History of ORDC

History of the Development of Operating Reserve Demand Curve (ORDC)

  • In June 2012, the Brattle Group filed its report (6/19/12) on the options to resolve resource adequacy concerns in ERCOT.  This brought into the open discussions on whether to improve the Energy-only Market (EOM) or move toward a capacity market;
  • In the summer and early fall of 2012, the PUCT held several workshops, with parties filing comments in July (7/24/12),[1] August (8/30/12), September, and October (10//23/12);
  • GDF Suez filed supplemental comments on 11/14/12, which included a paper by Prof. Hogan on “Electricity Scarcity Pricing through Operating Reserves: An ERCOT Window of Opportunity” (355).  It proposed to implement an Operating Reserve Demand Curve (ORDC) as one response to the resource adequacy concerns;[2]
  • The PUCT directed ERCOT to evaluate implementation options for an ORDC, but the staff found that to accomplish the task, as offered in the paper, would be too expensive and lengthy;[3]
  • Subsequently, the staff worked with Prof. Hogan on a modified proposal, which was filed on 1/22/13, as the “Interim Solutions to Improve Scarcity Pricing by Utilizing Reserve Demand Curves” (369).  This paper contained Options A (focusing on generator energy offer floors) and B (focusing on an ORDC);
  • On the same day, GDF Suez filed supplemental comments (370), with Prof. Hogan’s paper “Improved Electricity Scarcity Pricing and Operating Reserves;”
  • At the 1/24/13 workshop,[4] the Commission expressed preference for Option B, which, after additional modifications, came to be known as B+;[5]
  • At the request of the Commission, ERCOT staff have filed back-casts/analyses of Option B+, including the latest ones, on 3/22/13 – 392 and on 5/3/13 – 402;[6]
  • On 5/17/13, ERCOT filed an impact analysis of cost and timeline estimates for the B+ implementation (406), noting that it would take six-to-eight months and cost $100K-$200K;
  • As another workshop was announced (for 6/27/13), stakeholders filed comments on 5/31/13;
  • On 6/18/13, ERCOT filed Estimating the Value of Lost Load (VOLL), as prepared by London Economics Inc. (LEI).  A third part of the study has yet to be done; [7] and
  • On 6/25/13, ERCOT filed the Brattle Group’s estimates for the economic equilibrium planning reserve margin, using an ORDC (429).

 


 

[1]  Starting with this date, the Commission moved all resource adequacy filings into Project No. 40000 – Commission Proceeding to Ensure Resource Adequacy in Texas.

[2]  Prof. Hogan stated on more than one occasion that this ought to be done regardless of the market structure, as a necessary (first) step.

[3]  In March 2013, ERCOT finalized its Loss of Load Study – ERCOT Loss of Load Study-2013-Part II (results) and ERCOT Loss of Load Study-2013 (methodology).  Also, on 5/1/13, ERCOT issued the Capacity, Demand, and Reserves (CDR) Report, with a slightly improved forecast.  

[4]  This was sponsored by GDF Suez, but was billed as a PUCT open meeting. 

[5]  Option B was a calculation, based on the Loss of Load Probability (LOLP), Value of Lost Load (VOLL), and the level of available reserves in real time.  At the 1/24/13 workshop, concerns were raised about the Option B because of negative-market behavior, which the proposal could incent.  Modifications were made to add an Ancillary Service (AS) imbalance settlement to Option B, thus producing Option B+, which then became a part of the Interim Solution B+.

[6]  Earlier analyses were filed on 2/13/13 (373) and on 3/22/13 (390).  The staff looked at what energy prices (and the Peaker Net Margin) would have been in 2011 and 2012, with the minimum contingency levels of 1375MW, 1750MW, and 2300MW (the 2300MW level was added in the 5/3/13 filing).

[7]  The filed materials contain an overview of the literature and a macro-economic analysis; LEI stated that to get a VOLL number specific to ERCOT, a customer survey would have to be carried out.  This may be done later in the summer/fall.

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