THE MERCHANT SOLAR PATH: Increasing Regulatory Certainty for the Settlement of PV Generation Resources in the ERCOT Market

Transcription

1 THE UNIVERSITY OF TEXAS SCHOOL OF LAW Presented: RENEWABLE ENERGY LAW January 28-29, 2014 Austin, Texas THE MERCHANT SOLAR PATH: Increasing Regulatory Certainty for the Settlement of PV Generation Resources in the ERCOT Market Clay A. Butler, Author & Speaker Chad Blevins, Co-Author Clay A. Butler Austin, Texas Continuing Legal Education

2 About The Butler Firm is a combined legal and consulting firm that focuses solely on servicing clients in the Clean Energy Market. The firm represents and serves some of the largest and most prominent clean energy companies in the United States. The firm s attorneys and consultants provide comprehensive services to project developers, lenders, investors, insurers, engineers, construction contractors, and public entities for clean energy projects throughout the world. In addition, the firm provides both financial and legal due diligence services as part of its mergers and acquisitions practices. These services include economic modeling, cash flow analysis, contract assessment, and tax review. About Clay A. Butler Clay is the founder of The Butler Firm and one of the leading attorneys in the U.S. working on the development and acquisitions of renewable energy power plants and has experience at all spectrums from utility-scale project development to distributed generation. He has worked on behalf of some of the largest companies in the renewable power industry. Clay s current focus is managing the firm s mergers and acquisitions group which has performed financial and legal due diligence on over 500 MWs of solar projects for developers and investment groups in the US and Latin American markets. For his work Clay was named to the esteemed Who s who in Energy list for 2013 by the Austin Business Journal. His involvement goes beyond the client level. Among his various leadership roles in the community Clay served as the Policy Chair for the Texas Renewable Energy Industry Association, serves on the Electric Utility Commission for the City of Austin, is a board member of the Texas Solar Energy Industries Association and is an alumnus of the National Renewable Energy Laboratories Energy Executives program. Clay is a proud veteran of the United States Marine Corps. He earned his law degree from St. Mary s University School of Law and his undergraduate degree from Texas State University. About Chad Blevins Chad Blevins serves as the chief financial analyst and ERCOT market analyst for The Butler Firm. He advises in the disciplines of energy finance, energy policy, and emerging technology markets. His practice includes building financial cash flow models using specific market structures, statistical analyses, and incorporating uncertainty (using Excel and Monte Carlo building computational economic models of resource trading; and monitoring ERCOT and PUCT stakeholder deliberations. In addition to his duties at The Butler Firm, Mr. Blevins is the chair of the Emerging Technologies Working Group at ERCOT and is on the CleanTX Leadership Council. Prior to joining the firm, he conducted due diligence, market assessments, and economic impact assessments for the ATI Clean Energy Incubator. Mr. Blevins served as the President of the Energy Resources Group at the University of Texas while he was a graduate student in the Energy & Earth Resources masters program (degree pending). Mr. Blevins is an Air Force Distinguished Graduate and Summa Cum Laude alumnus of Saint Edward s University., 1601 Rio Grande St., Ste 331, Austin, TX P (512) F (888) E butler@thebutlerfirm.com

3 Table of Contents I. Introduction... 2 II. The Revision Process... 3 A. Completing the NPRR... 4 B. The Sponsor Strategy... 4 C. Submitting the NPRR... 5 D. The PRS... 5 E. The TAC, the Board of Directors, and Beyond... 6 III. Revisions in Process for PVGRs... 7 A. NPRR IV. Future Revisions... 8 V. Conclusion... 9 APPENDIX A NPRR Process Chart APPENDIX B - Links Page 1 of 12

4 The Merchant Solar Path Increasing Regulatory Certainty for the Settlement of PV Generation Resources in the ERCOT Market, by Clay A. Butler and Chad Blevins of The Butler Firm, PLLC I. Introduction The electricity market in ERCOT is governed by the 24 Section, thousand + page Nodal Protocols primary document, as well as 51 separate Other Binding Documents (OBDs). These Protocols define generation resources, and determine how they are allowed to interconnect and participate in the ERCOT market. Market participants require this level of specificity in order to reduce the uncertainty surrounding their potential revenues resulting from entering and transacting in the market. As an example, in the primary Nodal Protocols document (version January 7), the term WGR (for Wind Generation Resources) is referenced over 200 times. These references specify such things as Ramp Rate Limitations for WGRs ( ) and calculating Capacity Ratio Shortfall Shares for Qualified Scheduling Entities (QSEs) with WGRs ( ). Photovoltaic Generation Resources (PVGR), however, are not currently defined in the Protocols. Generation Resources of this type are, thus, handled either as a generic non-wind resource, or in the catch-all Intermittent Renewable Resource (IRR) category. So, while a PVGR can presently participate in the ERCOT market, it does so with a greater uncertainty regarding its treatment. This uncertainty is reflected in a reduced riskadjusted returns projection for potential projects. Thus, making it harder to economically justify the investment. Page 2 of 12

5 And yet, the commercial interest in building PVGRs to participate in the ERCOT market is clear. According to ERCOT s latest System Planning Monthly Status Report (December 2013), there are 2,849 MWs of Solar Generation Interconnection Requests currently under review. In addition, there are 130 megawatts (MWs) of Solar Generation with signed Interconnection Agreements and there are 1,691 MWs of Solar undergoing Full Interconnection Studies (representing 22 potential projects). The developers and financiers of these projects and other potential projects have an interest in revising the existing Nodal Protocols and OBDs to reduce uncertainty and insert language that is specific to a PVGR. II. The Revision Process The change request process in ERCOT utilizes a formal Nodal Protocol Revision Request (NPRR) document in the case of making changes to the primary document, and Other Binding Document Revision Request (OBDRR) document in that case. There are also corresponding processes for Commercial Operations Market Guide Revision Requests (COPMGRR), Competitive Metering Guide Revision Requests (CMGRR), Load Profiling Guide Revision Requests (LPGRR), Operating Guide Requests (OGRR), Nodal Operating Guide Requests (NOGRR), Retail Market Guide Revision Requests (RMGRR), Settlement Metering Guide Revision Requests (SMOGRR), and System Change Requests (SCR). Page 3 of 12