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Latest Developments on ERCOT Resource Adequacy
May 1, 2014 ERCOT Provides Additional Information on CDR
Copyright 2014 by Competitive Assets, LLC. All rights reserved
On 5/1/14, ERCOT staff spoke to media to relate additional information on the release of the Capacity, Demand, and Reserves (CDR) report and summer and fall 2014 reports:
ERCOT’s CDR Report Shows New Generation Added
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On 5/1/14, ERCOT released its Capacity, Demand, and Reserves (CDR) report, the final Seasonal Assessment of Resource Adequacy (SARA) for summer 2014, and a preliminary outlook for fall 2014. The CDR’s Executive Summary states: “Currently available information indicates that the planning reserve margin in the ERCOT region will be approximately 14% for the 2015 and 2016 summer seasons, and then decrease to 13.8% for the 2017 summer season. Subsequent to the last CDR report released on February 28, 2014, NRG announced that its five S.R. Bertron units, with a combined summer rating of 727MW, will not return from mothball status. New capacity added since the February CDR report includes the FGE Texas 1 natural gas combined-cycle plant, with a summer rating of 703 MW. This facility is projected to be available for the 2017 summer season.” “The outlook improves significantly by August, when we typically experience the highest system peaks of the year,” said Warren Lasher, director of System Planning. “We may need to ask consumers to reduce electric use if we experience extremely hot weather or widespread unit outages during the early summer months.” Six new generating units, totaling 2,153MW of combined capacity are expected to begin operations in August 2014, with 2,112MW of that coming from four new facilities: Ferguson Replacement, Panda Sherman, Panda Temple I, and Deer Park Energy Center [this will increase the reserve margin to about 15.2%].
Texas Rep. Phil King Concerned about EPA Carbon Emission Rules’ Impact on Texas Electricity Market
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Texas House Representative Phil King is concerned that new EPA carbon emission rules will the affordability and reliability of Texas’ electricity. In an opinion piece published by Texas Energy Report, Rep. King notes that Texas has a true “all-of-the-above” strategy when it comes to electricity, with “coal, natural gas, nuclear power, and the nation’s largest fleet of windfarms.” He fears that the efforts in Washington, D.C. to further decrease carbon emissions from coal and natural gas plants is designed specifically to phase out these power sources. The efforts of the EPA are removing the flexibility that Congress gave the states in meeting clean air standards. He stresses that the “EPA should not be allowed to strip Texas of that freedom, nor to impose unreasonable mandates that will make our electricity more expensive and less reliable.” Leaders in Texas and a number of other states are letting the EPA hear about this, and he encourages others to let their voices be heard concerning the proposed power plant rule.
April 24, 2014: Lawsuit Accuses Texas Electricity Company Of Market Manipulation
April 23, 2014: Electricity Prices in Texas Fall Amid Below-Forecast Demand
April 23, 2014: US Power Dailies Move Mixed, With Strong Northwest Gains
Market Participant Alleges Irrational Results In ERCOT Market
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On 4/21/14, the PUCT opened new Project No. 42424, Petition for Rulemaking to Remove §25.504(c), the Exemption from the Market Power Definition for Entities Controlling Less than 5% of the Generation Capacity in the ERCOT Region. The petition was filed by Raiden Commodities (RC), who alleges that “real and/or perceived ability” to exercise market power in the ERCOT’s energy-only market may be consistently leading to “irrational results.” Through examples, RC explains how the three premises that support P.U.C. Subst. R. 25.504(c) – i.e., that an entity with 5% or less of generating capacity, by definition, cannot exercise market power or have an effect on system-wide prices, and that, while high prices will not lead to more investment, the benefit of investment will exceed the cost to the market of high prices – are not representative of reality. The company proposes to delete the entire subsection (c), which has also been known as the “small-fish-swim-free” provision. In a related matter, earlier this year, stakeholders at ERCOT rejected NPRR574, Removal of Offer Curve Flexibility for Day-Ahead Market (DAM) Committed Resources. Among the supporters of this NPRR was RC, who commented that “allowing QSEs the ability to change offer curves in real-time to reflect said QSE’s position and/or due to QSE’s perception that market conditions are favorable to be influenced by altering offer curves, demonstrates the ability to control prices. This is strictly prohibited according to Commodity Futures Trading Commission (CFTC) regulations. We feel that current ERCOT protocols are failing to align with the CFTC laws and rules.”
April 21, 2014: Power Supply Outlook Tight But There’s Nothing To Worry About, Says DOE
April 21, 2014: EPA Proposals Jeopardize Affordable Power Supplies
April 18, 2014: Power Assets Not For Sale, LCRA Executive Says
April 17, 2014 PUCT to Look Outside ERCOT for Reliability Standard Ideas
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In anticipation of a discussion on “what reliability standard is appropriate for ERCOT,” Commissioner Anderson filed a memo in Project No. 42302, related to the review of the reliability standard. The memo states, in part: “As part of their review, I would ask Staff to determine what, if any, rationale, basis, or theory underlie the reliability standards adopted or used in other jurisdictions. If a region or jurisdiction does not have a reliability standard then this also should be noted and the rationale explained. In addition, I would ask Staff to request information (with copies if available) concerning what if any studies (including without limitation any cost benefit studies) or other analyses, were used to determine, justify, or support the relevant selected reliability standard.” This topic may be discussed at the 4/17/14 open meeting of the PUCT.
April 15, 2014: Power Jumps in Texas as Cool Air Boosts Demand Above Forecasts
April 14, 2014: Conn. Attorney General Alleges Generator “May Have” Exercised Market Power in Capacity Market
April 15, 2014: Texas Might Avoid Blackouts and Brownouts This Summer
April 15, 2014: Power Prices Advance From Indiana to Houston as Demand Rises
April 14, 2014: Power Prices in Texas Fall as Wind Generation Above Forecast
April 14, 2014 ORDC Training Underway at ERCOT
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This week, ERCOT has scheduled two training sessions on the implementation of the Operating Reserve Demand Curve (ORDC) – on 4/16/14 at Garland, and on 4/18/14 at Austin. The sessions’ agenda focuses on:
ERCOT’s State of the Grid Report Now Available
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ERCOT has now posted the 2013_ERCOT_State_of_the_Grid_Report. It provides basic facts about the grid system in ERCOT, lists issues of importance, and looks at the nodal market and the importance of the recently energized CREZ lines.
April 11, 2014
PUCT to Discuss ERCOT Reliability Standard at its Next Meeting
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At its 4/17/14 open meeting (OM), the Commission is scheduled to discuss questions related to “what reliability standard to use in the ERCOT region.” For the OM, the PUCT staff have filed a memo in related Project No. 42302, presenting the “scope of work on this matter, including a research plan and project schedule for investigation of relevant aspects of ERCOT’s reliability standard.” The staff’s plan includes researching reliability standards in other jurisdictions, collecting updated ERCOT calculations, gathering stakeholder input, and presenting findings and potential ranges of options for moving forward to the Commission. These efforts will be coordinated with ERCOT, and staff also expect to conduct a workshop and receive stakeholder comments.
April 10, 2014: Trade Group Leads Effort To Advance Energy Storage In ERCOT Grid
April 8, 2014: Demand Response Exceeds Expectations in Texas During January Grid Emergency
April 8, 2014: ERCOT Board Approves Houston Import Transmission Project
April 8, 2014: ERCOT News Release: New Transmission Project To Deliver More Power To Houston Area
April 2, 2014: U.S. Sen. Schumer Asks FTC to Investigate Polar Vortex Pricing
April 1, 2014: Demand Response Is the Best Cure for Texas’ Ailing Grid
April 1, 2014: Long-Time Capacity-Market Supporter Direct Energy Embraces “Freedom” for Texas Electric Market, Says “Choice” Fundamental
April 1, 2014 PUC Punts Capacity Market Decision To The Texas Legislature In 2015
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An article in the Dallas Business Journal notes that the legislature in 2015 may consider the structure of the Texas electricity market. At the recent Open Meeting of the PUCT, a workshop on resource adequacy was postponed indefinitely. In an interview, PUCT spokesman Terry Hadley noted this delay and also stated that a decision was made to not make changes to the energy only market until they can get input from the Texas Legislature. The article also notes that “fears that Texas will run short of electricity have subsided considerably in recent months since the state started using a new forecasting method to project future demand.” The Legislature convenes in January. A review of interim charges to date for the Texas legislature has not shown any topic that would include consideration of the electric market structure.
March 31, 2014: PUC Punts Capacity Market Decision To The Texas Legislature In 2015
March 31, 2014: Generators Zero-In on Problem of Polar Vortex — Prices Were Too Low!
March 30, 2014: Rising Utility Costs Lingering After Winter’s Chill Fades
March 28, 2014: News Release: Wind Generation Output In ERCOT Tops 10,000 MW, Breaks Record
March 27, 2014: Wind Power Sets New Daily Records In Texas
March 28, 2014: ERCOT Proposes Reduction in Cure Period
March 27, 2014: GHG Permit Issued For El Paso’s Natural Gas-Fired Power Plant
March 27, 2014: Automated Demand Response Proposed at CPS
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On 3/26/14, Honeywell announced “a two- year program with CPS Energy in San Antonio, Texas. The utility will use automated demand response (ADR) technology and services from Honeywell to connect and collaborate with commercial and industrial customers, and adjust electricity consumption when the demand for energy peaks. As a result, CPS Energy will have additional tools to enhance the stability of the Texas electrical grid, especially on hot summer days when air conditioners and other cooling equipment are often running at capacity.”
March 26, 2014 ERCOT’s Proposed Houston Import Transmission Project Lacks Consensus
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At its 3/27/14 meeting, the Technical Advisory Committee (TAC) will consider a proposal by ERCOT for the Houston Import Project. This was originally scheduled in February, but NRG asked for a delay. ERCOT staff clarified that, in July/Aug. 2013, CenterPoint Energy, City of Garland/Cross Texas Transmission, and Lone Star Transmission separately identified a reliability need to increase import capability into the Houston area by 2018. After an extensive review, ERCOT staff concurred, and are proposing to build a 345kV double-circuit line (130 miles) and several upgrades. The cost is estimated at $590 million. NRG, however, disagrees and filed its concerns with the HIP’s assumptions in time for the upcoming TAC meeting. NRG asserts that the staff’s assumptions are flawed and the proposal would not solve the “perceived reliability problem.” While the TAC members often review new transmission proposals, their approval is not necessary for the projects to proceed. The HIP may be considered by the ERCOT Board in April.
Stakeholders Seek PUCT Opinion on ERCOT’s Non-Spin Service Changes
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On 3/24/14, CPS Energy filed comments in Project No. 40000, related to resource adequacy. The comments inform the PUCT about NPRR576, Changing Non-Spin Service to Be Dispatched by ERCOT, which is now being considered by stakeholders at ERCOT. The revision request proposes to continue allowing On-Line Non-Spin, but also places it behind the High Ancillary Service Limit (HASL). Additionally, the minimum offer floor for On-Line Non-Spin would be reinstated, with the value to be determined by TAC. Previously, the Commission had approved offer floors for some Ancillary Services (AS), but eliminated them as part of the decision to approve the Operating Reserve Demand Curve (ORDC). The CPS comments, filed at the request of stakeholders, seek the PUCT’s feedback “on whether this proposed change is consistent with prior Commission decisions on offer floors for AS.”
March 26, 2014: NRG CEO Crane’s Vision for Energy Industry Again Inconsistent With Push for Capacity Market
March 24, 2014: New PJM Bal Day Application Manages Trader Price Risks in Extremely Volatile Energy Market
March 24, 2014: Demand Response: The Power Of Aggregation
March 20, 2014: Power Prices In Texas Rise As Wind Generation Below Forecast
March 19, 2014: FERC Conference on Winter’s Extreme Wholesale Pricing Doesn’t Include Any Retail-Only Suppliers
March 17, 2014: PJM ‘Statement’ on Winter 2014 Cold Weather Events
March 17, 2014: Merchant Generators Don’t Care If Retail Choice Dies
March 11, 2014: Cold Snap Knocks Texas Electric Generators Offline
March 11, 2014: ERCOT Details Outages During Jan. 6 Cold Snap
March 11, 2014: Electricity Prices Fall From Texas To Boston As Demand Drops
March 12, 2014: State Regulators Say PJM Generators Seeking To Recover Inflated Costs Not Actually Experienced Under FERC Waiver Make-Whole Payments
March 10, 2014: Coal’s Share Of ERCOT’s Market Grows Stronger, Gas’ Share Continues To Fall
March 10, 2014: Polar Vortex Emboldens Industry To Push Old Coal Plants
March 10, 2014: Texas Electricity Prices Rise As Power Demand Exceeds Forecast
March 8, 2014: Too Much Panic In Texas Power Market
March 8, 2014: Drought Hastens End Of LCRA’s Hydropower Era
ERCOT Reports on 1/6/14 Energy Emergency Alert Event
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On 3/6/14, ERCOT issued its Final Report on the 1/6/14 Energy Emergency Alert (EEA) event. After the event, ERCOT received several requests for information on resource outages and limitations during emergency operations leading up to, and including, the execution of the EEA plan on 1/6/14. With the expiration of the confidentiality period for the status of Resources, ERCOT has made its analysis of outages and limitations public. The final report includes the identification of Resources which had performance issues that day. Overall, at least 109 units experienced some type of a problem, including outages at Sandy Creek (LCRA/Brazos – 970MW) caused by frozen instrumentation and also at several Luminant units. The causes of outages throughout the day varied, with many being weather-related.
ERCOT Expects Tight Reserves At Start Of Summer Only
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On 3/5/14, ERCOT released the final Seasonal Assessment of Resource Adequacy (SARA) for this spring and a preliminary outlook for the summer. The accompanying press release states that: “Although tight conditions are likely on the electric grid during the early summer months, the outlook improves by late summer, when more than 2,100MW from four new natural gas-fired generation resources are slated to begin commercial operations.” These include Ferguson, Panda Sherman, Panda Temple I, and Deer Park Energy Center, and have a start date of 8/1/14. ERCOT anticipates peak demand in the summer to exceed 68,000MW, and the current drought conditions are not expected to cause operational problems.
March 4, 2014 ERCOT News Release This Morning (3/4/14)
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At 9AM, ERCOT send out a press release thanking consumers for helping to maintain grid reliability yesterday and this morning. “Energy conservation by consumers has helped ERCOT keep generation and electric demand balanced during this extremely cold, windy weather,” said Dan Woodfin, ERCOT director of System Operations. “We appreciate this support, as well as efforts by generation and transmission companies to keep as many facilities available as possible.” Peak demand on Monday morning reached 54,549MW, exceeding ERCOT’s previous March peak demand record from 2002, by more than 11,500MW. Hourly demand figures remained above the previous record the entire day. ERCOT said that electric use was lower than expected during these cold temperatures, and remained low enough to prevent an energy emergency. Peak demand on Tuesday morning was about 4,000MW lower than Monday, as temperatures started to rise. The Conservation Alert is no longer in effect.
ERCOT Stakeholders Address Price Reversals In the Market
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Responding to a directive from the PUCT at the last open meeting, stakeholders at ERCOT re-opened the Resource Adequacy Task Force (RATF) to address questions around price reversals/suppression that may happen in the market under certain circumstances. The group’s first meeting was on 3/3/14 to discuss three items and potential solutions, including: (a) how to account for the Emergency Response Service (ERS) in the Operating Reserve Demand Curve (ORDC) calculation; (b) the effect on prices from the deployment of load resources; and (c) the effect on prices of RUC-ed resources (Reliability Unit Commitment) (i.e., 0 to Low Sustainable Limit (LSL)). Participants developed a list of options to resolve price reversals during emergency/scarcity conditions, and will meet again, weekly, until the end of March, when this information is expected at the Commission. If no resolution is found by that time, RATF may continue working on it past March. On 3/3/14, RATF considered adding several other issues, including how to handle Reliability Must Run (RMR) resources and firm-load shed, and possibly raising the RUC floors.
March 3, 2014 Alert: ERCOT Issues Another Conservation Notice this Afternoon (3/3/14)
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At 1PM on 3/3/14, ERCOT issued another conservation notice, “asking electric consumers to continue limiting their electric use as much as possible through 9AM, Tuesday, 3/4/14, as late winter weather conditions continue.” “We were able to maintain grid reliability without an energy emergency this morning, and we appreciate this help from consumers,” said Dan Woodfin, ERCOT director of System Operations. “With the continued cold weather, we expect conditions to remain tight, especially during the early evening tonight and early morning hours tomorrow.” On Monday morning, peak demand reached 54,549MW, with all available generation being used to ensure system reliability. High demand because of very cold temperatures and windy conditions is expected to continue through at least Tuesday morning, and generation supplies remain limited.
Texas Consumers Asked to Conserve Electricity This Morning (3/3/2014)
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On 3/2/14, at 9:10AM, ERCOT issued a Watch “due to the strong arctic front that is making its way through the ERCOT system. ERCOT is starting to experience Resource and transmission issues:” (a) QSEs are instructed to keep COPs (Current Operating Plans) updated; (b) QSEs with wind Resources need to update their COPs to reflect accurate data; (c) [generation resources need to] review fuel supplies and notify ERCOT of any known or anticipated fuel restrictions and review and implement weatherization and operating procedures, including winterization; and (d) preparations need to be made for higher than usual loads. Also resources have to notify ERCOT of any changes or conditions that could affect System Reliability. Shortly after 7PM on 3/2/14, ERCOT issued a conservation alert, asking consumers to use less energy Monday morning.
March 3, 2014: Why Texans Are Using Less Energy Than Predicted
March 4, 2014: Energy Demand Breaks 12-Year-Old March Record
March 4, 2014: Texas Mulls Capacity Market
March 4, 2014: Texas Grid Extends Power Conservation Call As Cold Boosts Usage, Prices
March 3, 2014: Latest Arctic Blast Sends Texas Power Usage, Prices Soaring
March 3, 2014: Texas Power Market Monitor Resigns Amid Unresolved Reform Debate
March 3, 2014: ERCOT Report Empowers Fans Of Texas’ Current Electricity Market
March 4, 2014: Energy Conservation Urged Through Tuesday Morning
March 4, 2014: Proposed ERCOT Resource Adequacy Task Force Matrix
Feb 28, 2014 ERCOT Releases New CDR Report
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Today (2/28/14), ERCOT released its much-anticipated Capacity, Demand, and Reserves (CDR) report (also, here). Usually, the winter CDR comes out in December, but this one was delayed to gain stakeholder agreement on revisions to the load-forecasting methodology. The revised methodology resulted in load forecasts significantly lower than in the May 2013 CDR; it uses premise count, with specific economic drivers for various types of customers, including residential, commercial, and industrial. Weather also is a significant driver in system-wide peak demand, and the updated forecast is based on 12-year average weather patterns. ERCOT stakeholders, an independent consultant, and the ERCOT Board thoroughly reviewed the new methodology prior to the final forecast. The new CDR has updated load and generation data, and uses the previously approved wind Effective Load Carrying Capability (ELCC) of 8.7%. The reserve margin on 6/1/14 is indicated at 13%.
Feb 28, 2014: Texas Sees Higher Summer Power Supply Amid Slower Demand Growth
Feb 28, 2014: ERCOT Report Should Slow Down Energy Industry’s Push To Dip Into Ratepayer’s Pockets
Feb 28, 2014: Capacity Market Foes Seize On Brighter Electric Forecast
Feb 28, 2014: ERCOT: Growth in Texas Energy Demand Slows
Feb 28, 2014: Calpine Buys San Antonio-Area Power Plant For $625 Million
Feb 27, 2014: Lesson From Europe: Renewable Energy = Need For Capacity Payments?
Feb 28, 2014: Officials: Electricity Reserves Better Due to Efficiency
Feb 27, 2014: ERCOT Reports Significant Improvement in Reserve Margins, In Latest CDR Report
Feb 27, 2014: Calpine Completes Purchase of Guadalupe Power Plant in Texas for $625 Million
Feb 26, 2014: Remake Of Texas Electricity Market Likely To Wait As Supply Fears Abate
Can Smart Thermostats Help Manage Texas Energy Market?
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A detailed article in the Austin American Statesman discusses whether “smart thermostats can help Texas.” The thermostats in question are made by Nest, recently bought by Google for over $3 billion; last Christmas, 20% of them were sold as gifts, at a retail price of $250. For utilities, this equipment has the potential to address issues, like the one Texas has been struggling with recently – i.e., the ability to reduce electricity consumption during times of peak demand, to lessen the threat of rolling blackouts, and postpone the need to invest in new power plants. The highest demand in the state is during the hot summer afternoons, but Nest’s VP of business believes that this can be reduced by 50%-60% with the use of its smart thermostat. The article says that: “About 50% of U.S. broadband households own a programmable thermostat, but only 11% have a device that can be connected to the Internet. However, Parks Associates’ consumer survey showed that 62% of the respondents would purchase an Internet-connected thermostat if given a $75 rebate. “Energy efficiency is limited,” said John Barrett of Parks Associates. “Greater convenience and control will be the true market driver for energy management products and services.” Austin Energy, which has a program to adjust customers’ usage at peak, says it saved customers $500K last summer. It now gives an $85 rebate for customers to purchase internet-connected thermostat.
Feb 22, 2014: Texas Commissioner Marty Says Energy Market “Healthy”, As Focus Shifts to Reliability Standard
Feb 21, 2014: Another Power Plant Proposed for Nolan County in Texas
Feb 22, 2014: Retail Suppliers Tell PJM Board They’re “Deeply Concerned” About “Lack of Transparency” on Reserves Charges
Feb 20, 2014: Plans Unveiled For Natural Gas-Powered Power Plant In Nolan County, Texas
Group Urges PUCT to Continue Working on Resource Adequacy
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Calling forecasts “educated guesses,” the Texas Reliability Assurance Market Advocates filed a new statement in time for 2/21/14 PUCT open-meeting discussion. In it, they dispute that urgency in resolving resource adequacy in Texas has diminished and warn that waiting to address these issues until near-term planning reserves are insufficient will lead to high transition costs and threatened reliability. The group lists several factors that may affect reliability in the next few years, including the growth of business, plant retirements (up to 9,000MW), new federal regulations, and transmission constraints. Moreover, potential outages fall disproportionately on residential and small business customers, the group says, adding that going to a 15% reserve margin could be achieved at relatively low cost. “Rather than turning away from the volumes of expert analysis on reliability and resource adequacy that have been produced over the past several years because a series of assumptions have changed, TRAM Advocates recommend that the Commission continue its research and deliberations on resource adequacy by proceeding forward with the cost-benefit analysis previously planned by the Commission.”
Feb 19, 2014: Will The New Texas Power Report Change The Game?
Feb 19, 2014: Proposed “Electricity Tax” Sends Wrong Message To Texans—Old And New
ERCOT to Release Capacity, Demand and Reserves Report Feb. 28
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On 2/18/14, ERCOT issued a press release, announcing that the new Capacity, Demand, and Reserves (CDR) report will be published on 2/28/14. This winter CDR, delayed from its usual Dec. 1 release date, will use a revised load-forecasting methodology (leading to new, preliminary results), in addition to modified generation data, an 8.7% value for the Effective Load Carrying Capability (ELCC) of wind, and separation of the coastal and non-coastal wind capacity. It will not, however, list a value for the target planning reserve margin (currently, 13.75%), and will make no changes to the wind ELCC (as originally proposed in the 2013 Loss of Load Study). In July 2013, the ERCOT Board delayed a decision on raising the reserve margin and ELCC; since then, the issue has been discussed at the PUCT, but no recommendations have been made. Moreover, Commissioner Andersonfiled a memo (2/5/14), in which he suggested that the Commission study what should be the appropriate reliability standard for ERCOT; this topic may be discussed at the 2/20/14 open meeting.
Feb 18, 2014: NTE Energy to Develop One of the Most Efficient Natural Gas Fired Power Plants in ERCOT
Feb 17, 2014: How Electric Vehicles are Strengthening the Texas Power Grid and improving Air Quality
Feb 14, 2014: Coal Powers Past Natural Gas To Electrify Texas In January
Feb 12, 2014: Coal’s Share Of ERCOT Market Remains Strong, Gas’ Share Falls Again
Battle for Future ERCOT Electric Market is Heating Up
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The war of words is heating up in the ongoing effort to address resource adequacy concerns in Texas. A group, Texans for Reliable Power, is running radio ads, noting that: “A new report says rolling blackouts could be 10 times more likely in a few short years,” and that a capacity market is the answer. The ad asks its listeners to contact legislators to tell them “you don’t want to be left in the dark and to act before the crisis.” The list of supporters on the group’s website includes several former FERC commissioners. The ads come after a couple of setbacks for capacity markets proponents, as explained in a subscription-only article in the Sunday’s Austin American Statesman, Texas blackout debate – doing nothing is now an option. It notes recent developments, including: (a) ERCOT’s new Load-Forecasting Methodology (also, ERCOT Board’s update), which lowers peak demand (e.g., by 4,000MW in 2016); and (b) the Brattle Group’s report, which “determined that the existing wholesale market should create ‘sufficient reserves’ for years,” barring unforeseen political reactions. The article quotes Senator Fraser, “There is no crisis;” Commissioner Marty: “We’re getting information now that suggest we have room to breathe;” and Chairman Nelson: “I think it’s time for us to turn it over to the legislature.” This may have been the first time the Chair publicly suggested turning the matter over to the legislators. The next phase in the debate may be a struggle over numbers; for example, how much additional cost would a capacity market and/or mandated reserve margin impose on consumers vs potentially lower energy prices sometime in the future.
Feb 11, 2014: Despite Sufficient Reserves, Texas Power Providers Warn Of Rolling Blackout Risk
Feb 11, 2014: Luminant’s Reopened Power Plants Are Dirty Old Relics
Feb 12, 2014: FERC Grants Windfall to Generators By Allowing Offers In Excess Of $1,000/MWh to Set Clearing Price
Battle for Future ERCOT Electric Market Continues
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The battle for the future of the Texas electric market continues in the PUCT filings and on the newspaper pages. Yesterday, the Texas Public Policy Foundation (TPPF) filed a statement, noting that just recently, NRG Energy filed comments with the EPA in support of its petition to move gas turbines to Texas to be used for generation: “NRG Texas considered the efficiencies, capital costs to install, potential revenue sources, operating costs, and the targeted “super peak” hours before arriving at the decision to install the GE 7 turbines [that] represent the only identified generating technology which meets the … requirements for low capital cost and economic viability.” The filing also mentions a TXU expectation from 2001 that “it is highly likely that the market itself will address any predicted future shortfall by encouraging generators to build new generation because market prices will likely increase when reserve margins decrease.” The TPPF then cites a 2013 paper by Kleit and Michaels, disputing the Independent Market Monitors’ conclusion that the Peaker Net Margin is an accurate measure of generator revenues: “Peaker Net Margin is an administrative creation that does not fully reflect the economic opportunities open to generators. Our calculations show that adding the option of producing non-spin to that of the balancing market can raise a peaking generator’s net margin in ERCOT into the range of economic viability.”
Feb 8, 2014: Copelin: Texas Blackout Debate — Doing Nothing Is Now An Option
Feb 7, 2014: Texas To Consider Target Power Margin Review Amid Push To Drop Capacity Market Talk
Feb 7, 2014: Electric Cars Seen Having Role in Stabilizing Texas Power Grid
Feb 10, 2014: Brattle FERC Report: “Energy-Only Markets Can Attract The Optimal Level Of Generation Investments”
Feb 6, 2014: Cold Weather Prompts Call For Power Conservation In Texas
Feb 6, 2014: Studies Prove Texas Grid Is Healthy, Commissioner Says
Feb 6, 2014: Hedge Funds Bet On Us Gas Shortage As Cold Boosts Demand
Feb 6, 2014: ERCOT Adds 848 MW Of Wind, Energized $3.17B In Transmission In 2013
Feb 5, 2014: ERCOT Energy-Only Market Expected To Support Average Reserve Margin
Feb 5, 2014: Electric Trucks Provide Frequency Regulation In ERCOT
Feb 4, 2014: Luminant Restarts 3 Texas Coal-Fired Units As Power Prices Rise
Feb 4, 2014: Luminant Restarts Power Units Early As Natural Gas Prices Rise
Feb 3, 2014: In Grid Debate, New Info Doesn’t Sway Opinions
Feb 3, 2014: Brattle Economists Analyze Economically-Optimal Planning Reserve Margin For Texas Power Market
Brattle Group Report: The Economically Optimal Reserve Margin in ERCOT Would Be 10.2%
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According to the much-awaited Brattle Group report, filed in Project No. 40000, related to resource adequacy, the economically optimal reserve margin in ERCOT would be 10.2%. This is lower than the 14.1% reserve margin needed to meet the typical one-in-ten Loss of Load Expectation (LOLE) target; BG estimates that going from 10.2% to 14.1% would increase the total system costs by about $100 million, or a small amount in the annual $35 billion market. The report presents a range of possible reserve margin targets, including “the 11.5% equilibrium reserve margin that the current energy-only market design is likely to achieve,” and which exceeds the 10.2% risk-neutral, economically optimal reserve margin. This means that the “current market design will support sufficient reserve margins from an economic perspective,” concludes the report. The authors touch on the correlation between the reserve margin and capacity: “If reserve margins are low and prices are high, suppliers will build because they expect to earn more than their investment costs. Those newly built plants will increase the average reserve margin and thereby suppress energy prices.” The report does not rule out going to a capacity market, which the authors believe would cost an extra $400 million annually, but getting there may be hindered by a contentious process and even litigation. They also acknowledge ERCOT’s recently released preliminary load forecast, which may decrease the urgency in addressing resource adequacy issues.
ERCOT’s Revised Load Forecasting – Workshop II
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The second load-forecasting workshop at ERCOT delved into the details of the proposed methodology, model validation, and reviewer’s recommendations. The stakeholders asked for additional information and some suggested changes to the forecast. To read more, please subscribe to Texas Electric Watch. If you are interested in purchasing this TEW issue, please click here. If you are interested in subscribing the Texas Electric Watch, please click here or call Competitive Assets at 512-581-0151.
Jan 31, 2014: Texas Power Capacity Market Debate Falls On Doorstep Of State Legislators
Jan 31, 2014: Report: Texas Can Wait To Address Threat Of Power Shortages
Jan 31, 2014: New Report Will Figure In Debate Over Electricity Reserves
Feb 3, 2014: Brattle: Current Texas Energy-Only Market Can Maintain Optimal Reserve Margin
Jan 30, 2014: FERC Approves Change in PJM Capacity Market Seen as Increasing Costs $1.8 Billion Over Two Years
Jan 30, 2014:Texas Power Play: War Of Words Heating Up
Copyright 2014 by Competitive Assets, LLC. All rights reserved
The Texas Energy Report published details about a letter, sent to state lawmakers by “a group called Texans for Reliable Power (TRP), founded by power generating companies seeking major changes in the state’s competitive electric market.” In the letter, TRP calls statements by its opponents “downright wrong or grossly misleading.” Among the most vocal opponents of these changes in Texas – i.e., capacity markets – have been many large industrial customers, the Texas Public Policy Foundation, and some environmental groups.
Jan 28, 2014: Smart Meter Backers See Role In Texas Power Market Debate
Jan 28, 2014: Texas Capacity Market Supporter Asks FERC to “Permanently Eliminate” $1,000/MWh Price Cap in New York
Jan 28, 2014: Power Marketer Slams PJM’s “Objectionable” Request to Lift $1,000/MWh Price Cap “On The Fly”
Jan 27, 2014: In Texas, Wind Nears 10 Percent of Electricity Generation
Jan 27, 2014: PJM Seeks to Allow LMPs to Exceed $1,000/MWh Cap; May Be Easily Gamed
Jan 24, 2014: New Forecast Challenges Views On Texas Electricity Crunch
Jan 24, 2014: New Forecast Should Drive Stake Through The Heart Of Proposed Energy Tax
Jan 24, 2014 Demand Response Could Factor into Grid Debate
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The Texas Tribune reports on the renewed importance of Demand Response (DR), particularly as the recent cold pushed the ERCOT grid toward a possibility of outages. Demand response deserves more focus and attention, according to Doyle Beneby, the president of CPS Energy, a municipally owned utility: “In Texas, it could be a big part of the solution.” When the polar vortex hit, CPS Energy saved about 77MW of power use through its two demand response programs. That is enough to power 32,725 homes under normal conditions and 13,680 homes at peak times. “You don’t really notice,” said Adam Leija, who said he has seen his energy bills shrink since he became one of nearly 100,000 enrollees in the utility’s programs. “It helps us become more energy conscious.” The Brattle Group estimated that DR could shave about 4% during peak, but an obstacle to greater growth of DR in ERCOT is its inability to participate in the wholesale market.
Jan 23, 2014 PUCT Chairman Proposes Postponing ERCOT Resource Adequacy Workshop and Asks for More Comments
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On the eve of the 1/23/14 open meeting, the PUCT Chair Donna Nelson filed a memo (643) in Project No. 40000, related to resource adequacy, suggesting that – before proceeding with decisions in this project – the Brattle Group study the cost of the various market designs and the Commission postpone its planned workshop/hearing until mid-May. In addition, she proposed asking for comments on the parameters of such a study, to be filed by 2/7/14, with a discussion set for 2/21/14. The memo describes four market scenarios, which the Brattle Group would analyze: (a) the current market design (with the system-wide offer cap at $9,000/MWh); (b) an energy market, with the Operating Reserve Demand Curve (ORDC) and a “forward reliability market;” (c) same as (b), with a 14% reserve margin; and (d) same as (a), with a backstop designed to achieve a 14% reserve margin (e.g., Supplemental Reserve Service, as proposed by the Texas Industrial Energy Consumers). The Commission will discuss this, and several related projects, at the 1/23/14 open meeting, including on Capacity, Demand, and Reserves; Demand Response; and the feasibility of instituting real-time co-optimization in ERCOT.
Jan 23, 2014: ERCOT Prepares for its 1/27/2014 Workshop on the CDR Load Forecast
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ERCOT will hold a workshop on the Review of the Capacity, Demand, and Reserves (CDR) Load Forecast Methodology on 1/27/14, and has posted additional materials on the proposed load forecast. The workshop will discuss Itron’s Evaluation of ERCOT’s Forecasting Methodology, which includes recommendations to re-specify the Neural Network (NN) model to isolate the growth index and obtain a stable model; explore the use of a regression model to validate any advantage of a NN model over a traditional approach; and use the historic weather simulations to capture weather uncertainty. Also posted for this workshop are the Itron Premise Presentation and ERCOT’s Preliminary Load Forecast
Jan 23, 2014: ERCOT Now Forecasts Slower Growth In Electricity Demand In Texas
Jan 23, 2014: ERCOT Looking At Reducing Its Texas Power Demand Forecast
Jan 23, 2014: New Forecast Gives Hope For Power Reserves In Texas
Jan 23, 2014: Texas Grid Operator: Cold Snap Won’t Spark Another Power Emergency
Electricity Capacity Markets Are Nothing To Advertise About
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On 1/20/14, the Austin American Statesman published an op-piece from the Texas Public Policy Foundation, arguing against the recent advertisement by a pro-capacity-market group, Texans for Reliable Power, that Texas is running out of generation capacity. In what is yet another salvo in the ongoing struggle for public opinion on the pros and cons of the two types of electric markets, the author, Kathleen Hunker, explains what happened when ERCOT declared Energy Emergency Alert during the recent cold spell. She looks at regions that have a capacity market and concludes that it does not protect customers against unplanned outages and potential shortages in extreme weather.
Fact Check: Is Texas Experiencing the Fastest Population Growth in the Country?
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In the 1/20/14 issue of the Austin American Statesman, PolitiFact Texas looks at the claim by the Texans for Reliable Power that “Texas is experiencing the fastest population growth in the country” by adding more than 1000 people a day. The evaluation concluded that, while Texas added the most new inhabitants in 2012-2013 (i.e., 1061 per day, on average), North Dakota, Utah, and Colorado had higher population growth rates.
Jan 22, 2014: Texas Lt. Governor Candidate Todd Staples Asks PUCT to Reject Capacity Market
Jan 22, 2014: Preliminary Revised ERCOT Load Forecast Shows Reserve Margin Above 16% Until 2019
Jan 22, 2014: Owner of 13,000 MW of Merchant Generation: PJM’s Capacity Auctions Don’t Provide Adequate Support for Competitive Generators
Jan 21, 2014: Behind Texas Electric Grid Emergency Alert, a Power Plant Failure, Not Demand
Jan 21, 2014: What Billions in Capacity Payments Buy: Shoestring-Operated Generators Unable to Run Because No Staff is Present
Jan 21, 2014: Seven Years Later, Capacity Market Conceded by RTO To Be A “Failure”
Jan 20, 2014 ERCOT Experienced a Brief Loss of Generation
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On 1/18/14, ERCOT went into an Energy Emergency Alert (EEA) Level 1 because of “sudden loss of generation,” occurring at 08:41, totaling 1, 231MW. Also, frequency declined to 59.710Hz, while ERCOT load was 39, 428MW. The operators deployed Non-Spin at 8:44 and at 9:05, before issuing a Watch (Physical Responsive Capability (PRC) at less than 2500MW) and EEA (Reserves below 2300MW). At 9:00, the EEA was cancelled, but later that day, a couple of Advisories were issued (PRC below 3000MW).
Updated Report Regarding Real-Time Co-Optimization of Energy and Ancillary Services in ERCOT Filed by ERCOT and IMM
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On 1/17/14, ERCOT and the Independent Market Monitor (IMM) jointly filed an Updated Report Regarding Real-Time Co-Optimization of Energy and Ancillary Services in the ERCOT Markets. Based on a request by Commissioners, this report adds additional information to the report originally filed by ERCOT and the IMM on 12/12/13. In this update, they describe what they see as “the different benefits of the two approaches under consideration for Real-Time Co-optimization of energy and AS: the “minimum” approach, which co-optimizes on a single-interval basis; and the “maximum” approach which would incorporate a multi-interval Real-Time Commitment and Real-Time Dispatch.”
The report concludes that “implementation of the recently-approved ORDC will address the operating reserve shortage pricing aspect of “minimum” real-time co-optimization. Additional market efficiency value can be gained from the added functionality afforded by the “maximum” approach including multi-interval SCED – namely the enabling of SCED dispatch of additional resources to contribute to price formation.” They also note that an additional option could be considered: – a market construct with multi-interval Real-Time Commitment and Dispatch incorporating the already-approved reserve price adder based on ORDC, while foregoing the more complex challenges of real-time energy and AS co-optimization. A table is provided comparing various features.
Jan 19, 2014: Saturday: ERCOT Issues ‘Power Watch,’ Asks For Energy Conservation After ‘Sudden Outage’
Jan 17, 2014: Texas’ System Of Electric Reliability
Jan 20, 2014: ERCOT: Demand Increased Only 1% in 2013
Jan 17, 2014: ERCOT: Electricity use up 2.1 percent in 2013
Jan 16, 2014: How The Polar Vortex Impacted Energy Prices, Grid Reliability
Jan 15, 2014: Winter Weather Brings Peak In Power Use
Jan 15, 2014: Texas Power Prices Jumped More Than States Hit Harder By Polar Vortex
Jan 15, 2014: Report: Percent of PJM Forced Outages During Cold Snap Grid Stress Four Times That of ERCOT
Jan 14, 2014: Could Solar Solve Texas’ Peak Demand Problem?
Jan 14, 2014: ERCOT Energy Usage Up In December And For All Of 2013
Jan 14, 2014: Power Crisis Costs in ERCOT Haven’t Hit Home
Jan 14, 2014: ERCOT Receives Notification of Suspension of Operations
Jan 14, 2014: Businesses Continue to Flock to Texas Despite Alleged Resource Inadequacy
Jan 10, 2014: West Texas Wind Helped Power Through Cold
Jan 9, 2014: Did Wind Really Save Texas from Rolling Outages?
Jan 10, 2014: Energy Investors Grabs Texas Power Plant
Senator Touts Plan To Address Water, Power Issues
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The 1/12/14 edition of the Austin American Statesman featured on its front page a proposal by Senator Fraser to build new power plants at sites where brackish groundwater can be desalinated and used as a substitute for fresh water. The idea, addressing the both electricity shortages and a lack of water, would lead to power plants being used for water desalination, until they are needed for electric power in times of shortages. The Senator proposes to use revenues from power sales to lower the cost of desalination, plus this peaker unit would be productive year-round – unlike the usual peakers. The proposal is being discussed with ERCOT, LCRA, and CPS Energy, and may be first tested in San Antonio. While it still needs a lot of study, several officials involved in the talks seem to believe the idea to build four-to-ten such projects is promising and could help alleviate both water and electric energy shortages.
Jan 10, 2014: West Texas Wind Helped Power Through Cold
Jan 9, 2014: Did Wind Really Save Texas from Rolling Outages?
Jan 10, 2014: Energy Investors Grabs Texas Power Plant
Capacity Market Fight Takes to Advertising Pages
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On 1/9/14, Austin American Statesman carried a full page ad from a new group, Texans for Reliable Power, alleging that “Texas is on course for a power reliability crisis, with the potential for regular rolling blackouts in just a few short years.” The ad also states that “special interests” opposed to changes “are largely unaffected by blackouts, under the current system,” and provides a PUCT customer line email for contact. The group includes NRG Energy, Calpine Corp., NextEra, and Exelon.
Jan 9, 2014: Rolling Blackouts Are Texas’ Future Without Reform, Generators Say
Jan 9, 2014: Texas’ System Of Electric Reliability A Success Story
Jan 9, 2014: Texas Power Market Debate Poised To Heat Up After Cold Snap
Jan 9, 2014: State Grid’s Reliance On Wind Generates Some Concern
Jan 9, 2014: Next Texas Resource Adequacy Open Meeting/Workshop Pushed to March
Jan 8, 2014: Role Of Texas Wind Power Debated After Winter Emergency
Jan 8, 2014: Texas Oil Lobby Takes On Electric Power Generation Lobby
Jan 8, 2014: Oil And Gas Industry Says No On Capacity Market Proposal
Jan 8, 2014: As Winter Takes Hold, Plunging Temperatures Test Utilities
ERCOT Set a New Winter Demand Record
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On 1/7/14, ERCOT issued a press release, noting a new winter demand record of 57,277MW during the hour ending at 8:00AM. The previous winter record was from 2/10/11, when demand reached 57,265MW.
Jan 7, 2014: Texas Power Companies Want More $$
Jan 7, 2014: Texas Sets New Winter Electricity Demand Record
Jan 7, 2014: Xcel Energy Seeking Rate Increase For Texas Retail Customers
Jan 7, 2014: Texans Use More Power But Avoid A Repeat Of Monday Crisis
Jan 7, 2014: Saving Energy Saves Millions for The Grand Prairie ISD
Jan 6, 2014: ERCOT: 2011 Lesson Helped Texas Avoid Rolling Blackout
Jan 6, 2014: ERCOT Urges Texans To Conserve Power During Cold Snap 1/6/14
Jan 6, 2014: Texas Grid Ends Power Alert; Extends Conservation Call
Jan 6, 2014: Cold Weather Causes Surge In Demand On Texas’ Electric Grid
Jan 6, 2014: Equipment failures leave thousands in Burleson in the dark; conservation alert in effect
Jan 6, 2014: Capacity-Market Dependent PJM Issues “Third World” Plea for Electric Conservation
Jan 6, 2014: Texas Power Grid Manager Cancels Emergency Alert
ERCOT Narrowly Avoided Blackout on 1/6/14
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On the morning of 1/6/14, ERCOT called an Energy Emergency Alert (EEA), bringing all available generation online and deploying all load resources under contract, including for the Emergency Response Service (ERS). Because of unusually cold weather, the morning peak demand reached 55,487MW (8:00AM), while available reserves were impacted by the tripping of two units in North Central Texas, totaling about 3,700MW. The units experienced problems with their instrumentation, according to ERCOT staff. At the same time, about 9,300MW were offline because of planned outages, and available wind power was around 2,000MW. ERCOT also had to bring in about 800MW from the Eastern interconnect and 180MW from Mexico. The staff noted that energy prices went up to the cap in the morning.
By 9:18AM, ERCOT cancelled the alert notice, noting that conditions had returned to normal, and by mid-morning, the two units were also back in service. In the evening, the peak demand rose even higher, to 56,031MW (8:00PM)
For the morning of 1/7/14, ERCOT is now forecasting peak demand at 59,770MW, with the ISO issuing an additional advisory for generators and TDSPs. Based on public notices, here is the chronology of relevant notices:
Jan 1, 2013: In Texas, Natural Gas And Renewables Expected To Meet Future Energy Needs
Dec 31, 2013: FERC Accepts PJM’s Streamlined Emergency Demand Response Registration Process
Dec 28, 2013: Texas Electricity Prices Jump as Power Demand Exceeds Forecast
Dec 28, 2013: New England, With Capacity Market, Seeing More Retail Energy Suppliers Default than “Volatile” Texas Energy-Only Market
Dec 27, 2013: PJM Reports “Poor Generator Response” Led to “Operational Issues” on Day Firm Load Shed
More Comments Filed in ERCOT Resource Adequacy Project
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On 12/23/13, seven parties filed reply comments in PUCT Project No. 40000, related to resource adequacy. The Sierra Club and Texas Industrial Energy Consumers oppose a capacity market and question whether the Commission has the authority to make a market change; Environmental Defense Fund and Demand Response (DR) Coalition support a capacity market in the belief that it would lead to greater development of DR; and NRG, Texas Reliability Assurance Market Advocates, and STEC all support a forward capacity market. They state that the PUCT has statutory authority to make this change, with some arguing that it would be similar in concept to the current Ancillary Services market. The Commission will discuss at its 1/9/14 open meeting whether to reschedule a resource adequacy workshop, currently planned for the end of January. At the last open meeting, concerns were raised that some of the information (e.g., the Brattle Group report or Capacity, Demand, and Reserves report) might not be ready in time for the workshop.
Dec 19, 2013: Texas Electricity Prices Decline As Demand Falls Below Forecast
Dec 19, 2013: Natural Gas-Fired Power Plants Help Bolster State In Drought
Dec 19, 2013: Noble Americas Retail Provider Warns Capacity Market in Texas Will Lead to Customer Dissatisfaction with REPs, Competition
Dec 17, 2013: ERCOT Load-Forecast Methodology
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On 12/16/13, ERCOT staff held a workshop to review the newly proposed revisions to the load forecasting methodology. The same presentation was made to the ERCOT Board in December, after a November decision to postpone the release of the Capacity, Demand, and Reserves (CDR) report. The staff announced that ERCOT had just signed a contract with Itron to perform an independent review of the new methodology by mid-January, and that the CDR report is expected to be released in late January or early February. The latest issue of the Texas Electric Watch captures the discussion at the workshop, in addition to the summary of the original and revised methodologies and resulting decreases in load growth. To read more,, please subscribe to Texas Electric Watch. If you are interested in purchasing this TEW issue, please click here. If you are interested in subscribing the Texas Electric Watch, please click here or call Competitive Assets at 512-581-0151.
Dec 17, 2013: Texas Power Prices Rise as Demand Increases Above Forecast
Dec 16, 2013: New Round of Comments filed in Texas ERCOT Resource Adequacy Project
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At least 28 parties filed initial comments in PUCT Project No. 40000, related to resource adequacy. The comments on specific questions about capacity markets had been requested at the PUCT open meeting in November by Chairman Nelson and Commissioner Anderson. The filings provide responses to such fundamental questions as whether the Commission has statutory authority to undertake a major market redesign, the efficacy and costs of capacity markets, the likelihood of regulatory uncertainty, effect on the retail market, proposals for alternatives, and others. Considering what type of a capacity market might be appropriate, one commenter stated: “As an extreme example, a ten-year forward market would model reserves needed based on a forecast 10 years ahead and assign obligations to Load Serving Entities (LSEs) on that basis. There is little likelihood that such outcomes will be accurate. Looking one year ahead is likely to be much more accurate. The problem with shorter forward markets is that they do not align with construction decisions for many resources.” This is just one of many questions the Commission will be addressing at the 1/29-30/14 workshop. Replies to comments are due on 12/23/13.
Dec 17, 2013: H-E-B, Shell Oppose Texas Capacity Market
Dec 17, 2013: Latest Six-Year Fixed Product from FirstEnergy Solutions Reinforces How Capacity Market Skews Playing Field in Retail Market
Dec 17, 2013: NRG to Receive Subsidized, State-Arranged Contract to Repower New York Capacity
Dec 16, 2013: Keep Capacity Markets For Electricity Out Of Texas
Dec 12, 2013: Noting “Major” Software Projects to Start in 2014, ERCOT Reports Full Co-optimization Would Take Over Three Years to Implement
Dec 10, 2013: Chastened by ’11 Debacle, Texas Utilities Kept Plants Up In Latest Freeze
Dec 10, 2013: Four Proposed Coal Export Terminals Have Now Failed This Year Due To ‘Diminished’ Market
Report: Partnering Natural Gas and Renewables in ERCOT
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On 12/10/13, the Texas Clean Energy Coalition announced the receipt of a study, prepared by the Brattle Group, titled Partnering Natural Gas and Renewables in ERCOT. The study’s executive summary states: “Low natural gas prices have fueled concerns that natural gas will soon crowd out renewable resources, undermining Texas’ progress toward the development of a thriving wind industry and toward reducing emissions. At the same time, recent ERCOT analysis found wind and solar resources to be competitive with natural gas over the next 20 years under a number of plausible scenarios. This white paper, therefore, analyzes the interactions between gas and renewables in ERCOT, both in the short and long term. The main conclusions of this white paper are that in the short-run, low gas prices are extremely unlikely to change the fact that existing renewables will nearly always have priority over gas-fired plants since, due to the absence of fuel costs, their variable costs are lower than those of essentially all other resources. Over the long-term, as new plants are planned and built, it is possible that new gas-fired plants will compete with new sources solar and wind generation. Which source is cheaper will depend on the levels of gas prices, the existence (or lack thereof) of continued federal (and perhaps state) support and the technological progress of both wind and solar resources. In addition, it is possible that in the long-run, some combination of renewables and gas will displace existing coal-fired generation.”
PUCT Staff’s Analysis Disputes NRG’s Study on Capacity Markets Copyright 2013 by Competitive Assets, LLC. All rights reserved
On 12/9/13, Commissioner Anderson filed his staff’s analysis of the Charles River Associates study on resource adequacy and outages in ERCOT (573), which was commissioned by NRG and recently filed in Project No. 40000 (449). The staff’s analysis consists of three parts: an executive summary; methodology review; and an appendix, with details of mathematical assumptions used in CRA’s study. The filing asks interested parties to “critique this analysis” and file responses in Project No. 40000, in an effort to improve accuracy of the information available to the PUCT Commissioners, as they address resource adequacy issues in ERCOT.
The executive summary of the Analysis of Charles River Associates Capacity Market Study states: “The CRA Study grossly overstates the direct cost per event of electric service interruption in its evaluation of the energy market construct. This is the value that CRA uses in its economic model to determine the effect on the Texas gross state product. In calculating the direct cost per event, CRA ignores warnings from the authors of a referenced national study and uses summer weekday afternoon cost values for every time period of the year. Ignoring yet another warning from the same national study, CRA fails to account for a significantly higher load profile for afternoon and evening periods, which also inflates its numbers. The inflation is so great that the CRA Study uses $85,000/MWh as an overall average cost per un-served MWh (or $85 per un-served kWh), for every time period of the day, season of the year, business type and residential consumer. Finally, CRA assumes an 8.4% reserve margin by way of incorrect assumptions and basic math errors for the energy market in 2016, to determine the total amount of un-served energy in a year, and it carries these errors throughout all years of the study. The net effect of these errors and omissions is to increase the cost estimate of an energy market by at least a factor of ten (likely, by a factor of at least 40). Some, but not all, of the errors also affect CRA’s results for the energy plus capacity market.”
Commissioner Anderson’s web page also contains a breakdown of Capacity Market Costs Allocated by Meter, posted on 12/9/13.
Dec 9, 2013: PUC Commissioner Says NRG Overstated Costs On Power Study
Dec 9, 2013: Texas Power Prices Rise As Chill Pushes Demand Above Forecast
Dec 9, 2013: ERCOT Sets New December Peak Load Record With Frigid Weather
Dec 9, 2013 On State’s Power Grid, Which Bogeyman Are We Fighting?
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The Austin American Statesman published an article titled “On state’s power grid, which bogeyman are we fighting,” which summarizes many of the difficult issues in the current debate about resource adequacy. Two of the main ones are clarifying the 1-in-10-years event and agreeing on a reliability standard.
Dec 6, 2013 Democrat Candidates for Governor and Lt. Governor Weigh in the ERCOT Electric Market Change Discussion
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Texas Senators Wendy Davis and Leticia Van de Putte, running for Governor and Lt. Governor, respectively, waded into the discussion about a potential capacity market in Texas, by filing comments in Project No. 40000 (Davis and Van de Putte), related to resource adequacy. Both urged the Commission to conduct a cost/benefit analysis before proceeding any further in its decision-making process. Senator Davis suggested that the analysis focus on these points:
The next step in this project will be the filing a comments on 12/16/13, and a workshop on load forecasting on the same day.
Dec 6, 2013: Ice Leaves More Than 250,000 Without Power; DART Suspends Rail Service; Txdot Plowing
Dec 6, 2013: Oncor Responds to Winter Storm
Dec 5, 2013: ERCOT Says There’s Enough Power as Storm Arrives
Dec 5, 2013: Perry Directs PUC, TXDOT And Military To Help In Storm
Dec 5, 2013: TXU Energy Urges Conservation During Winter Storm
Dec 4, 2013 ERCOT Proceeds to Re-evaluate its Newly Revised Load-forecasting Methodology
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At the 12/3/13 meeting of the Technical Advisory Committee (TAC), ERCOT staff described the process to re-evaluate the newly revised load-forecasting methodology. The first step will be a detailed presentation at the 12/10/13 ERCOT Board meeting; next, a workshop has been scheduled for 12/16/13, to get market participant input; and third, there are plans to discuss related issues with the TDSPs at the 12/17/13 meeting of the Regional Planning Group (RPG). In addition, ERCOT is planning to hire an independent consultant to review the methodology and provide suggestions for improvement. The TAC Chair clarified that the purpose of all this is to get a better understanding of the methodology and thoroughly vet it, as it is a significant change. He added that any decision on the methodology has to be right, rather than quick. A staff presentation to the Board has been posted.
Dec 4, 2013: In Texas, Reliability Concerns Pit Manufacturers Against Generators
Dec 4, 2013: Subsidies for Texas Electric Plant Construction Stir Legal, Financial Concerns
Dec 3, 2013: Power Plant Deal To Augment Calpine’s Share Of State Market
Dec 3, 2013: The $4 Billion Texas Electric Bill
Dec 1, 2013: Neeley: Rule Could Mean Lights Out In Texas
Dec 2, 2013: Calpine To Buy Texas Power Plant But Delay Plan For New Units
Dec 2, 2013: Calpine to Purchase Power Plant Near S.A.
Dec 2, 2013: Debate Over a Changing Texas Energy Market Heats Up at Senate Natural Resources Committee Hearing
Dec 2, 2013: ERCOT Files 4CP Report with PUCT
Dec 2, 2013: Calpine to Purchase Texas Power Plant for $625 Million
Dec 1, 2013: Power Companies Face Grim Reality As Commodity Bets Expire
Nov 27, 2013 ERCOT May Delay Its Capacity, Demand, and Reserves (CDR) Report by Two Months C
opyright 2013 by Competitive Assets, LLC. All rights reserved
At the last ERCOT Board meeting, on 11/19/13, there was a discussion about the issuance of the next Capacity, Demand, and Reserves (CDR) report, planned for 12/1/13. The discussion and uncertainty about the load data led the Board Chair to recommend delaying the report, until after the next Board meeting, on 12/10/13. This would give members an opportunity to review the results of the revised load forecast and compare them to the previous methodology. A few days after that, Reuters reported on a statement by ERCOT’s CEO Trip Doggett that the CDR may be delayed by up to two months, because of the decision to let the revised load data go through the stakeholder review. Consequently, the just-issued agenda for the Technical Advisory Committee (TAC) meeting on 12/3/13, features as one of the first items an update on the “Process for Finalizing the Load Forecast Methodology for the CDR Report.” It is not, however, shown as a voting item.
Nov 26, 2013: Texas Regulators Warned Against Power Capacity Market Without Legislator Support
Nov 26, 2013: Industry Group Proposes Alternative To Capacity Market In Texas
Nov 26, 2013: Industrial Group Calls Power Plan Too Costly
Nov 25, 2013: Manufacturers Strongly Oppose Moving Texas Power to a Capacity Market
Senator Fraser Tells PUCT, “Slow Down!”
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Amid accusations of “agency creep,” the Chair of the Senate Committee on Natural Resources reprimanded the PUCT at the 11/25/13 hearing about getting ahead of itself and “putting the cart before the horse” in its deliberations about resource adequacy and mandated reserve margin. Senator Fraser asked the Commissioners to slow down, reminding them that the change to a capacity market would be major, and that the legislature also has an opinion on the matter. The Committee then heard from various stakeholders, mostly in opposition to a potential capacity market. To read a complete summary of the hearing, please subscribe to Texas Electric Watch. If you are interested in purchasing this TEW issue (including the supplemental issue), please click here. If you are interested in subscribing the Texas Electric Watch, please click here or call Competitive Assets at 512-581-0151.
Nov 25, 2013: On Market Decision, Lawmakers Question PUC’s Authority
Nov 25, 2013: Lawmaker Says Texas Agency Moving Too Fast To Reform Power Market
Nov 25, 2013: Texas House Representative Turner: A Windfall For Power Dealers
Nov 25, 2013: Texas Manufacturers Criticize Proposed Changes To Power Grid
Nov 25, 2013: Wal-Mart, Valero Oppose Texas Capacity Mandate, Would “Increase Costs and Harm Texas Economy”
Nov 25, 2013: Texas Electric Demands Are Slowing, State Grid Chief Says
Nov 25, 2013: Opinion: Capacity Market Facing 1,000 MW Deficit of Existing Resources
Nov 25, 2013: Latest New England Capacity Market Mess Shows Fantasy of “Texas-Style” Capacity Market
New Developments on ERCOT Electric Market Changes
Copyright 2013 by Competitive Assets, LLC. All rights reserved
Today, on 11/25/13, the Texas Senate Committee on Natural Resources, chaired by Senator Fraser, is holding a hearing on resource adequacy issues facing the Texas electric market. There will be invited testimony only. The hearing was scheduled after several PUCT open meetings this summer and fall, during which Commissioners debated vastly differing visions of how to address resource adequacy, with little agreement in sight.
On 11/22/13, the PUCT staff filed a Notice of Workshop and Request for Comments (564) in Project No. 40000, related to resource adequacy. As discussed at the 11/15/13 open meeting, a workshop has been scheduled for 1/29-30/14, with comments on Commission’s questions due on 12/16/13, and replies on 12/23/13. The questions – which reflect two very different perspectives – may be found at: http://interchange.puc.state.tx.us/WebApp/Interchange/Documents/40000_522_771540.PDF (by Chairman Nelson) and http://interchange.puc.state.tx.us/WebApp/Interchange/Documents/40000_559_773656.PDF (by Commissioner Anderson).
Nov 25, 2013: Pressure Mounts Against Corporate Welfare For Texas Electric Industry
Nov 25, 2013: Texas Senators Question Electricity Pricing Plan
Nov 24, 2013: Grid Plan May Overload Power Bills
Nov 21, 2013: Delay Of Texas Summer Reserve Report Could Be Months-Official
Nov 21, 2013: Texas Employer: Capacity Market Would be “Serious Mistake”, Endanger Economic Prosperity
Nov 20, 2013: Texas Grid Agency To Delay 2014 Reserve-Margin Report
Nov 19, 2013: Municipal Groups Knock Proposed Changes In Texas Power Market
Nov 19, 2013: Texas Coalition for Affordable Power: Capacity Market for Electricity Would Result in Higher Bills, More Regulations
Nov 18, 2013: More Texas Economic Engines (TI, Oil Producers) Line Up Against Capacity Market
Nov 15, 2013: Debating the future of Texas electricity in Dallas
Nov 15, 2013: Drivers of Texas Economic Growth Say Mandating a Reserve Margin Premature
Nov 13, 2013: ERCOT Panel Keeps Alive Proposal To Ban Intra-Day Offer Changes
Nov 15, 2013 Report: PUCT Open Meeting 11/15/13
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The 11/15/13 PUCT open meeting was light in the number of decisions made, but made up for it in the intensity of the discussions, as the three Commissioners addressed resource adequacy issues. And this was just the procedural issues! To find out more, please subscribe to Texas Electric Policy News. If you are interested in purchasing this TEPN issue, please click here. If you are interested in subscribing the Texas Electric Policy News, please click here or call Competitive Assets at 512-581-0151.
Alert: PUCT Commissioner Anderson Asks Parties to Address A Number of Questions Regarding Implementation Of A Mandatory Reserve Margin For Generation Capacity In ERCOT
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On 11/15/13, PUCT Commissioner Ken Anderson filed a memo detailing 38 questions he would like considered in the upcoming workshop on Resource Adequacy in Texas. The questions are about alternatives to an energy-only market in ERCOT and implementation of a mandatory reserve margin, and cover 4 broad topics: 1) Questions of General Applicability, 2) Backstop Generation as an Ancillary Emergency Reserve Service in EOM, 3) Reserve Margin Obligation on Load Serving Entities (LSEs), and 4) Centralized Forward Capacity Market. The Commission is discussing this topic in Project 40000 at their open meeting today, 11/15/13.
Nov 14, 2013 Fraser Tells PUCT to Back Off Electricity Market
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The Dallas Morning News is reporting that Senator Fraser yesterday sent a letter to PUCT Chairman Nelson, requesting PUCT “not take any further action that would result in changes to the fundamental design of the Texas market before the appropriate legislative bodies have had the opportunity to provide clear guidance in the form of instruction or statute.” As one of the co-authors of Senate Bill 7, the legislation that restructured the retail electric industry in Texas to make it competitive, Senator Fraser noted that current Commission lacks the institutional knowledge that would have made them aware that the Legislature deliberately applied free market economic principles to design the energy only market that ERCOT currently uses. He further states that “[i]t certainly was not envisioned [that] the law would give the agency unprecedented power to do whatever they wanted under the pretext of ensuring ‘resource adequacy’.” He states that because the proposed plan for a capacity market could cost as much as $4 billion per year, he “cannot justify a potential hike of this magnitude imposed upon [his 800,000 constituents] by an appointed board, unaccountable to the voters.”
ERCOT Reported Preliminary Results Of The Revised Loss-Of-Load Expectation (LOLE) Study
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At the 11/7/13 meeting of the Technical Advisory Committee (TAC), ERCOT staff reported that preliminary results of the revised Loss-of-Load Expectation (LOLE) study point to a planning reserve margin of 14.7%, and the Effective Load Carrying Capability (ELCC) for wind of 13.9% (non-coastal) and 27.2% (coastal). The study is being revised, based on ERCOT Board’s directive during its July meeting. Before revisions, TAC – but not the Board – approved a planning reserve margin of 16.1% and wind ELCC of 14.2% (non-coastal) and 32.9% (coastal).
Nov 12, 2013 PUCT Staff Asks For Comments on its Investigation of the Feasibility of the Institution of Full Co-Optimization in ERCOT Energy Markets
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On 11/8/13, the PUCT staff filed (2) a list of questions in Project No. 41837 – Investigation of the Feasibility of the Institution of Full Co-Optimization in ERCOT Energy Markets, noting that they will ask for the Commission’s input and approval at the 11/15/13 open meeting:
The filing also contains a notice of workshop in the project, scheduled for 1/28/14, with comments being due on 1/3/14 (and replies on 1/17/14).
Nov 8, 2013 ERCOT Approves Nodal Protocol Revision Related to Real-Time Reserve Price Adder Based on Operating Reserve Demand Curve (ORDC)
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On 11/7/13, the Technical Advisory Committee (TAC) approved Nodal Protocol Revision Request NPRR568 (Real-Time Reserve Price Adder Based on Operating Reserve Demand Curve (ORDC)). The NPRR was modified after a long discussion and now also includes the 11/6/13 ERCOT comments (plus attachment), reflecting a concern about the setting of Locational Marginal Prices (LMPs) at the price floor of -$251/MWh before the addition of the price adder (based on NPRR385, which set a pricing floor at a Settlement Point Price of no less than -$251/MWh). An initial motion to pass the NPRR568 without ERCOT comments failed. ERCOT staff also revised the Impact Analysis, which now estimates: (a) the cost of $400k-$500K; (b) a longer implementation time, including stabilization period; and (c) delivery of the NPRR in two phases, starting on 6/1/14. The staff will provide monthly updates at TAC on the implementation process, and will develop education for market participants.
Nov 15, 2013: Drivers of Texas Economic Growth Say Mandating a Reserve Margin Premature
Nov 13, 2013: ERCOT Panel Keeps Alive Proposal To Ban Intra-Day Offer Changes
Nov 5, 2013: Bennett: Idea For ‘Capacity Market’ In Electricity Would Hurt Us All
Comments Filed at PUCT to Address Raising the Value of Lost Load (VOLL) in the Operating Reserve Demand Curve (ORDC)
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On 11/4/13, comments were filed in P.U.C. Project No. 40000, related to resource adequacy. The Commission had requested responses to a 10/18/13 suggestion (509) by GDF Suez to raise the Value of Lost Load (VOLL) in the Operating Reserve Demand Curve (ORDC) to $25,000/MWh, while keeping the Minimum Contingency Level (MCL) at 2000MW (and a price cap of $9,000/MWh). In the comments, the following views were expressed:
– Potomac Economics, the Independent Market Monitor (IMM), believes that, based on the information available, it is unclear whether $9K, $18K, or $25K “are appropriate values to use as VOLL for the types of customers who would be subject to rotating outages in short-supply conditions.” The IMM also reviews the effect of higher VOLL on the overall prices and possibility of non-market actions during the Energy Emergency Alert (EEA);
– CPS Energy and Austin Energy recommend rejecting GDF Suez’s proposal, based on procedural objections and the uncertainty it would create because of the $9K price cap. Instead, they urge the Commission to design the ORDC, using first principles, and focus on the development of the real-time co-optimization;
– White Camp Solar generally opposes the ORDC as a subsidy to generators, including the GDF Suez proposal, but does suggest several adjustments to the ORDC;
– Luminant’s analysis shows that adjustments to VOLL would have only minimal impact on the Peaker Net Margin. There are, however, remaining issues that the Commission ought to address: (a) the Emergency Response Service (ERS), when deployed, should be excluded from available reserves to avoid price suppression; and (b) Reliability Unit Commitment (RUC) and Online Reliability Must Run (RMR) should be excluded from available reserves to mitigate price suppression and to avoid interfering with price formation;
– The Texas Industrial Energy Consumers (TIEC) calculate that agreeing with GDF Suez’ suggestion would result in “true VOLL” at 1375MW of $50K-$75K, which is too high (and even VOLL at $9K may be too high). TIEC states that “the Commission should avoid modifying the ORDC without strong quantitative analysis demonstrating that the proposed change is consistent with efficient market design principles;”
– NRG Energy repeats its contention that the ORDC: (a) does not solve resource adequacy; (b) its main purpose ought to be improvement to the accuracy of scarcity pricing in the real-time market; and (c) cannot simultaneously deliver both market efficiency and resource adequacy;
– Frontier Associates recommend “adopting $9,000/MWh as the ERCOT standard VOLL for all future implementations of ORDC, unless or until credible research provides a more suitable value;”
– Concerned about the generators’ ability to hedge, LS Power Associates suggests “… a larger operating reserve holdback, which we believe needs to be coupled with a release curve that has a gentle slope,” with rare price spikes to the cap, but more frequent higher prices;
– The Texas Public Policy Foundation filed a correction to its previous comments, estimating that “the total cost of transition to competition” was $9.5 billion; and
– The Texas Demand Response Coalition asks that the PUCT further clarify that “… the ORDC reserve calculation should subtract out the amount of ERS deployment that is instructed by ERCOT, allowing the quantity of available reserves to represent pre-ERS deployment reserves.”
Nov 4, 2013: This Electricity Market Change Could Cost Texans Billions and Pollute the Air
The Perils of Forecasting Texas Electricity Needs Copyright 2013 by Competitive Assets, LLC. All rights reserved
On 11/3/13, the Austin American Statesman published an article (subsc. only) describing the difficulties and coming changes in energy forecasting at ERCOT. The author notes that the longer the term of the load forecast, the less certainty there is. For example, the reserve margin changed from 14.48%, as predicted in December 2010, to 7.64% in 2011, 10.9% in 2012, and then to 13.8% in 2013. The December 2013 report on Capacity, Demand, and Reserves (CDR) will use a revised methodology for load forecasting, which is expected to be more accurate.
Nov 1, 2013: Texas Grid Operator Predicts Plenty Of Winter Power
Nov 3, 2013: ERCOT Expects Sufficient Electricity This Winter and Next Spring
Oct 31, 2013: Debate Intensifies On State’s Power Reserve Needs
Oct 31, 2013 Energy Storage Providers Support a Capacity Market for ERCOT
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The new filings in Project No. 40000, related to resource adequacy, are a presentation by Tom Pierson of Texas Energy Storage Alliance (TESA), and comments by Robert Klein of VdE Corp. Both support creation of a capacity market in hopes that their technologies could be utilized under such a market construct. The TESA presentation focused on accurately measuring capacity of gas turbines during peak times, explaining that “ERCOT’s peak power supply decreases, as temperatures increase (at 100°F, a gas turbine may have lost up to 20% of its nameplate capacity).” Accurate measurements and a corresponding market value would ensure adequate summer peak capacity, according to TESA.
VdE Corp. develops sustainable, low-pollution energy, and is currently working on “one or more Closed Loop Pumped Storage (CLPS) projects in the Texas Panhandle, near Tulia.” Closed cycle, limited aquatic resource impact pumped storage facilities represent a sustainable, zero pollution technology for converting wind and solar generated electricity into dispatchable power. Clean-wind-generated electricity is purchased in the surplus, off-peak hours to pump water to the upper reservoir at night (when the wind-generated electricity would otherwise have been unused); and this stored water is run back downhill in the daytime on-peak hours to generate scarce, valuable on-peak electricity.
Potential Increased Participation of Energy Efficiency and Demand Response Providers in ERCOT
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Greentechmedia is reporting on the potential efforts by energy efficiency and Demand Response (DR) providers to increase their participation in the ERCOT market, given the recent indications of a change to a capacity market in Texas: “ … efficiency advocates argue that it could unlock new demand side resources that can get better compensated for their ability to lower power consumption when demand skyrockets. They want to follow the model of PJM and ISO New England, the regional grid operators that have allowed DR providers to bid into capacity markets and get paid for future efficiency procurement.”
Oct 30, 2013: As Texas Inches Toward a Reserve Power Market, Efficiency Advocates Make Moves
Oct 30, 2013: Texplainer: What’s an Energy Capacity Market?
Oct 31, 2013: Opinion: Exelon: Looking to Victories at Court, Regulatory Agencies to “Support Our Pricing” of Competitive Generation
Oct. 29, 2013 Texas Senators Voice Different Opinions Regarding PUCT’s Decision to Change ERCOT Market
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The Austin American-Statesman is reporting that Senator Troy Fraser, who is one of the original state Legislators who supported deregulation of the Texas wholesale electricity market, has expressed an opinion that the Public Utility Commission lacks authority to shift the market design from an energy-only market to a capacity market. As the chairman of the Senate Committee on Natural Resources, he stated that “he intends to convene a hearing to question the three members of the utility commission about their 2-to-1 decision last week to begin mandating the level of electricity reserves, a first step to possibly redesigning the market.” At this time the hearing has not yet been scheduled.
The article goes on to say that “State Sen. John Carona, R-Dallas, wrote the utility commission last summer supporting its efforts to address the issue. On Monday (10/28/13), Carona – who is chairman of the Senate Business and Commerce Committee – repeated his support. “The Public Utility Commission is charged with the responsibility of ensuring that adequate energy resources are available for Texas consumers,” Carona said by email. “I have encouraged the Commission to examine the issue closely and do what is necessary to meet this challenge.” Carona concluded that the commission’s decision to ensure an adequate reserve margin “is a move in the right direction” to help the Texas economy and he would work with Senate colleagues to be sure the utility commission has authority to do what it needs to do.”
ERCOT Files Back Cast Analysis Regarding Proposal In GDF Suez Energy’s Comments
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On 10/18/13 ERCOT filed a Back Cast Analysis regarding a proposal made by GDF Suez Energy NA in their comments in PUCT Project No. 40000. The Commission is scheduled to discuss the adoption of an Operating Reserve Demand Curve on November 15, 2013, and has requested comments from interested parties by November 4, 2013. The Commission requested the ERCOT Back Cast analysis before the November 4th deadline so it could be evaluated by parties who plan to comment.
The Back Cast reviews the impact of the Value of Lost Load at $18,000 and $25,000, using 3 scenarios. The analysis found that the estimated additional Peaker Net Margin would have ranged in 2011 from $157,333/MW to $378,764/MW, and in 2012 from $27,173/MW to $78,509/MW. Also reported are the Energy Weighted Average Price Adder P_S and the Energy Weighted Average Offline Reserve Price P_NS.
Oct 28, 2013: Electricity, But At What Cost For Texas?
Updated: The Commission Charts a Path on Reserve Margin
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By now, it has been widely reported that the PUCT, at its 10/25/13 open meeting, delved into a discussion on whether to have the planning reserve margin (PRM) be a mandate or a target. Chairman Nelson – in a somewhat surprising move – asked that the Commission decide the question at the meeting. Commissioner Anderson opposed making the decision, noting that it is a precursor to a capacity market, which is opposed by some of the state’s largest employers. The newly appointed Commissioner Marty sided with the Chairman during the discussion, which at times became quite heated and contentious.
The Texas Tribune is reporting that “State Sen. Troy Fraser, R-Horseshoe Bay, who co-authored legislation that deregulated Texas’ electric market in 1999, said the Commissioners should wait for more information before solidifying their opinions, calling the vote a “severe miscalculation” that is “putting the cart before the horse.” Fraser also questioned the PUC’s authority to overhaul the market, and said he would soon meet with his colleagues to discuss the legislature’s role: “I don’t think it was ever envisioned that the PUC would change the market,” he told the Tribune. “That’s a huge decision, and it should not be made by an agency. It should be made by the Legislature.”
Oct 25, 2013: Texas PUC Vote Signals Support For Market Shift
Oct 25, 2013: Vote To Require Spare Power On Texas Grid Spurs Debate
Oct 28, 2013: Government Knows Best: Texas Capitulates to Capacity Owners, Adopts Mandated Reserve Margin
Oct 28, 2013: Opinion: Alternatives to Texas Capacity Auction? Many Superior & Viable Options Exist, But Don’t Bet on Them
Oct 25, 2013: Oxer, Parsly, and Wood: Texas’ Deregulated Power Market Should Evolve To Meet Future Challenges
ALERT: The Commission Charts a Path on Reserve Margin
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At the 10/25/13 open meeting, the Commission delved into a discussion on whether to have the planning reserve margin (PRM) be a mandate or a target. Chairman Nelson – in a somewhat surprising move – asked that the Commission decide this question today. Commissioner Anderson opposed making the decision and said that he did not “appreciate the surprise.” Commissioner Marty was leaning toward the Chair’s position during a discussion, which at times became quite heated and contentious.
After a recess, and an agreement on the schedule to consider resource adequacy further (through January 2014), Chairman Nelson again pushed for a vote on the mandate/target determination for the reserve margin. There was an additional discussion, partly about the appropriate reliability standard and also on whether the Commission would be locking itself into the future approval of a capacity market with this vote (this was a question Commissioner Marty wanted resolved before voting). The Chairman then repeated that she wants a vote and got confirmation from Commissioner Marty on her support for the reserve margin to be a mandate.
Commissioner Anderson made a strong statement in opposition to the vote at this time and the approval of the reserve margin as a mandate, saying that this was a slippery slope toward destroying “the economic engine that is Texas.” Chairman Nelson stated that she is making this move so that the economy of Texas would not suffer from unreliable power supply and that it is a balancing act.
When asked whether she wants to proceed with a vote today, the Chair briefly said “No.” It appears, however, that the intent may have been to put everybody on notice that there are at least two votes to designate ERCOT’s reserve margin as a mandate. (Some other press outlets have interpreted the entire discussion as a positive vote (i.e., 2-1) on the mandated reserve margin; while others have not drawn this conclusion.)
The latest issue of the Texas Energy Policy News “PUCT Open Meeting 10/25/13 Excerpt of Discussion on Reserve Margin“ summarizes only what at times was a heated and contentious debate about this topic and clarifies the final outcome. If you are interested in purchasing just the Excerpt, please click here. If you are interested in subscribing the Texas Electric Policy News, please click here or call Competitive Assets at 512-581-0151.
In addition, a full report on Today’s Open Meeting is available and if you are interested in purchasing this full TEPN issue, please click here.
Report: ERCOT Planning Reserve Margin Workshop 10/8/13
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The debate about resource adequacy and what type of a market construct to have in ERCOT continued during the October workshop at the PUCT. The Commission, perhaps for the first time, delved into the pros/cons of a capacity market and considered differing viewpoints of various market participants. Read more about this debate in the latest issue of the Texas Electric Watch, including why the Independent Market Monitor does not believe that the centralized, forward capacity market is the way to go. If you are interested in purchasing this TEW issue, please click here. If you are interested in subscribing the Texas Electric Watch, please click here or call Competitive Assets at 512-581-0151.
Oct 23, 2013: Opinion: Texas Capacity Owners Misrepresent Position of Independent Market Monitor in Pushing for Capacity Market
Oct 23, 2013: Opinion: Texas REP: Capacity Market Would Allow Capacity-Owning REPs to Put Me Out of Business
Former FERC Chairman Kelliher on Texas Resource Adequacy Solutions
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The 10/22/13 edition of the Austin American Statesman carries an opinion piece by the former Chairman of FERC, Joseph T. Kelliher, on the need for Texas to implement “smart electricity reforms.” He writes that reliability is valuable and necessary, but comes at a price, and the challenge for Texas is to figure out how to pay for it. While the energy-only market has worked in Texas in the last ten years, “…short-term prices can and do sharply increase. The potential for enormous price spikes inevitably leads to “price caps,” which ironically discourage the development of the planning resources needed for the longer term. This negative feedback loop has played out in other states – notably California – resulting in supply inadequacies with disastrous results.”
He states that “the experience of other regions suggests that a planning reserve market, otherwise called a capacity market, will ensure electricity reliability at a reasonable cost – if Texas can avoid the mistakes of other regions.” The best procurement period would be at least five years, which would help with long-term planning. In his view, limiting a capacity market to new resources only or for congested areas is not recommended.
ERCOT Publishes Reports Related to Implementation of ORDC
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Starting last weekend, ERCOT has been publishing Indicative Real-Time Reserve ORDC (Operating Reserve Demand Curve) Price Adder: “This report captures the value of the opportunity costs of online reserves, based on the defined ORDC. This will be an adder to the Real-Time Locational marginal Price (RT LMP), based on Nodal Protocol Revision Request NPRR568. The ORDC is a curve that represents the value of reserves at different reserve levels, based on the Loss of Load Probability (LOLP) at that reserve level and the Value of Lost Load (VOLL). (The RT Reserve and Price Adder is calculated, based on the ERCOT Comments 101113 for NPRR568, plus the Online Wind Resource capacity in the online reserve calculation. Any comments and changes made to the NPRR568 after the 10/11/13 ERCOT comments are not included in the current report.)
As part of the information on the scarcity-pricing mechanism, ERCOT also publishes the Peaker Net Margin (i.e., the cumulative Peaker Net Margin in dollars per MW, since the start of the annual resource adequacy cycle, posted daily) and the System-Wide Offer Cap (i.e., the cap in place for Ancillary Services and Energy, posted for the last thirty days, on a daily basis).
PUCT Should Make the Right Call
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On 10/21/13, the Austin American Statesman published an opinion piece by Kathleen Hunker of the Texas Public Policy Foundation, arguing against a mandated reserve margin and capacity market in Texas. Calling it a “corporate redistribution scheme,” she says that generators want such “radical transformation” because it is necessary to maintain a reliable supply of electricity. In her view, however, there is no energy shortage and the energy-only market is working well: “In fact, the transition to competition has been so successful that the market has too much electricity today – which is one reason prices are so low.” At the end, the author reiterates that “the PUC should not rush into a decision to mandate a reserve margin. In fact, it should not adopt a mandatory reserve margin at all. Projections of future reserves in a capacity market would be no more reliable than projections today, but the cost of poor projections for consumers would be significant.”
ERCOT PRS Approves NPRR on ORDC
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On 10/1/8/13, the Protocol Revision Subcommittee (PRS) approved an extensively amended Nodal Protocol Revision Request NPRR568 (Real-Time Reserve Price Adder Based on Operating Reserve Demand Curve (ORDC)). The amendments include Morgan Stanley Comments 100813 (without the reference to load), ERCOT Comments 101113, and Luminant Comments 101613. Also added were PRS revisions, based on informal comments submitted by Citi. Moreover, a couple of issues were assigned to a subcommittee and working groups:
The next step for ERCOT staff is to develop an Impact Analysis on the approved revisions.
NPRR568 will be considered next at the 11/7/13 meeting of the Technical Advisory Committee; its rank and priority was set at 2013/70.
Also on 10/18/13, ERCOT staff announced that: ” ERCOT published the Indicative Real-Time Reserve Price Adder on ercot.com for Operating Day (OD) 10/17/2013. The posted price is calculated, based on the 10/11/13 ERCOT comments for NPRR568, and include the Online Wind Resource capacity in the Online reserve calculation. Any comments and changes made to the NPRR568 other than the 10/11/2013 comments are not included in the currently posted prices. The posting is a zip file that can contain multiple csv files; each csv file contains the price adder for all the Security Constrained Economic Dispatch (SCED) runs in each operating day. The prices are posted under Scarcity Pricing Mechanism section (http://www.ercot.com/mktinfo/rtm/).
PUCT Workshop on Investigating Potential Impacts of an Increase in the System-Wide Offer Cap on Retail Markets
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On 10/17/13, the PUCT staff held a workshop in Project No. 41641, Project to Investigate Potential Impacts of an Increase in the System-Wide Offer Cap on Retail Markets. Previously, on 10/7/13, parties filed comments, responding to staff’s questions on mitigating potential impacts, possibly increasing capital requirements on REPs, impact of peak load events on some REPs, and any other impacts. At the workshop – which ran only about 30 minutes – there were several questions about Interval Data Recorder (IDR) meters, since one of the ways to lessen impact on the retail market would be a shortened settlement timeline. Participants pointed out that IDR data are provided monthly, so data estimation would have to become more prevalent with a shorter timeline. Switching such meters to Advanced Metering Systems (AMS) would be costly to REPs and their large customers, many of whom maintain entire systems, based on IDR. The staff were also cautioned that, while going to a five-day settlement timeline is manageable, anything shorter than that will have to be very carefully evaluated.
Oct 18, 2013: ERCOT Overhauling Power Forecasting Methods For Texas
Oct 20, 2013: Hunker: PUC Should Make The Right Call
Oct 17, 2013: ERCOT Considers Implementing Real-Time Reserve Price Adder Based on Operating Reserve Demand Curve
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On 10/17/13, ERCOT’s Protocol Revision Subcommittee (PRS) will consider Nodal Protocol Revision Request NPRR568 (Real-Time Reserve Price Adder Based on Operating Reserve Demand Curve (ORDC)). Last week, ERCOT staff filed updates to the NPRR and a revised procedure, after several rounds of stakeholder discussions. The updates incorporate consensus items for the summer 2014 implementation and beyond, in addition to listing unresolved items. Also before the meeting, several market participants filed additional comments that may be discussed at PRS. The NPRR, which is estimated to cost between $150-$250K to implement, with a four-to-six month timeline, is expected to be considered by the ERCOT Board in November.
Oct 15, 2013: PUCT Commissioner Marty Testifies on Generation Adequacy Issues before a Senate Committee
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On 10/15/ 13, the Texas Senate Business and Commerce Committee met to discuss its interim work and hear testimony from several state agencies, including the PUCT. The Austin American Statesman (AAS) is reporting that the new PUCT Commissioner Brandy Marty indicated her preference for a quick resolution of the generation adequacy issue – perhaps as early as next year: “Certainly one option would be to make the decision to adopt a mandatory reserve margin and not be able to build anything around that until we have the information on what that exactly should look like,” Marty said.” Laylan Copelin of AAS writes that “her remarks … are likely to be interpreted as favoring redesigning the existing wholesale electricity market – a prospect that critics have warned could raise electricity rates.” The article continues: “After the Tuesday’s hearing, Marty said the industry and consumers should not assume that the ultimate solution would be the capacity market favored by most owners of power plants. “I think people’s minds go there because of the model we’ve seen, but Texas tends to do what’s best for Texas and there are going to be components from several different markets,” she said. “I don’t know yet because we are waiting for information.”
At the 10/8/13 PUCT workshop on resource adequacy, the Chairman was inquiring about how much time would be needed before the effectiveness of the Operating Reserve Demand Curve (ORDC) solution, currently under development at ERCOT, could be evaluated. One participant suggested that it would take at least twelve months after the implementation – i.e., not until the summer of 2015 – to see the full effect.
Oct 15, 2013: PUC Member Hints At Adopting Mandatory Power Reserves
Oct 15, 2013: Key Decision On Possible Changes To Texas Power Market May Come In Early ’14, Official Says
Oct 9, 2013: Texas Utility Commission To Weigh Changes To Market
Oct 9, 2013: Report: Correcting for Load Forecast Errors “Debunks” Myth ERCOT Facing Resource Adequacy Shortage
PUCT Workshop on Resource Adequacy Project 10/8/13
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On 10/8/13, the PUCT held a workshop in Project No. 40000, on resource adequacy, to discuss whether the reserve margin should be a target or a mandate and how best to maintain adequate reserves. The afternoon session focused on presentations from: (a) ERCOT staff on revisions to the forecasting model, resulting in lower load forecasts and somewhat higher reserve margin (i.e., 16.7% in 2014 and 16.1% in 2015); (b) the Sierra Club on the need to incorporate energy efficiency, Demand Response, distributed generation, renewables, and other new technologies into the forecasting methodology; and (c) the Texas Industrial Energy Consumers (TIEC), whose representative noted ERCOT is the best price-responsive market in the US and that a 10-year Capacity, Demand, and Reserves (CDR) report might not be too useful beyond five years. The Commission made no decisions, although the new Commissioner Marty expressed concern about sufficient reserves to enable business growth. At one point, Commissioner Anderson alluded to possible changes to the Emergency Response Service (ERS), and explained how ERS can bid into the market. Also, at the workshop, ERCOT staff reported that they will start producing indicative prices for the Operating Reserve Demand Curve (ORDC) on 10/19/13. The information will be posted to the Market Information System (MIS) page. On the same day, Representative Turner filed comments, cautioning the Commission before proceeding with a capacity market, without doing a thorough cost/benefit analysis.
Oct 8, 2013: Texas Power Providers Seek Fees To Insure Generation Reserves
Oct 8, 2013: Debate Over State’s Power Reserves Raises More Questions
Oct 8, 2013: Resource Adequacy Hype Doesn’t Fit the Facts
Oct 8, 2013: Opinion: Texas Market Monitor: “Not Sure” Any Capacity Market a “Good Facilitator” of Decision to Invest
Oct 8, 2013: Opinion: Texas Energy Consultant Details Innovative Generation Development Under Current Market Design
Oct 8, 2013: Texas Representative Sylvester Turner Files Comments with PUCT before Today’s Resource Adequate Workshop
ERCOT Staff Presented Changes to its Load Forecast Process
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At the 10/7/13 Generation Adequacy Task Force (GATF) meeting, ERCOT staff presented revisions to the load-forecasting process, which are leading to lower-forecast values. One significant change has been to stop using the Moody’s economic-growth model, since it has consistently proven too optimistic (or, “a bubble,” according to staff). The result of the changes, including how solar, hydro, and wind are counted, is that the planning reserve margin for 2014 has risen to 16.7% (not yet adjusted for the Effective Load Carrying Capability of wind). The same presentation will be discussed at the 10/8/13 PUCT workshop and the ERCOT Board in November.
Oct 7, 2013: Moravec: Perils Of This Electricity Plan in ERCOT
Oct 7, 2013: Changes In ERCOT Electricity Market Carry Risks
Oct 7, 2013: PUCT Staff Posts Final Agenda for Today’s (10/8/13) Workshop on Resource Adequacy Project
Oct 6, 2013: PUCT New Commissioner’s Mission: Affordable, Reliable Power
ERCOT Considers Changes to its Load Forecast Methodology
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On 10/7/13, the Generation Adequacy Task Force (GATF) is meeting to review:
The changes for the load forecast methodology that staff are proposing include:
ERCOT’s Resource Adequacy Task Force Continues to Work on Implementing ORDC
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The Resource Adequacy Task Force (RATF) met on 10/4/13, to discuss further details of the Operating Reserve Demand Curve (ORDC) and the revised Nodal Protocol Revision Request 568NPRR ERCOT Comments (Real-Time Reserve Price Adder Based on ORDC). The group sought consensus on remaining unresolved issues, and scheduled additional meetings for 10/9/13 and 10/11/13. Also, comments in Project No. 40000, related to resource adequacy are due on 10/11/13.
Oct 3, 2013: PUCT Requests More Comments in Project No. 40000
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At the 10/3/13 open meeting, the Commission asked interested parties to comment on the questions asked in a CPS 10/1/13 filing (485) in Project No. 40000, related to resource adequacy. The deadline for comments is 10/11/13. The Commission is also holding a workshop in this project on 10/8/13.
Sept. 30, 2013: PUCT Staff files Agenda for October 8 Workshop for Resource Adequacy Project
Oct 1, 2013: Battle Over Power Capacity In Texas Heats Up
Sept. 26, 2013: Reserve Margin Comments in Project No. 40000
Copyright 2013 by Competitive Assets, LLC. All rights reserved
The latest issue of the Texas Electric Watch (TEW) provides a summary of all 24 comments filed in Project No. 40000 on the Commission’s questions related to setting the planning reserve margin (PRM) and reliability standard. While a few parties offered suggestions on the PRM, most commenters expressed support for a capacity market, including renewable and Demand Response providers. Find out also about the TIEC’s alternative to a capacity market. After the 9/23/13 filings in Project No. 40000, two additional filings were made by a Demand Response provider, supporting a capacity market in ERCOT, and by the Texas Public Policy Foundation, which vehemently opposes such a market. A Supplemental TEW offers a brief summary of the new comments. To read more, please subscribe to Texas Electric Watch. If you are interested in purchasing this TEW issue (including the supplemental issue), please click here. If you are interested in subscribing the Texas Electric Watch, please click here or call Competitive Assets at 512-581-0151.
ERCOT Proposes Protocol Revisions For ORDC B+ Implementation
Copyright 2013 by Competitive Assets, LLC. All rights reserved
On 9/19/13, ERCOT filed Nodal Protocol Revision Request NPRR568 (Real-Time (RT) Reserve Price Adder Based on Operating Reserve Demand Curve (ORDC)), including a preliminary Impact Analysis (IA) and Methodology for Implementing ORDC (a similar filing was made in P.U.C. Project No. 40000 – Proposed Protocol Revisions for ORDC/B+ Implementation). The NPRR requires ERCOT to implement an ORDC in the Real-Time Market (RTM) to determine the RT price adder for RT Settlement Point Prices (RTSPPs). The RT price adder reflects the price for reserves available in the ERCOT System, based on the Loss of Load Probability (LOLP) at that reserve level. The addition of this price adder to the RTSPP ensures that the RTSPP reflects the opportunity cost of reserve scarcity. A new Other Binding Document (OBD) describes the methodologies for developing the ORDC and determining the reserve price adder, using the ORDC. In addition to various revisions, the 62-page NPRR creates a new Protocol Sec. 6.7.4, RT Ancillary Service (AS) Imbalance Payment or Charge. The filing explains that in the absence of RT Co-optimization, an AS imbalance settlement will be performed “to ensure that Resources are indifferent between providing energy and reserves in RT.” Moreover, “Reliability Unit Commitment (RUC) Resources and Reliability Must-Run (RMR) Units are removed from this AS imbalance payment for their online capacity in RT, since making the payment and clawing it back would result in the same financial outcome, but with significant changes to the Protocols.” The IA estimates the cost of implementing the NPRR at $150K-$250K, with a four-to-six-month timeline. The ORDC was first proposed in November 2012, and has been extensively discussed since then, both at the PUCT and ERCOT. On 9/26/13, the Resource Adequacy Task Force at ERCOT will discuss the newly-filed NPRR.
PUCT Instructs ERCOT How to Proceed with the Implementation of the Operating Reserve Demand Curve
Copyright 2013 by Competitive Assets, LLC. All rights reserved
At the 9/12/13 open meeting, the Commission instructed ERCOT staff to use the following inputs, when drafting Protocol language for the implementation of the Operating Reserve Demand Curve (ORDC):
ERCOT staff said that the draft Protocol revision may be ready by the end of the next week, and the Commissioners noted that they see no reason to delay consideration of the ORDC by ERCOT stakeholders. In further developments:
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