ERCOT Backcast Finds Minimal Impact To Generator Revenues From Removing RUC From ORDC
ERCOT filed with the Texas PUC a report on the impact of removing Reliability Unit Commitment capacity from the online reserves used to calculate the Operating Reserve Demand Curve (ORDC) price adder.
A backcast analysis performed by ERCOT estimates that, had RUC capacity been removed from the ORDC in 2016, the energy revenue to generators from the ORDC price adders would have increased by approximately $6.6 million (from about $95.1 million to $101.6 million) and the real-time ancillary service imbalance (Online and Offline ORDC Reserve) payments would have increased by approximately $0.1 million (from about $1.3 million to $1.4 million).
In 2017 the energy revenue to generators from the ORDC price adders would have increased by approximately $18.6 million (from about $84.4 million to $103.0 million), and the real-time ancillary service imbalance (Online and Offline ORDC Reserve) payments would have increased by approximately $0.4 million (from about $1.6 million to $2.0 million).
For context, the total generator revenues (in this case defined as the sum of the total real-time energy payments, real-time ancillary service imbalance (Online and Offline ORDC Reserve) payments, and day-ahead ancillary services payments) was about $8.4 billion in 2016 and $9.5 billion in 2017.
This equates to a total revenue impact of 0.07% for 2016 and 0.2% in 2017.
ERCOT noted that, "While the use of the back-cast provides valuable insight to the potential effect of removing RUC from ORDC, this analysis may not accurately project future pricing impacts of such a change for several reasons. First, ERCOT's operating rules and practices could change. For example, as ERCOT previously noted in Project 47199, ERCOT has implemented a number of Protocol revisions and operator display enhancements that substantially impact the deployment and settlement of resources committed via RUC. Additional changes could be introduced in future years. Second, a back-cast analysis does not adjust for changes in behavior that might be expected to follow from the changed assumptions. Market participants routinely react to increases in price, yet a back-cast presumes their behavior remains unchanged. Finally, future operating conditions may differ from past conditions. Because these three factors limit the precision of a back-cast analysis, ERCOT would suggest that the Commission view this study as an estimation of the general magnitude of potential pricing impacts rather than as a prediction of a specific pricing outcome."
The estimated cost of modifying ERCOT's systems to remove online RUC and RMR Resources from the ORDC online capacity value is $15,000 to $25,000