Before the U.S. Environmental Protection Agency released its Clean Power Plan earlier this year, with goals for each state to slash carbon dioxide emissions, Texas was already preparing for a changing energy mix.

The Lone Star State’s grid operator, ERCOT, has been evaluating its grid-balancing needs as it takes on more wind power, while coal is retired at an increasing pace.

Under the new EPA rules, even more coal would be shelved -- up to 9,000 megawatts. With growing intermittent renewable energy loads, especially wind, and fewer thermal power plants, ERCOT needs to find new resources to provide much of its ancillary services in the coming years.

“The generation mix is changing,” said Kenneth Ragsdale, principal of market design at ERCOT. “The type of resources available is changing.”

Although ERCOT does not fall under FERC jurisdiction, it is also following in the footsteps of other regional grid operators that were mandated under FERC Order 755 to pay more for faster-responding grid-balancing services. Currently, responsive reserves are sort of a catchall for much of the frequency control in ERCOT, with several distinct operational requirements all bundled together.

“This creates an awkward fit for the capabilities of some existing resources and new technologies which could otherwise provide valuable services,” ERCOT wrote in its ancillary services redesign request.

To fix that, ERCOT is redesigning the market to allow faster-responding assets to be paid more. 

“We will have markets, and there will be competition to provide it,” said Ragsdale. “We should get the best prices because of the competition.”

Not all grid services will be affected; emergency response, voltage support and black-start services will not be changed.

The responsive reserves will be unbundled into fast response, primary and contingency reserve. Fast-response frequency response is further split into two products, one of which only has to participate for 10 minutes at a time. The fastest resources will have to respond to ERCOT signals within half a second, while primary resources are called upon on a continuous basis.

As the services are designed now, some valuable resources such as batteries, flywheels, cold storage and compressed air energy storage have not been able to play any significant role in the market.

If the process redefines the regulation signal and makes it more granular, batteries could be one of the big winners. But ideally, the market would look at storage as an entirely new category, and not just as a generation asset in the ancillary services market, said Matt Roberts, executive director of the Energy Storage Association.

The faster-responding resources, such as demand response and batteries, will be paid more than primary resources, but how exactly that calculation will be made is still up for debate in ERCOT.

ERCOT is also updating its methodology for responsive reserves. In the past, it was set at 2,800 megawatts all the time.

In the future, the load requirements will be figured in four-hour sets and will also be set closer to when they are needed, rather than a whole year ahead. It will likely be a day-ahead market, said Ragsdale. By aligning resources more closely with current market conditions, “we’ve eliminated all kinds of uncertainty,” he added. In PJM, faster resources can follow the signal more accurately and quickly, and this has allowed the grid operator to lower its regulation requirement.

“Because storage is faster, better and stronger, it actually shrinks [ancillary] markets,” said Roberts.

Although some uncertainty is resolved with the proposed changes, plenty will still remain. ERCOT conducted a pilot with grid-scale batteries and a fleet of EV trucks to understand how to provide a signal to more distributed frequency regulation resources.

During the pilot, the grid frequency signal was not sent directly to the EV trucks, although they probably would have to be able to receive it to be a part of the new market. Another issue is how ERCOT will handle smaller, distributed resources, including the question of whether an aggregator will deliver them all together as one resource.

“We have a bigger picture of how we deal with smaller resources on the system,” said Ragsdale, “but those details have not been hammered out.”

A full cost-benefit analysis is expected out in the late spring of 2015. If the board approves the changes next summer, the new rules would be implemented three years later.