Reuters obtained a draft of a U.S. Department of Energy study concerning a review of factors impacting electric markets and reliability (and baseload resources), and, in a footnote, the draft bizarrely claims that ERCOT's resource adequacy approach is now arguably "similar" to that of PJM

A DOE spokesperson told Reuters that the draft was outdated and had not gone through "any adjudication" from staff.

Of note is a discussion of capacity markets (page 111, native pagination) which states in a footnote, "ERCOT has recently modified its energy prices to include a 'real time reserve price' adder, linked to an administratively-determined 'operating reserve demand curve' (ORDC). Arguably, this amounts to building an explicit capacity component into its energy market, making ERCOT's resource adequacy approach similar to that of PJM and ISO-NE."

To be clear, the footnote and attendant discussion was not addressing the pricing of reserves and real-time energy prices, or operational resource adequacy. Rather, the footnote is appended to the text, "Four RTO/ISOs operate capacity markets [footnote], using annual auctions in which bidders compete by submitting offers (in terms of $/MWh) at which they are prepared to make capacity commitments."

Even if one were to accept the premise the ORDC reflects an explicit "capacity" component by valuing reserves, no reasonable argument can be made that ERCOT's resource adequacy approach is similar to that of PJM or ISO-NE.

Putting aside the fact that, as indicated by its name, the ORDC deals in operating reserve capacity, and not installed capacity as is procured in capacity markets (now, after a decade, with performance obligations), the most blatant divergence is that the ORDC does not mandate any capacity purchases. It only drives prices in the absence of the defined reserves.

Even with an ORDC adder, ERCOT does not, on behalf of load, procure a mandated amount of capacity to meet a mandatory resource adequacy reserve margin. ERCOT's approach, and that of PJM and ISO-NE, can not be more different.

Link to draft

Tags:
ERCOT   Texas   Capacity Market  

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