ERCOT's IMM filed the 2019 state of the market report

The IMM noted that, "The first stage of a change to the shortage pricing mechanism was implemented on March 1, 2019. This change had the effect of increasing the revenue due to shortage pricing by $1.9 to $2.1 billion in 2019, out of a total $3.7 to $5.1 billion. Shortage pricing is key in ERCOT’s energy-only market because it plays a pivotal role in facilitating long-term investment and retirement decisions."

The IMM reported that, "Only 4.5% of ERCOT’s generation was unavailable during the summer peak conditions, similar to 2018 but lower than the 6% during the summer peaks in 2016 and 2017. We attribute this increased availability to the effectiveness of the shortage price signals in motivating participants to increase maintenance and minimize outages during the summer peak."

The IMM reported that, "For the first time since 2011, the net revenues in all four zones exceeded the estimated cost of new entry for both natural gas combustion turbines and combined cycle resources. The sharp increases in net revenues were primarily driven by the significant shortages in August and September, in combination with the adjustments to the ORDC in 2019. The increase in the frequency of sustained shortages is consistent with the declining reserve margin in recent years. This existence of operating shortages is not a concern. In an energy-only market, shortages play a key role in delivering the net revenues an investor needs to recover its investment. Such shortages will tend to be clustered in years with unusually high load or poor generator availability."

The IMM said that, "Texas heads into the summer months of 2020 with an improved planning reserve margin of 12.6%, notably higher than the 8.6% reserve margin for 2019. It is worth mentioning that the current methodology of performing the Capacity, Demand and Reserves (CDR) analysis does not consider energy storage resources (e.g., batteries). Including storage resources will increase the reserve margin, potentially by a greater amount than planned thermal generation. Ensuring that the market can efficiently price and dispatch energy from newer technologies will become increasingly important."

Among the IMM's recommendations is to eliminate the “2% rule” and price all congestion regardless of generation impact. ERCOT only includes a constraint in its real-time pricing and dispatch engine (the Security Constrained Economic Dispatch, or SCED) if at least one resource exists that has a shift factor of greater than 2% or less than negative 2%, originally due to software limitations.

The IMM again urged to modify the allocation of transmission costs by transitioning away from the 4CP method.

The IMM recommended pricing Ancillary Services (AS) based on the shadow price of procuring each service.

The IMM recommended modifying the reliability deployment adder and operating reserve adder to improve pricing during deployments of Emergency Response Service (ERS).

The IMM recommended implementing a locational reliability deployment price adder

The IMM recommended implementing transmission demand curves

See the full report here

Tags:
ERCOT   Texas   Resource adequacy  

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