/Duke: 36 MW, behind meter w/ wind ConocoPhillips: behind meter w/ wind or solar Source: filings in Public Utility Commission of Texas (PUCT) Projects 39764, 39917, 41026

Some uses of electricity storage Energy time-shift Peak shave Ancillary services Reliable power in outage Address voltage, frequency variations Transmission support ↓ transmission congestion Defer T&D upgrades 7 Adapted from PUCT 2011 Scope of Competition Report

Generalized attributes of storage technologies CAES Battery Can inject for hours-days Can inject ≤ hour Can respond to grid needs in minutes Can respond to grid needs in seconds Hundreds of MW Tens of MW, modular $ hundreds of millions $ 1-10 million 2 years to build 1 year to build Must be near cavern or similar, TX has Attributes/capabilities vary by project & technologies are evolving 8

Regulatory limits on uses of ERCOT storage In non-retail choice areas, utility, coop, muni can own G&T Can own storage that serves both functions In retail choice areas, utility owns T&D, power generation company owns generation Protects competition Keeps storage from supplying & being paid for all its uses 9

Storage as transmission PUCT Docket 35994, ETT Transmission/distribution utility owns 4 MW battery to help voltage & delay transmission in remote area, does not own or sell energy from the battery PUC: transmission asset, can put in rate base Operational since 2010 10

Storage as generation 2011 statute (SB 943) – Texas storage: Intended to sell energy or ancillary services at wholesale is generation May interconnect, obtain transmission service, sell electric energy & ancillary services at wholesale consistent w/ TX law re: power generation company or EWG Must register as power generation company 11

PUCT pricing rule on storage (2012, Project 39917) 3 main decisions Electricity purchases by storage for charging are wholesale, not retail (same as FERC) Such electricity purchases are settled nodally (at bus that connects the storage facility), not zonally like a load Retail transmission & ancillary service charges do not apply to such electricity purchases 12

ERCOT rule changes, integration issues ERCOT’s Emerging Technologies Working Group IDs & proposes changes to ERCOT requirements that preclude market participation of emerging technologies Has addressed # issues relating to storage Is developing a list of operations issues relating to storage 13

PUCT ERCOT pilot project rule (2012, Project 40150) Allows ERCOT pilot projects for storage/other ET ERCOT may temporarily exempt pilot participants from specific ERCOT requirements ERCOT board must approve pilot project; board decision appealable to PUCT Rule leaves many issues, e.g. cost allocation & post-pilot transition if any, to ERCOT pilot review process to resolve 14

Pilot projects at ERCOT ERCOT posts documents for each pilot project on its website ERCOT has been working on a pilot project for a Fast Responding Regulation Service (similar to FERC Order 755, “pay for performance”) 15