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FERC: ERCOT Summer Reserve Margin "Tight"; A Better Description Is Efficient

June 16,2017

FERC issued a Staff summer 2017 reserve margin report stating, "The anticipated reserve margin in ERCOT continues to be tight when compared to the other regions, although ERCOT expects to have sufficient generating capacity to serve peak demand during this upcoming summer season."

FERC Staff listed ERCOT's reserve margin as 15%, above the target of 13.75%

FERC Staff called this "tight" when compared to other regions, such as PJM and NYISO, whose reserve margins approach 30% with reliability targets of 16-17%

We find it incongruous to call a reserve margin in excess of the reliability target, "tight", when the reserve margin is already a cushion -- an amount of excess power above what is forecast as needed for reliability. But somehow meeting this insurance target isn't enough anymore, now customers have to pay to be "sufficiently" above the reserve margin, so as not to be in "tight" conditions.

Rather than being tight, perhaps ERCOT's reserves should be called what they are: efficient. Reserve margins of 30% aren't free, and the burdensome costs of excess capacity, which customers pay for in systems with a mandated reserve margin (whether the system be vertically integrated or restructured), were one of the primary reasons for restructuring in the first place.

But rather than hailing ERCOT as the most efficient model in assuring reliability for least cost, eliminating inefficient resource decisions, FERC Staff uses a pejorative term such as "tight" because the market design doesn't procure wasteful capacity. Go figure

Capacity Market   Texas   ERCOT  

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