The implementation of various new DC ties connecting ERCOT to other grids would increase costs to ERCOT customers under the current transmission cost allocation, the Texas Competitive Power Advocates said in comments shared with ERCOT's Regional Planning Group

"ERCOT utility rate design requiring load to pay for integration may inadvertently benefit off-system customers at the expense of ERCOT ratepayers," TCPA warned

TCPA's comments were in response to the latest proposal -- a DC tie connecting MISO and ERCOT -- but TCPA noted various other recent proposals for DC Ties -- such as Tres Amigas and Southern Cross

"Introducing a large load addition / DC Tie export would increase system prices during exports, as well as increase transmission costs to ERCOT customers. The long-standing practice of load paying for transmission infrastructure through the 'postage stamp' methodology to accommodate system upgrades associated with a resource would be equally applied to DC ties absent a change in utility rate structures," TCPA noted

"As such, expansive transmission projects to ensure resource deliverability of the DC tie would be borne by ERCOT ratepayers," TCPA observed

"TCPA suggests that DC ties may need to be considered differently from other transmission assets, so that system expenses associated with a tie are equitably shared among the owners and/or beneficiaries of the tie. TCPA has no specific recommendation at this time, but suggests that stakeholders consider a mechanism to equitably assess system charges to DC ties," TCPA said

Moreover, DC ties intended to move large amounts of power from one side of ERCOT to another (say, West Texas wind into the Eastern interconnect) could further impose costs on load through other transmission upgrades needed in addition to the DC tie, plus from congestion costs, TCPA noted

"Absent careful transmission planning for full export/import under a range of system conditions, the load/resource associated with a DC Tie may cause congestion and elevated local prices around the DC tie," TCPA said, recommending that all DC ties should be studied and assessed (economically) considering full deliverability of the DC tie to the ERCOT system.

"Absent sufficient transmission infrastructure to accommodate a new tie, ERCOT load customers and resources competing for transmission capacity would be harmed relative to the potential off-system benefit associated with the presence of a new DC tie," TCPA said

Similar to cost allocation of the DC tie itself, TCPA said that transmission rate structures may need to be adjusted to ensure equitable cost sharing of any upgrades associated with a new DC tie. "The mechanism should assign system costs to the owners and/or beneficiaries (potentially including ERCOT ratepayers to reflect the system benefit) of the DC tie," TCPA said

"ERCOT utility rate design requiring load to pay for integration may inadvertently benefit off-system customers at the expense of ERCOT ratepayers," TCPA said

TCPA noted that federally governed tariffs typically apply a “but-for” test for large load additions, whereby system upgrades are attributed to the entity causing the need for an upgrade. "In other words, if that upgrade were not necessary but for the presence of the large load addition, then the resource owner/beneficiaries should pay for those upgrades. If ERCOT ratepayers bear the cost of a large load addition, then system exports benefit off-system customers who obtain a free-ride on the ERCOT system, absent a rate structure change that equitably shares system costs with those who benefit from off-system exports," TCPA said.

TCPA further suggested that DC ties could negatively impact the ERCOT energy-only market, allowing generators to build in other grids with capacity payments (and lower offer caps), then importing power into ERCOT during ERCOT scarcity conditions

"ERCOT’s energy-only marketplace depends upon certain market fundamentals, including periods of scarcity pricing, to provide price signals for the maintenance and development of ERCOT resources. The proposed DC ties, in aggregate, introduce gigawatts of new capacity to the ERCOT marketplace. Additionally, the neighboring grids sourcing the DC ties for ERCOT imports are situated in markets with very different market elements, including much lower offer caps1. Accordingly, for coincident extreme demand across neighboring grids, ERCOT would likely always be the premium market. This would likely be a short-term win for ERCOT customers, where real-time scarcity events would be indefinitely extinguished by the new entrants utilizing the new DC ties. TCPA suggests, however, that the long-term unintended consequence can be negative effects on resource adequacy and limited development within ERCOT. For example, absent the scarcity events that the ERCOT energy-only marketplace depends upon, a developer would be better suited to develop in neighboring markets, potentially receiving capacity payments in other markets, and wheel power to the ERCOT system only under rare scarcity pricing conditions. TCPA strongly encourages market participants to consider how new DC ties may interact with the resource adequacy mechanisms in place," TCPA said

"TCPA welcomes the addition of DC Ties, provided that the resource is integrated in a fashion that is fully deliverable to the ERCOT system, and costs associated with that integration are borne equitably by the beneficiaries of the tie (potentially including ERCOT ratepayers.) Historically, DC ties were installed for emergencies and occasional flows between grids. These new DC ties appear to be intended for, or certainly highly impacting, commercial transactions. Given the number and size of these proposed ties, TCPA strongly suggests that ERCOT, the Public Utility Commission, and stakeholders carefully consider all potential impacts on the ERCOT market, and if projects go forward, develop new practices and policies to ensure efficient planning and equitable cost allocation for new DC ties," TCPA said

Tags:
Texas   DC ties   Transmission   Energy-Only  

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