The Electric Reliability Council of Texas is considering doubling the size of a virtual power plant pilot project, in addition to making a slate of other changes aimed at growing the underutilized program.
The aggregated distributed energy resource pilot, or ADER, launched in 2022 with a goal to harness 80 MW of flexible resources, primarily batteries, on the ERCOT grid. But so far only Tesla and Bandera Electric Cooperative have brought aggregations to the grid, accounting for about 15 MW.
The ADER project aims to evaluate the participation of aggregated distributed resources in the ERCOT wholesale market, but experts say initial limits on the program have kept it from achieving its goals.
Commissioner Jimmy Glotfelty has helped lead the ADER effort from the Public Utility Commission of Texas, working as a liaison to the task force which developed the initial rules for the pilot project with the grid operator.
“I’m happy with where we are,” Glotfelty told Utility Dive. “But there are some things which need to change” about how the program is set up. “Success, to me, is if in three years, or two years, we have 300 MW or 500 MW and it's a general part of the market system.”
At a time when Texas energy demand is rising and the state is rushing to add resources, lawmakers have taken an interest in the ADER program and how it can help keep the state’s electric grid reliable.
ERCOT Senior Vice President and Chief Operating Officer Woody Rickerson testified before the Texas Senate Committee on Business and Commerce in October, discussing challenges which have limited the ADER program. Whereas the grid operator has typically focused on larger, transmission-connected resources that might be 100 MW in size or larger, ADER focuses on pulling together resources around 0.1 MW in size, operating at lower voltages.
“That’s not something ERCOT has typically had any hand in,” Rickerson said.
“It sounds like a lot of work to get 15 MW,” said Sen. Charles Schwertner, a Republican and chair of the Senate Committee on Business and Commerce.
“It has been a lot of work, but I do think it has some potential,” Rickerson replied.
Difficulty in getting DER aggregations to respond to precise grid signals has been one barrier to their participation in the ERCOT market. “We’re opening up a new phase where there will be bigger signals so [aggregations] won’t have to be as precise,” Rickerson said.
There are also potential changes to how qualified scheduling entities, or QSEs, represent aggregations in the market. In ERCOT, QSE’s submit bids and offers to ERCOT on behalf of resource entities or load serving entities, charging fees for their service. And ERCOT does not allow aggregators to bundle aggregations across load zones, further raising costs for aggregators.
“That is the number one barrier to entry” to ADER participation, said Arushi Sharma Frank, founder of energy consulting firm Luminary Strategies. Sharma Frank participates on the Public Utility Commission of Texas’ ADER task force through her company, and formerly served as vice chair when she worked for Tesla.
While large, centralized generators have revenue potentials that are much larger than the cost of telemetry systems and other QSE costs, ADERs have a break-even point around 15 MW to 20 MW, Sharma Frank wrote on behalf of Tesla in 2023 in a task force memo. “This scale is at or above current QSE caps, which must be increased,” she wrote, referring to the ADER pilot’s initial limits.
Sharma Frank says a host of barriers to entry have limited the ADER pilot’s size.
“We were far too conservative on Day One of the pilot because it was new,” she said. The 80 MW cap was too low, and it was split across eight settlement zones creating multiple smaller caps. Other limits — such as what services the pilot could provide to the ERCOT market — have also kept the program from fulfilling its potential, she said.
The caps and limits “create a depressing signal on market interest,” Sharma Frank said. “You can't create a model of what you could get out of a program at its zenith, if what the regulators give you up front is a bare fraction of that, and there's no certainty of opportunity.”
The commercial and strategic work required to pull off complex, multi-party relationships in the ERCOT market, like the ADER pilot, “fundamentally rests on there being such a huge number on the other side, of value, that all these folks can come in and sit at the same table and agree to split that value,” Sharma Frank said. “That's the opportunity that was missing.”
Glotfelty has also pressed for consumers to be able to register their equipment with the aggregator of their choosing. In particular, he has expressed concern that Tesla Powerwalls are only able to participate in the ADER project through a Tesla retail provider.
“We have an open market in Texas, and choosing how you want to be a part of a resource group should be part of that,” he said.
The task force is hoping to address many of the barriers with an update to the pilot’s governing documents. ERCOT has just completed a first pass of those changes and sent red lines of the governing documents back to the group. Those changes will be reviewed at a Dec. 18 meeting.
If the task force agrees with ERCOT’s changes, then the grid operator will complete a final review and the changes go to the commission for approval. The first quarter of next year seems to be the “right guess” for when that will happen, Sharma Frank said. She expects the market can respond to the ADER updates within a year because so much time has already been spent addressing technical issues.
The changes
The first and second phases of the ADER pilot limited the combined registered capacity of all ADERs to 80 MW and subsequently split the services they could provide, 40 MW each between ERCOT’s ancillary non-spin and contingency reserve services. The grid operator is now proposing to increase those limits to 160 MW and 80 MW, respectively, “to allow the pilot to continue to grow and evolve,” according to task force workshop documents from the Nov. 18 meeting.
The proposed changes also include allowing aggregations to participate in the ADER project through a new Aggregated Non-Controllable Load Resource framework, or A-NCLR, which will accommodate more “blocky” responses from aggregations struggling to meet telemetry requirements.
“Blocky” refers to larger loads coming off the system in chunks, as opposed to smaller amounts of capacity.
NCLRs are typically large demand response resources on the ERCOT system that respond in bigger chunks than the 5-minute granular responses the ADER pilot initially required from devices.
“Some of the technical requirements for participation in some of the ancillary services are a little onerous,” Glotfelty said. “And they are onerous for a reason — to ensure that we could, in this first phase, aggregate different amounts of load across regions, and that we could find ways to ensure that the market signals and the pricing was set accurately.”
Now the task force is looking for ways to “tear down barriers” to resource participation, he said.
“The A-NCLR framework makes both communication to and from an aggregation of devices, and the response, easier and cheaper for the participants to provide, and more blocky in how ERCOT views it, which is just an extension of how ERCOT already receives blocky responses from large loads today,” Sharma Frank said.
The proposal also opens the door to bundling aggregations, Sharma Frank said.
“Because the response is blocky, the technical back-end work that one QSE has to do should decline sharply, and we should be able to take multiple entities’ aggregations through a single chain of command to ERCOT,” Sharma Frank said. “It would completely change the barrier-to-entry problem.”
As for issues of interoperability, and moving equipment from different manufacturers between aggregators, Sharma Frank expects those issues will be addressed as the market expands.
“The interoperability challenge in Texas is related to ... the suppression of economic growth value,” she said. Equipment manufacturers are not going to spend money to integrate with new providers if the revenue opportunity is small, she said.
Beyond batteries
The future of DER aggregations in Texas will hinge on the effective integration of resources and expanding what types of resources can be aggregated, John Padalino, chief administrative officer and general counsel of Bandera Electric Cooperative, told the Senate Business and Commerce committee. Bandera is one of the two ADER aggregations operating today, along with Tesla.
In 2017, Bandera developed Apolloware, an appliance-level electric meter that can provide real-time energy feedback, Padalino said. It can connect devices from different manufacturers while also meeting ERCOT’s telemetry requirements.
While a limited number Texas homes have battery backup systems, Padalino said about 1.3 million do have smart thermostats. “If we convert just 40,000 thermostats into registered ADER participants, we can achieve the 80 MW goal,” he told lawmakers.
For now, the ADER program is largely designed to accommodate small devices capable of dispatchable exports of energy to the system, Sharma Frank said. But the changes to allow for blockier load participation could mean more types of devices are enrolled.
NRG and Renew Home announced last month they are partnering to deploy hundreds of thousands of smart thermostats across Texas to support a residential virtual power plant with nearly 1 GW of capacity by 2035. The VPP is not a part of the ADER project but “speaks to a large-scale effort to increase our VPP capabilities in ERCOT,” NRG said in a statement.
Reliant, NRG’s flagship retail electric provider in Texas, has an aggregation that is registered with the ADER pilot and is undergoing testing with ERCOT, the company said.
Sharma Frank said NRG’s announcement is “a follow on to the fact that ADER has created a roadmap for revenue certainty.”
“No one entity had ever successfully put out lots of megawatts from an aggregation of sub 1-MW sites. Now that we're actually doing it, ERCOT is learning a lot from that process and they're creating validation around the technology,” Sharma Frank said. “It has made the market opportunity more meaningful, scalable and more certain, because it's actually happening.
