NOTICE DATE: Friday, May 3, 2024

NOTICE TYPE: M-A050324-01 Contracts/RFP

SHORT DESCRIPTION: Notice Regarding Forthcoming Issuance of Request for Proposals for Capacity for Summer 2024 under ERCOT Protocols § 6.5.1.1(4)

INTENDED AUDIENCE: All Market Participants

DAYS AFFECTED: July 1, 2024 through September 30, 2024

LONG DESCRIPTION:  In accordance with paragraph (4) of ERCOT Protocols § 6.5.1.1, ERCOT Control Area Authority, ERCOT has identified a need to procure capacity to meet Load and reserve requirements during the summer 2024 Peak Load Season.  This need is informed by several factors, including significant Load growth since last summer and a reliability need to limit power transfers across specific transmission interfaces that deliver power from South Texas into the San Antonio region under certain conditions involving high, systemwide Demand. 

Such conditions arise when (1) the ERCOT System is experiencing a near-scarcity of generating reserves to meet systemwide Demand, (2) insufficient generation exists to meet Demand in the portion of the ERCOT System north of the specific transmission constraints, and (3) an excess of generation is available to be exported from South Texas to the rest of the ERCOT System, including over the relevant transmission lines.  The involved transmission facilities have been identified as Interconnection Reliability Operating Limits (IROLs), as defined by the North American Electric Reliability Corporation (NERC), because under certain circumstances, overloading of such transmission facilities and the occurrence of an additional contingency could lead to cascading outages that adversely impact the reliability of the Bulk Electric System.  ERCOT is obligated by NERC Reliability Standard IRO-009-2, Requirement R2, to develop a plan to avoid the exceedance of IROLs.    

ERCOT has established South Texas Export Generic Transmission Constraints (GTCs) which will enable ERCOT’s Security Constrained Economic Dispatch (SCED) software to manage generation dispatch within the IROLs’ limits the majority of the time.  However, if insufficient generation exists to meet Demand north of the constraints without exceeding the IROLs, ERCOT is required, under NERC Reliability Standards and its mitigation plan, to direct Load shedding before the limits of the IROLs are exceeded.  Last summer, before establishment of the South Texas Export GTCs and IROLs and changes to nearby transmission facilities that assist in relieving loading on the constraints, the relevant transmission facilities were overloaded numerous times. 

Therefore, ERCOT will seek to procure Demand response Capacity Sources that provide up to 500 MW of relief on the relevant transmission facilities.  This procurement is in accordance with ERCOT Protocols § 6.5.1.1(4), which recognizes ERCOT’s “authority to prevent an anticipated Emergency Condition relating to serving Load in the current or next Season by procuring existing capacity that may be used to maintain ERCOT System reliability in a manner not otherwise delineated in the[] Protocols and the Operating Guides.” 

ERCOT is seeking Demand response capacity that would provide up to 500 MW of relief on the constraints based on observed power flows over the relevant transmission facilities in the summer 2023 Peak Load Season.  The maximum exceedance observed was 139%; 40% of each facility’s limit equals 472 MW.  Thus, an amount of up to 500 MW will address a historical max exceedance recognizing continued Load growth.      

ERCOT provides the following timeline and schedule of activities for the procurement:

* Unless otherwise noted, all Business Day deadlines shall include a Business Hour deadline of 5:00 PM Central Prevailing Time (CPT).

ERCOT identifies the following potential sources of Demand response that ERCOT considers acceptable for providing the capacity that ERCOT seeks to procure:

1. Customers at individual sites with peak Demand response capability exceeding 1 MW that have not previously exhibited price-responsive behavior and are not a participant of any other Demand response program that covers the hours of 3:00-9:00 PM CPT nor Emergency Response Service for the hours of 3:00-9:00 PM CPT.                                    
2. Aggregations of Customer sites that have not previously exhibited price-responsive behavior, including sites with unregistered dispatchable generation that may offset Load if such aggregations exceed 1 MW of Demand response.  Such sites may not be a participant of any other Demand response program that covers the hours of 3:00-9:00 PM CPT nor Emergency Response Service for the hours of 3:00-9:00 PM CPT.

ERCOT will only seek capacity from eligible providers of Demand response capable of contributing relief on the constraints, i.e. having beneficial shift factors on the constraints.  Attached to this Market Notice is a table of counties in Texas with beneficial shift factors.  (Note that not all load sites in the counties on this list may have beneficial shift factors, but the list includes counties that potentially have load sites with beneficial shift factors.)  ERCOT’s cost/benefit evaluation of each proposal shall consider the shift factor applicable to each site offered in the proposal and how effective the proposal is in helping reduce the loading on the constraints.

The time period during which awarded Demand response capacity sources could be deployed is 3:00-9:00 PM CPT, with no more than one deployment per day, and no deployment exceeding four hours.  Additional details, including a maximum number of deployments over the contract period will be provided in the forthcoming RFP and Governing Document.

Customers designated as critical Loads are not eligible to provide capacity under this procurement.

As described in the forthcoming RFP and the Governing Document, Qualified Scheduling Entities (QSEs) will be allowed to respond to the RFP and offer capacity sources of Demand response.  A QSE’s submission must include a form identifying the sites that comprise the Demand response source.  If any offered sites are in the service area of a Non-Opt-In Entity (NOIE), the QSE must also provide a NOIE authorization form.

ERCOT will issue a Market Notice on June 25, 2024 identifying any QSEs receiving awards along with the relevant MW quantities and prices awarded.  

ADDITIONAL INFORMATION: For additional information regarding the process and terms under which ERCOT may contract for additional capacity, please refer to paragraph (4) of ERCOT Protocols § 6.5.1.1.

CONTACT: If you have any questions, please contact your ERCOT Account Manager. You may also call the general ERCOT Client Services phone number at (512) 248-3900 or contact ERCOT Client Services via email at ClientServices@ercot.com.

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