© ICF

The New World of Power Supply

TEC Managers Conference

December 7, 2023

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 Objectives

 ERCOT Market Forces Effecting Power Supply

 “New” Power Supply Resources
 Power Supply Planning Today

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Who am I?
Elaine H. Johns
EnerVision, Founder and President/CEO
• One of the founders and current President/CEO of
EnerVision, leading the firm’s nationwide consulting
and business development efforts
• Over 37 years of consulting experience in areas
ranging from strategic planning, power supply
planning, utility rates, marketing, and economic
analysis
• Formerly 13-year employee of Oglethorpe
Power
(G&T in Georgia): resource planning, IRP,
competitive
studies, rates, system operations and G&T
restructuring
• Institute of Industrial and Systems
Engineers
(Fellow), Georgia Tech Foundation Board of Trustees
and Georgia Tech President’s Advisory BoardConfidential 3
 Who is EnerVision?
 EVI is a management and technical consulting firm in the electric
utility industry
 Came out of the 1997 Oglethorpe Power restructuring
 Employee owned since 1998
 Over 35 states, more than 150 clients
 Staff in GA, NC, MD, TN, VA & TX
 Headquartered in Atlanta

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Services / Business Lines

• Power Supply

• Emerging Energy Solutions

• Management Consulting

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 EnerVision’s Power Supply Team

 Avg 25 years among 10 senior project leaders each

 Wholesale Power Supply is our Wheelhouse
– Power supply planning and analysis
• Integrated Resource Plans
– Wholesale power supply solicitations & evaluations
– Contract negotiations and administration
– Trading operations
 Experience in RTO/ISO Operations and Bilateral markets

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THE FORCES THAT HAVE CHANGED
ERCOT’S POWER SUPPLY
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Game Changer: Winter Storm Uri

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 Wholesale Power Market Trends

• ERCOT Market: transparency & risk

• Credit exposure
• Shorter term/fixed load shapes with market prices more prevalent
• Longer term full-requirements not as prominent
• Distributed Energy Resources (DERs) and Renewables
• Possible energy shortages looming due to:
• Widespread load growth
• EPA regulations on building thermal power plants
• Retirements of coal and gas resources

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 Typical Power Transactions

Wholesale power transactions take three general forms:

• Full Requirements – supplier meets 100% of needs of purchasers in all
hours
• Partial Requirements – supplier meets only a specified portion of
purchasers’ needs, typically wrapping around other resources to supplement
existing supply
• Structured Transaction – supplier provides an agreed quantity of capacity
and energy in specified hours, such as a 7x24 block (same quantity
delivered in every hour of the specified period)

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 ERCOT-Specific Power Supply Trends
 Impacts of Renewable Resources (Wind & Solar)
– Price suppression and impacts on dispatchable generation
– Peak shifts (3-4 pm to 7-8 pm)
– Ancillary Services changes (ECRS) = unpredictable and $$$
 Summer peak load > Dispatchable Generation = reliance on renewables
 Sizable, new dispatchable generation is at least 2-3 summers away
 Winter can be most volatile based on short term weather events
Key Take Away – One-size fits all / Fix-it-&-Forget-it strategies are no longer
viable; active, engagement (risk management) is needed.

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 85% of new
capacity has
been
intermittent,
renewable
resources

Source: Potomac Economics

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 Summer Peak
Shifts; How
does this change
the markets?

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 Very hot summer; several peak
record days
• Does this change your
summer power supply
strategies?
• Overreacting to the market
is as dangerous as not
reacting

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 Ancillary Services
have become sizable
cost to load. How do
you hedge this
exposure?

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 What are Ancillary Services?
They are the “belts and suspenders” to ensure that generation matches
load. Magnitude of A/S pricing can be linked to resource scarcity.
• Reg Up, Reg Down (REG) – deployed every 4 sec - respond quickly to the
instantaneous change in electrical demand
• Responsive (RRS) – 10 min – deployed to ensure abrupt changes in electrical supply
or demand can be met (loss of a large generator)
• Non-Spin (NSRS) – 30 min - deployed to prevent further deterioration of grid
conditions
• ERCOT Contingency Reserve Service (ECRS) – 10 min - Middle ground between
Responsive Reserve and Non-Spin capacity- secures additional power capacity beyond
the regular supply. Newest service due to intermittent resource fluctuations
• Black Start – Contracted for years at a time – deployed in event of total black out

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 Power Supply Trends Summary
 Renewables are here to stay – must address intermittency
– Ancillary services market continues to change
– Gas is not a “bridge” fuel
 Load following / traditional load arrangements come
with high price tags (and conditions)
 Risk and Credit must be managed
 Active engagement and understanding is imperative
– After all, power supply is ~65-70%+ of total member cost

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“NEW” POWER SUPPLY: DERS AND VPPS

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 The New Power Supply
Distributed Energy Resources Virtual Power Plants
(DERs) (VPPs)
 DERs are small, modular, energy ● Aggregating DERs that provide the
generation and storage technologies that same grid services that a
provide electric capacity or energy centralized power plant would
 DER systems may be either connected to ● Example 1: Grouping households
the local electric power grid or isolated with thermostats that a utility can
from the grid in stand-alone applications control
 DER technologies include wind, solar, fuel ● Example 2: Connecting several storage
cells, reciprocating engines, cogeneration, batteries to wind/solar to send energy
batteries, programmable thermostats, EVs, back to grid
etc.

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VPPs & Duke Energy
 Aggregating customers’ DERs into 1 VPP that utility
controls - reduces energy and capacity needs on the
grid
 Duke– offering a solar + battery storage VPP pilot
program: control customers’ battery storage up
to 36 times/year in return for a monthly incentive
– Duke’s VPP programs already done
with consumer HVAC systems
 A Brattle study modeled the economics of VPPs – found
VPPs can provide resource adequacy at 40% to 60% of
the cost of alternative options
 Also aggregating controlled appliances to a
scale typically seen at power plants

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 VPPs in Texas
• ERCOT and PUCT pilot program testing how aggregated distributed
energy resources (ADERs) can bridge the gap between residential
rooftop solar + battery systems and the larger wholesale market
• Significant for Texas due to limited interconnections
• VPP markets require technology-agnostic solutions that support
consumer choice and scale
• Compared to traditional power plants, MWs from ADERs have no
preference or penalty (can be deployed as Non-spin or as energy via SCED)

If these DERs are intelligently aggregated into VPPs, the state of Texas can
conceivably eliminate reliance on peakers in less than 10 years
- T&D
World Confidential 21
Game Changer: Battery Storage

Source: Deloitte

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 Battery Storage: National Trends

 Utility-Scale battery storage

capacity in the U.S projected to
reach 30 GW by the end of
2025
 IIJA injecting $7 billion into
US battery and component
manufacturing and recycling
 Battery storage costs are
expected to continue rising in
2023+
 Average prices rose Source: EIA

to ~$200/kWh (EPRI), largely

due to supply chain challenges
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 Battery Storage Technology Trends
 Energy Storage Technology
– Near-term profitability
– Long-term integration with
renewables
 Short-Duration Energy
Storage
– Advanced Lithium
Batteries
– Lithium Alternatives
– Super Capacitors
 Long-Duration Energy
Storage
– Thermal Energy Storage
– Solid-State Batteries Source: International Energy
– Compressed Air Agency
– Iron-Air Batteries
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 EV Charging Infrastructure

 Adoption of EV’s limited by access

to convenient and affordable charging
 Infrastructure law of 2021 provided $7.5B
for a national network of 500,000 EV
chargers
 Inflation Reduction Act extended federal
tax credits for vehicle purchases
 Charger development
months, from times are now
station conception about
to energizing $3.9B
18
stalls
 Many new charger installations require
new transformers which are subject to
supply chain delays Source: Grand View Research

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 Smart Charging
 Utilities increasingly setting rates
that encourage off-peak
charging
 Pilot activity is largely focusing on
fleet V2G programs and vehicle-to-
home charging
 Will contribute to the rise in DERs
while increasing difficulty in load
forecasting
 DERMS (Distributed Energy
Resource Management Systems) are
beginning to utilize machine Source: Bosch
learning with remote sensors to
optimally charge EV’s
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HOW TO APPROACH POWER SUPPLY
PLANNING TODAY
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Used to Be…

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NOW

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 What Do You Need?

 Cross Functional Team from Traditional Departments

– Power supply
– Engineering & Operations
– Energy management
• Dispatch
• Residential marketing
• C/I marketing
– Finance & Accounting
 Power supply planning experience
– Includes economic analysis and risk analysis skills

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 Economic Analysis

 What: Economic Analysis is a specific knowledge area of economics

focused on project evaluations
 Why: Used to understand economic viability of any scenario/solution
 How:
1. Classification of cost
2. Interest and interest formulas
3. Cash flow analysis: present & future worth, benefit-cost ratio,
payback/ROR
4. Financial decision-making: decision criteria, ranking
methods

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 Risk Analysis

 What: Risk Analysis is a specific knowledge area of quantifiable and

non- quantifiable situations focused on project evaluations.
 Why: Used to assess uncertainty to an expected outcome.
 How:
1. Which assumptions are vulnerable to change in different situations?
• What is the probability of occurrence?
• What is the magnitude of impact?
2. What can be done to reduce the High occurrence/High magnitude risk?

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 Summary

 ERCOT Market Forces Effecting Power Supply

 “New” Power Supply Resources
 Power Supply Planning Today

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