Texas Industrials Warn on Costs, Discrimination Under ERCOT Pilot Projects

Any rules adopted by the Public Utility Commission of Texas granting ERCOT authority to conduct pilot projects to evaluate new and emerging technologies, "should make clear that any pilot project cannot result in unjustified cost to the market ... [and] should also explicitly reaffirm the statutory requirement that any pilot project be open to all market participants on a non-discriminatory basis," the Texas Industrial Energy Consumers said in comments to the PUCT (40150).

As first reported by Matters, a proposal for publication would amend P.U.C. SUBST. R. 25.361 in order to give ERCOT the authority to conduct pilot projects to evaluate new and emerging technologies, such as energy storage projects, to determine the benefits that these technologies may bring to the ERCOT system

TIEC maintains the position that, "creating ERCOT-funded pilot projects for new technologies is unnecessary and inappropriate."

"Any technology may participate in the ERCOT market as long as it can meet the applicable requirements in the ERCOT protocols. Entities seeking to introduce new technologies to the market should be responsible for researching and developing their technology to ensure that it is capable of complying with the standards for market participation. Further, ERCOT already has sufficient flexibility to develop new ancillary services without the need for a pilot project," TIEC said.

However, if the Commission moves forward in adopting a rule to authorize pilot projects, TIEC said that the proposed rule should be modified to protect the market against unjustified costs and discriminatory treatment.

"As a general rule, the Commission should not create special services, favorable treatment, subsidies, or exemptions to reliability and performance requirements for specific technologies. This treatment is anti-competitive, creates artificial winners and losers, and interferes with the dynamics of a competitive market. Instead, the ERCOT market -- and any pilot projects -- should be designed in a technology-neutral manner, and should provide general, uniform standards and compensation schemes that apply to all entities providing a certain product or service," TIEC said.

"To this end, the proposed rule should be revised to reflect that any pilot project would be for the purpose of evaluating new services or processes that ERCOT is seeking, and not to provide special treatment to any particular technology," TIEC said.

TIEC said that in contrast to this objective, "the proposed rule appears to place an inappropriate focus on testing the capabilities of specific technologies and resources, rather than testing a service that will be open to any market participant that meets the requirements."

"A special service should not be designed to compensate a favored technology for its particular capabilities, even if those capabilities provide no value to the market and do not improve reliability. Nor should a pilot project allow a favored technology to participate in the market by limiting its competition. Creating a service to suit a technology's characteristics, and then excluding other market participants from competing to provide the service, would be anti-competitive and discriminatory. This type of pilot program is not creating a 'level playing field,' but is conferring an artificial advantage for select technologies. This would violate PURA § 39.001(c), which prohibits 'discriminat[ion] against any participant or type of participant ... in the competitive market,'" TIEC said.

"The ERCOT protocols should be designed to provide technology-neutral performance standards that ensure the reliability of the ERCOT grid, and those standards should not be compromised to accommodate technologies that cannot meet them. Similarly, if opening a new service to all market participants would cause reliability problems, that service should be not be adopted. As experience in the ERCOT market demonstrates, waiving protocol requirements in order to allow a new technology to compete creates reliability issues and costs for the market," TIEC said.

"Pilot projects should also not be used to allow a particular technology to provide a new or existing service under different performance requirements than those applied to other Resources providing the same service. This would not only violate PURA § 39.001(c), but would also run afoul of PURA § 39.151(a)(4), which requires ERCOT to 'ensure that electricity production and delivery are accurately accounted for among the generators and wholesale buyers and sellers in the region.' Pursuant to this language, any service being provided to the grid must be measured consistently for all Resources, regardless of technology, in order to provide an accurate accounting of what is being provided," TIEC said.

"The market should not pay to test new technologies. TIEC understands that new technologies must be tested before they can qualify to participate in the ERCOT market. However, the ERCOT protocols should provide nondiscriminatory performance standards that must be met by all Resources in order to maintain reliability. As long as a technology can meet these requirements, there should be no need to conduct a pilot to evaluate a resource's performance before allowing it to compete in the market. If the entities developing a new technologies are concerned that they cannot meet the current protocol requirements, the responsibility to test and modify the technology until it can meet those requirements should fall to the developers-not to the ERCOT market. The market should not be responsible for paying the research and development costs of new technologies," TIEC said.