Texas has a highly competitive electric market, but distributed energy resources (DERs) often have a difficult time participating in a market that was constructed before current technologies were widely available. The Electric Reliability Council of Texas (ERCOT) market is energy-only, meaning payments are only made for energy actually generated and consumed. Many markets have capacity markets which pay generators for availability even if they aren’t called to generate.
What is the challenge to greater inclusion of DERs?
Texas energy-only market in some ways makes the inclusion of Distributed Energy Resources more challenging than in a capacity market. There is no forward capacity market for demand-side resources, so the settlement process is a day-ahead and real-time transaction arena designed for large generation resources and Load Serving Entities (LSEs). Loads can participate in the day ahead or real-time energy market through an intermediary but loads cannot independently participate in the real time market.
The ERCOT market was originally designed to accommodate large, traditional power plants, interconnected to the grid at the transmission level. For typical distributed energy resources (DERs), the cost to qualify as a Generation Resource in order to participate in the market is usually prohibitive. The interconnection process for larger systems to the transmission system is handled by ERCOT directly and uniformly, but distributed generation is interconnected by each distribution utility with its own process.
Finally, the current interconnection rules which apply to each distribution utility are being considered by the PUCT now; the question has arisen as to what party must take responsibility for the interconnection agreement if a third-party installs and owns on-site generation at a customer’s residence or place of business. We believe that requiring the customer to accept liability for the interconnection agreement will discourage third party ownership structures that have led to widespread adoption in other regions.
SPEER’s policy work includes a focus on increasing participation of Distributed Energy Resources in the ERCOT market.
We have published several whitepapers on DERs:
A Smart Energy Roadmap for Texas: A series of recommendations compiled from interview of a wide variety of companies active in intelligent energy management. One of the recommendations specifically calls for greater inclusion of DERs in the ERCOT market.
Demand Response Study: Showed that inclusion of demand response in the market would have saved Texans $200 million over five days in 2012-13.
The Debate About Demand Response in Wholesale Electric Markets: A detailed look at how demand response provides significant benefits in wholesale markets by contributing to price formation and lowering prices.
Toward a More Efficient Electric Market: Focused on including energy efficiency as a resource in competitive electric markets (includes information on both capacity and energy-only markets as Texas was considering a move to a capacity market at the time of publication).
An Update on Smart Energy in Texas: Provides information on the use of intelligent energy management, demand response, and data to drive energy efficiency (includes information on participation of loads in the market).
What happens next?
Fortunately, there is recognition at ERCOT and the Public Utility Commission of Texas (PUCT) that DERs are coming and that their inclusion in the market is inevitable and even desirable. The PUCT has circulated a strawman rule that would allow third-party DER providers (rather than their customers) to be the signatory for formal interconnection agreements, remove the “on-site” requirement for distributed generators (allowing community solar for example), and remove an arbitrary 10 MW size limitation on Distributed Generation so long as it was still located on the distribution grid.
SPEER is active on issues related to DERs at ERCOT, where various working groups have begun to examine whether simplified levels of resource registration could be sufficient for smaller resources that want to be able to contribute to (and be compensated by) the energy or ancillary service markets at different levels. In fact, ERCOT discussed at the SPEER Summit that its staff is willing to consider system changes that will allow existing smart meters to be sufficient for DERs to participate in ancillary or energy market without an additional metering requirement from ERCOT. ERCOT staff is working with stakeholders to prepare a whitepaper (essentially a draft proposal for system changes), to address DER integration issues in ERCOT including these issues, as well as settlement mechanisms, forecasting tools, and compliance metrics that ultimately must be addressed.
The Dream Task Force at ERCOT is the initial venue for this set of discussions and preliminary negotiations.
These issues also are discussed and considered at the Demand Side Working Group (DSWG).
Most of the issues related to data access and third party energy management company ability to serve customers come before the Advanced Metering Working Group (AMWG).