ERCOT NPRR 1186 Amendment Softens SOC Requirements in Ancillary Services Market

The ERCOT ISO region of Texas continues to be one of the top two regions in the U.S. for BESS installation activity, along with California’s CAISO. According to S&P Global Commodity Insights, ERCOT accounted for 40% of newly installed BESS capacity in Q3 of 2023. Even as strong development activity there continues, the ERCOT market has been in a bit of an upheaval since a proposed rule change in December 2022 that would require Energy Storage Resources (ESRs) to have state-of-charge (SOC) at the beginning of an award period sufficient to provide the awarded power for the full duration of the award. The proposed change is contained in ERCOT’s Nodal Protocol Revision Request (NPRR) #1186. The purpose of the proposed change was to provide greater transparency and predictability of award fulfillment by ESRs, but asset owners and others have voiced concerns that there would be negative unintended consequences to the new rule.

The major predicted negative consequence is that significant ESR capacity could be side-lined during situations when power is urgently needed to support the grid (e.g., a major weather event), simply because some ESRs might not have sufficient SOC to complete a contract-increment time period of power provision. This would potentially lead to an effective reduction in ESR capacity in ERCOT.

A second potential unintended consequence is the diminution in the value of one-hour BESS systems. Since most ancillary services are awarded in at least one-hour increments, one-hour BESS systems would be unable to provide these services at their full rated-power capacity under the proposed rule change, since they would never be at 100% SOC, nor able to discharge to 0% SOC.

However, Energy Storage News is now reporting that ERCOT, in its November Board meeting has approved an amended final version of NPRR #1186 which limits the duration requirement to one hour, rather than potentially multiple hours in cases where an ancillary service contract is awarded in two or four-hour increments. This amendment should ameliorate the unintentional sidelining of ESR capacity because it will result in two-hour and larger storage capacity systems having sufficient capacity to participate in ancillary service a greater percentage of the time. However since the rule change still maintains the minimum one-hour SOC requirement, it seems that in its final form, it will still harm the business case for one-hour BESS systems in ERCOT.