ERCOT Market Monitor’s New Report Highlights Lower Prices and Higher Congestion

ERCOT Market Monitor’s New Report Highlights Lower Prices and Higher Congestion

June 2 2017

by Margarita Fournier, Copyright 2016 by Competitive Assets, LLC.  All rights reserved

ERCOT’s Independent Market Monitor (IMM) has issued the 2016 State of the Market Report. The report, filed in Project No. 34677, assesses the ERCOT market’s performance in 2016. Its main findings center around lower prices and much higher congestion in 2016:

  • Lower natural gas prices and surplus supply led to lower energy prices in 2016:
    • The ERCOT-wide load-weighted average real-time energy price was $24.62 per MWh in 2016, an 8 percent decrease from 2015;
    • The average price for natural gas was 4.7 percent lower in 2016 than in 2015, decreasing from $2.57 per MMBtu in 2015 to $2.45 per MMBtu in 2016;
  • Real-time prices did not exceed $3,000 per MWh in 2016, and exceeded $1,000 per MWh for only 3.9 hours cumulatively for the year;
  • ERCOT-wide real-time prices were negative for approximately 130 hours in 2016, a significant increase from the approximately 50 hours with negative prices in 2015;
  • ERCOT set a new hourly demand record of 71,110MW on August 11, 2016, an increase of 1.8 percent from the previous peak set in 2015. Average demand also rose in 2016, increasing 0.7 percent from 2015;
  • The total congestion costs experienced in the ERCOT real-time market in 2016 were $497 million, an increase of 40 percent from 2015. Transmission outages were the primary causes for this increase;
  • Net revenues provided by the market during 2016 were less than the estimated amount necessary to support new greenfield generation investment, which is not a surprise given that planning reserves are above the minimum target and shortages were rare in 2016; and
  • The Operating Reserve Demand Curve (ORDC), combined with a relatively high offer cap, should increase net revenues, when shortages become more frequent.

 

The PUCT has opened Project No. 47199, Project to Assess Price-Formation Rules in ERCOT’s Energy-Only Market, to study causes and solutions to the persistence of low energy prices in ERCOT

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