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ERCOT IMM Agrees Energy-Only Market "Not Broken"

September 18,2017



In comments on the FTI report on ERCOT pricing efficiency, the ERCOT Independent Market Monitor said, "The IMM agrees with those that assert that the ERCOT market is not broken."

"But the value of proven and incremental improvements to the market, such as real-time co-optimization, cannot be overstated. Real-time co-optimization is foundational to efficient pricing, especially in an energy-only market where participants are relying primarily on energy prices to facilitate short-term decisions to commit generation and long-term decisions to invest and retire. The IMM is confident that the benefits of real-time co-optimization will outweigh the implementation costs, moving to co-optimization with local reserve products is exactly in line with all of the philosophies, theories, and economics underlying the ERCOT market. It allows the theory and design applied ERCOT-wide to be applied to the locational level and the individual reliability requirement level," the IMM said

Regarding transmission cost allocation design, the IMM said, "The 4CP allocation mechanism used in ERCOT provides a very strong incentive that impacts decisions to consume around the peak. In an energy-only market like ERCOT, there is a heavy reliance on pricing and decision-making around the peak to send long-term price signals; more so than in any other RTO. It makes sense, therefore, to be even more vigilant about what incentives participants are given around the peak in ERCOT because those few hours around the peak play such a critical role in sending long-term price signals."

See the IMM's full comments here

Tags:
Texas   ERCOT   Wholesale   Pricing  

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