NOTICE DATE:  September 26, 2019

NOTICE TYPE:  M-A092619-01 Operations

SHORT DESCRIPTION:  Notice Regarding Provisional ERCOT DGR Integration Practices

INTENDED AUDIENCE:  ERCOT Market Participants

DAY AFFECTED:  Ongoing

LONG DESCRIPTION:  ERCOT issues this Market Notice to provide simultaneous notice to all Market Participants of ERCOT’s intended practices with respect to the interconnection and operation of Generation Resources interconnecting at distribution voltage (referred to in this Market Notice as “DGRs”).[1]  ERCOT has determined that these practices are necessary to mitigate reliability risks to the ERCOT System.  These practices are relevant only to the limited subset of distribution-level generators that register as Generation Resources (i.e., those that participate in Ancillary Services and/or economic dispatch) and do not apply to other distribution-level generators, including distribution-level Non-Modeled Generators (which will be called “Settlement-Only Distribution Generators” (SODG) upon implementation of NPRR889) and unregistered Distributed Generation.  Entities that wish to receive settlement for their distribution-level generation but do not wish to participate in Ancillary Services or be subject to economic dispatch may seek to register their generators as Non-Modeled Generators/SODGs.

DGRs are a subset of Generation Resources and by definition subject to all Protocols and other ERCOT rules that apply to Generation Resources.  However, DGRs present certain operational concerns that have not yet been addressed in ERCOT’s rules.  With increasing numbers of DGR interconnection proposals, ERCOT is concerned that these regulatory gaps could create reliability risks if sufficient numbers of DGRs begin to interconnect. 

These gaps include, but are not necessarily limited to, the following:

·         ERCOT rules governing outage coordination address outages of Resources (including all Generation Resources, whether connected to distribution or transmission) and Transmission Facilities, but do not address the coordination of outages of distribution facilities.  See, e.g., Protocols Sections 3.1.  Without rules requiring the Distribution Service Provider (DSP) (or possibly the Resource Entity for the DGR) to provide this information to ERCOT, DGRs could become unavailable to ERCOT without notice even when that unavailability was known in advance.

·         ERCOT rules do not assign responsibility for modeling distribution facilities or for providing telemetry of the status of those facilities.  The absence of any visibility of the path between DGRs and the ERCOT transmission system could create a reliability risk.  While mapping DGRs to the transmission system could avoid the need to model some or all distribution facilities, the Protocols do not currently authorize mapping of DGRs, and rules assigning responsibility for communicating limitations on the status of those facilities would likely still be needed.

·         ERCOT rules do not address how Transmission and/or Distribution Service Provider (TDSP) Load-shed obligations may be impacted by DGRs.  If feeders that connect DGRs to the ERCOT System are disconnected during an Energy Emergency Alert (EEA), Under-Frequency Load Shed (UFLS), or Under-Voltage Load Shed (UVLS) event, the resulting unavailability of the generation can worsen an already severe reliability condition.  This regulatory gap will need to be addressed by changes to ERCOT rules and possibly Public Utility Commission (PUC) rules.

·         ERCOT rules do not establish any process to ensure the DSP’s system can accommodate ERCOT’s dispatch of the DGR, as modeled in ERCOT’s system, under a reasonable range of voltages and other operation conditions.

·         While it is not clear that PUC Substantive Rule 25.212 applies to DGRs, to the extent it does apply to some or all DGRs, it imposes frequency relay settings that differ from the settings required by the ERCOT Nodal Operating Guide.  See 16 Tex. Admin. Code § 25.212(c)(3): Nodal Operating Guide § 2.6.2.  Paragraph (a)(4) of section 25.212 does allow the DSP and a DG owner to agree to requirements that differ from those imposed by the rule, but nothing in the ERCOT Protocols or Nodal Operating Guide requires the DSP and the DGR’s Resource Entity to agree to ERCOT’s settings, which creates the potential that the DGR may not comply with the frequency relay settings in the ERCOT Nodal Operating Guide.

ERCOT is currently developing rule revisions that will propose solutions to these issues and address other DGR-related matters.  ERCOT expects to submit these revision requests in the near future.  In the interim, ERCOT has concluded that its statutory duty to ensure system reliability[2] requires either that DGRs be prohibited from interconnection until the appropriate ERCOT rules are developed and implemented, or that ERCOT impose certain restrictions on the interconnection and operation of DGRs to address this reliability risk until the appropriate revision requests addressing these issues can be developed and implemented. 

Given that some Entities have already developed DGRs, and others may have developed reasonable investment-backed expectations in the operation of one or more proposed DGRs based on guidance from ERCOT, the most prudent policy at this point is to allow existing DGRs to continue operating and to allow those Entities that can demonstrate substantial investment in one or more DGRs to pursue development of those DGRs, but only on the condition that each such existing or proposed DGR complies with certain specified conditions regarding interconnection and operation.  This policy will apply only until ERCOT determines the appropriate revisions to ERCOT rules have been approved and implemented, or until ERCOT or the PUC determines that one or more conditions no longer applies.  

To qualify for interconnection of a proposed DGR during this interim period, an Entity must, by October 28, 2019, submit to ERCOT an affidavit signed by an officer or other authorized representative establishing that, as of the day before the date of this Market Notice, the Entity had either

·         incurred, or committed to incur, substantial cost associated with the development of one or more DGRs, including costs of one or more major components such as a generator, storage device, transformer, inverter, reactor, or capacitor; or

·         previously registered a distribution-level Non-Modeled Generator or Settlement-Only Distribution Generator (SODG) with ERCOT and had planned to re-register the Non-Modeled Generator/SODG as a DGR at some future date.

Any Entity seeking qualification under the first of the above conditions must include, as an attachment to the affidavit, documentation that demonstrates the required expenditure or binding commitment.  The affidavit must attest that the provided documentation demonstrates that a substantial cost has been incurred or that the Entity has irrevocably committed to incur a substantial cost, as applicable, and must attest that any attached documentation is an accurate and complete copy of the original.  Separate supporting documentation must be submitted for each DGR for which the Entity seeks qualification.  ERCOT will treat the affidavit and any supporting documentation as Protected Information pursuant to Section 1.3.1 of the ERCOT Protocols.  ERCOT, in its sole judgment, will determine whether the affidavit and submitted documentation demonstrates that the Entity qualifies to pursue interconnection of the DGR.  ERCOT will notify the Entity of its determination as soon as possible.

Additionally, to ensure ERCOT can satisfy its statutory responsibility to ensure system reliability in the absence of ERCOT rules addressing the above issues, ERCOT will require any existing DGR—i.e., any DGR that has been modeled in ERCOT systems as of the date of this Market Notice—and any DGR that is qualified for interconnection through the process described above to comply with certain conditions on interconnection and operation.  These conditions are set forth in the attached Provisional Conditions for Interconnection and Operation of Qualified Distribution Generation Resources (“Conditions Document”).  These conditions are generally consistent with those ERCOT has required of the limited number of DGR developers that have pursued interconnection with ERCOT to date.  A Resource Entity with an existing DGR is not required to submit the affidavit described above for that DGR, but is required to comply with the terms in the Compliance Document, provided that ERCOT will allow the Resource Entity a reasonable period of time to come into compliance with these terms. 

In several instances, the Conditions Document requires the Resource Entity for a DGR to provide written confirmation from the DSP or evidence of a written agreement with the DSP regarding certain matters (e.g., confirmation from the DSP that appropriate studies have been conducted).  This submission responsibility is placed on the Resource Entity to ensure the information can be properly maintained as part of the registration of the Resource, as the DSP may lack the appropriate access to ERCOT systems.  The Resource Entity must submit the information as an attachment to the Resource Asset Registration Form (RARF) submitted through the interface on the Market Information System (MIS) Certified Area, or, upon implementation, through the Resource Integration and Ongoing Operations Interconnection Services (RIOO IS) system.   

The attached Conditions Document and any updates will be posted on ERCOT’s Resource Integration page.  ERCOT will issue a Market Notice when it determines that its rules have been revised to address the above-described regulatory gaps, at which time the conditions specified in the Conditions Document will no longer be effective.

During the period before the appropriate rule revisions have been approved and implemented, or until further notice, ERCOT will not allow registration of any DGR for which the required affidavit and any necessary documentation demonstrating qualification as described above has not been submitted within the specified timeframe, and ERCOT will reserve the right to terminate the registration or operation of any DGR that fails to comply with the conditions specified in the attached Conditions Document.  Nothing in this Market Notice or the Conditions Document affects the Resource Entity’s responsibility to comply with any other requirement, including any requirement in ERCOT rules.  Additionally, nothing in this Market Notice or the Conditions Document affects ERCOT’s existing responsibilities, including its duty to ensure system reliability.

ERCOT emphasizes that Protocols and other rules affecting DGR interconnection and operation are likely to change and may differ from those conditions specified in the Conditions Document.  As with any other generation project, any Entity that chooses to pursue a DGR project assumes the risk of any regulatory change.  DGR developers also assume the risk that ERCOT or any affected TDSP may need to limit or prohibit the operation of the DGR to ensure system reliability until necessary rules addressing the above regulatory gaps have been developed and implemented. 

ACTION REQUIRED:  Any Entity wishing to interconnect one or more proposed DGRs must submit an affidavit and any required supporting documentation via email with a subject line “DGR Documentation” to MPRegistration@ercot.com by October 28, 2019.  If ERCOT determines that the Entity qualifies to pursue interconnection of a DGR as described in this Market Notice, the Resource Entity for the DGR must demonstrate compliance with the provisions of the Conditions Document, as it may be revised from time to time, as a condition for interconnection and continued operation of the DGR.  Any Resource Entity with an existing DGR should ensure the DGR complies with the terms of the Conditions Document within a reasonable period of time.

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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[1] The term “Distribution Generation Resource” was introduced by NPRR889, RTF-1 Replace Non-Modeled Generator with Settlement Only Generator, which has been approved but is grey-boxed pending system implementation.

2 See Tex. Util. Code § 39.151(a)(2); 16 Tex. Admin. Code § 25.361(b).