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

2 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

33 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

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

5 Generation under study in ERCOT * * No firm commitment to build + Calculated at 8.7% of nameplate capacity Fuel type Cancelled studies (MW) Suspended studies (MW) Active studies (MW) Gas1,9392,8908,317 Nuclear5,900 Coal3,635 Wind ,0921,560 Solar Biomass Storage906 Other 7001,480 Total7,40021,74716,854 Peak demand 68,379 MW Wind record 8,368 MW (17.64% of 47,452 MW load) of which 7,381 non- coastal

6 Some IPP storage development in Texas Compressed Air Energy Storage Battery Apex: 275 MWAES: 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

77 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 Adapted from PUCT 2011 Scope of Competition Report

88 Generalized attributes of storage technologies CAESBattery Can inject for hours-daysCan inject ≤ hour Can respond to grid needs in minutes Can respond to grid needs in seconds Hundreds of MWTens of MW, modular $ hundreds of millions$ 1-10 million 2 years to build1 year to build Must be near cavern or similar, TX has Attributes/capabilities vary by project & technologies are evolving

99 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

10 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

11 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

12 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

13 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

14 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

15 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”)