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ERCOT Issues RFP For Generation, Demand Response Alternatives to NRG Greens Bayou RMR

July 14, 2016

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Copyright 2010-16 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

ERCOT has issued a request for proposals (RFP) to procure one or more resources as a Must-Run Alternative (MRA) to the existing Reliability-Must Run (RMR) Agreement with NRG Texas Power LLC's Greens Bayou Unit 5, which is required as ERCOT found that the plant, which had sought to suspend operations, would reduce overloads on the Singleton-Zenith 345 kV import path into the Houston area under certain G-1 + N-1 conditions.

As previously reported, a June 2, 2016 RMR Agreement requires NRG to make its Greens Bayou Unit 5 available to ERCOT during the months of July through September 2016, June through September 2017, and June 2018 in exchange for a standby payment of $3,185 per hour during the term of the agreement plus an incentive factor of as much as 10%.

Protocols Section 3.14.1.4, Exit Strategy from an RMR Agreement, requires ERCOT to evaluate the availability of cost-effective alternatives to this RMR Agreement. Protocols Section 3.14.1.5, Potential Alternatives to RMR Agreements, authorizes ERCOT to replace the RMR Agreement with an MRA Agreement if the MRA Resource would:

• provide an acceptable solution to the reliability concern currently addressed by the RMR Unit

• provide at least $1 million in annual savings over the projected net annualized costs for the RMR Unit, and

• satisfy objective financial criteria demonstrating that the provider of the MRA Resource is reasonably able to fulfill its performance obligations.

Pursuant to these provisions, ERCOT’s RFP seeks MRA proposals that meet the reliability objectives of the existing RMR Agreement and satisfy the other MRA criteria in Section 3.14.1.5.

ERCOT seeks proposals to provide either new generation -- including new standalone units or augmentation or additions to existing units -- or demand response, including new DR capacity or currently registered Load Resources or ERS Resources (as more fully described below). The service may be provided by resources located at either transmission or distribution voltage, provided that the resource must have a negative Shift Factor of at least 3% with respect to the Singleton-to-Zenith constraint. The MRA Resource must be available for one or more months in the five-month period that includes June to September 2017 and June 2018. For any MRA Resource committed for June 2018, ERCOT may extend the MRA Resource’s obligation up to an additional 90 days.

Under the terms of the RFP, only Qualified Scheduling Entities (QSEs) may submit MRA proposals. Proposals will be awarded on an as-bid basis. ERCOT will provide hourly standby payments to awarded QSEs and will provide startup and energy costs, as described in the RFP and the MRA Governing Document. Awarded QSEs will be required to establish a separate sub-QSE for purposes of Settlement.

ERCOT will accept the least expensive offer or combination of offers that provide at least the equivalent reliability benefit of the RMR Unit, so long as the offer or offers provides at least $1 million in annual savings over the projected net annualized costs of the RMR Unit.

ERCOT may award multiple offers in order to acquire the equivalent reliability benefit of the RMR Unit (371 MW of capacity), so long as the offers collectively meet the lower-cost criteria (at least $1 million in annual savings over the projected net annualized costs for the RMR Unit) established for ERCOT in selecting the MRA Resource(s). If multiple MRA Agreements are executed, all accepted offers will be paid as-offered; there will not be a clearing price mechanism.

More specifically, eligible MRA Resource types include but are not necessarily limited to:

• New generation units, including proposed generation units in the ERCOT interconnection process but with an expected go-live date later than June 1, 2017. For purposes of this provision, the current expected go-live date will be the date associated with the Resource in the ERCOT Generation Interconnection Status Report as of the date of issuance of this RFP.

• Additional capacity added to existing Generation Resources that was expected to go live later than June 1, 2017 (in such a case, the Resource Entity would be required to modify its Resource Asset Registration Form and complete required Generator Interconnection requirements). For purposes of this provision, the added capacity will be calculated as the difference between the Seasonal Net Maximum Sustainable Rating (Summer) of the Resource after the new capacity is added, and that same value as recorded in the Resource Asset Registration Form as of the date of issuance of this RFP.

• New or existing distribution-connected generation units, which must be registered with ERCOT as either Distributed Generation or Non-Modeled Generation, and that were not included in the RMR analysis.

• New or existing Demand response (DR) assets, including Load Resources and Emergency Response Service (ERS) Loads, with maximum Ramp Periods of 10 minutes, 30 minutes or 1 hour. DR assets with other maximum ramp periods will not be considered.

QSEs must submit proposals to ERCOT no later than 3:00 p.m. Central Prevailing Time (CPT) on August 24, 2016. The RFP, MRA Governing Document and appendices of the RFP may be accessed on ERCOT’s website at the following link: http://www.ercot.com/about/procurement/rfp/index

ERCOT is to issue a notice of any MRA Agreement Award(s) on September 30, 2016

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