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Texas REPs Say Allowing VPP Provider Other Than Customer's REP Would Harm Reliability, Slow VPP Development
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Allowing Texas customers to use a virtual power plant (VPP) provider, compensated through the ERCOT market, that is not the customer's retail electric provider, would harm reliability and could hinder development of VPPs, a group of REPs participating in the Aggregate Distributed Energy Resources Task Force as well as members of the Texas Energy Association of Marketers (collectively, the REP Group), said in comments to the Texas PUC
The REP Group was responding to a directive from Texas PUC Commissioner Jimmy Glotfelty who, in setting forth next steps for the ADER task force, said that the task force should, "look at if it is possible for a consumer to select a VPP provider that is not their Retail Electric Provider."
See background here
The REP Group noted that REPs are the entities which assume the financial obligation for serving all of the retail customer's load
Customer participation in a VPP offered by a third party, particularly one monetized through the ERCOT market, disrupts the REP's ability to fulfill this market-assigned obligation
Unexpected load variations, due to VPPs operated by third parties into which REPs do not have visibility, would have, "significant negative financial
impacts," on REPs' risk and load management, resulting in retail rate premiums, the REP Group said
Moreover, a third party operating a VPP, independent of also being the customer's REP, could negatively impact "supply" obligations undertaken separately by the customer's REP, threatening reliability. For example, a REP may be planning to use a customer's battery during a specific time period under an ERCOT reliability or A/S program, but the third-party VPP provider may discharge the battery prior to this time period, leaving the REP, and market, short of the expected supply
The REP Group said that, "Such conflicts are not just
theoretical; members of the REP Group have encountered conflicts in which non-affiliated third-party
aggregators have enrolled devices in transmission and distribution utility (TDU) energy
efficiency programs or ERCOT Emergency Response Service (ERS) at the same premise where
the REP is serving its retail customer."
ECM observes (in a view that is solely ECM's own and which does not reflect the REP Group's comments) that it bears noting that former PUC Chair Peter Lake, in stressing the new approach to ERCOT reliability after Uri, repeatedly insisted that REPs would now be required to "guarantee" that the REP's power supply to customers is, "from a reliable source" (see background here).
Essentially, as observed by ECM, Lake took aim at "fly-by-night" REPs which rode the market and which did not procure supplies to hedge for their customers.
As such, for the past few years, ECM observes that the expectation from the PUC has been that REPs would appropriately hedge their super-peak exposure and other load risk. Such conservative operations necessarily include a higher cost to REPs from procuring (via hedging) extra supplies that customers may need
ECM observes that introducing third-party VPP providers into this dynamic -- where VPP providers are not responsible for serving any of the customer's load and do not assume any of the costs of reliably serving the customer with power supplies -- departs from the PUC's post-URI stance for the PUC's desired REP behavior.
First, ECM observes that embracing third-party VPP providers would undercut REPs who followed the PUC's direction and arranged, at great expanse, for reliable power supplies for their customers, by introducing a heightened risk that the REP will not be able to recover costs of these procured supplies (as potentially no usage from the customer may occur if the VPP is discharging power, and the REP can not bill for these hours under a usage-based bill).
Second, ECM observes that a policy of non-LSE VPP providers returns to a paradigm that the PUC had sought to abandon, where an entity is earning money from retail customers without this entity assuring that supplies have been arranged to serve the customer reliably. Pre-Uri, the behavior in question was unhedged REPs which, as painted by then-Chair Lake, served customers without procuring reliable supply. Under a VPP in which the VPP provider is not the customer's REP, the VPP provider is essentially selling power procured by the REP without the VPP assuming any obligation to procure such power, or to serve the customer's load if the VPP does not deploy the anticipated megawatts (due to customer opt-outs, etc.)
Returning to the REP Group's comments, the REPs said that if Glotfelty's sought review of the suitability of allowing a VPP provider other than the customer's REP was prompted by a lack of participation in the ADER pilot, then the focus should be on technical, operational, and/or market design challenges which may be preventing greater participation by REPs
The REP Group further noted that REPs are actively creating VPPs that are not monetized through ERCOT market programs as the ADER pilot is, and are thus not part of the ADER pilot VPP megawatt quantities. These non-ERCOT-market VPPs, REPs said, avoid technical dispatch requirements or limitations and the risk of non-performance penalties
The REP Group cited previously reported VPPs which are being developed, outside of the ADER pilot, by Octopus Energy, TXU, and NRG
The REP Group raised the specter of customer confusion from multiple parties controlling customer devices or directing the customer to respond (e.g. both the REP and third-party ADER provider)
Additionally, the REP Group noted that, currently, VPP providers are not subject to PUC licensure, while REPs must be certified by the PUC
The REP Group consisted of, "Octopus Energy, NRG
Energy, Vistra Corp., Shell Energy North America, and Base Power Company participating as
members of the Aggregate Distributed Energy Resources Task Force (ADER TF), collectively
'ADER REPs,' as well as REPs that are members of the Texas Energy Association of Marketers
(TEAM) (collectively 'REP Group')."
Project 53911
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November 18, 2024
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Reporting by Paul Ring • ring@energychoicematters.com
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