Energy Choice
                            

Matters

IMM Releases 2013 ERCOT State of the Market Report

September 30, 2014

Email This Story
Copyright 2010-14 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

The Independent Market Monitor has released the 2013 state of the market report for the ERCOT market.

Regarding resource adequacy, the IMM said that, " These results indicate that during 2013 the ERCOT markets would not have provided sufficient revenues to support profitable investment in any of the types of generation technology evaluated. The net revenues in 2013 were very similar to those in 2012, and both years were much lower than in 2011. This is not surprising because shortages were very infrequent over the past two years."

The IMM noted that, "resource investments are driven primarily by forward price expectations, so historical net revenue analyses do not provide a complete picture of the future pricing expectations that will spur new investment. In an energy only market, we would expect net revenues to be less than required to support new investment."

As noted in our story today on two new power plants from Exelon, the ERCOT energy-only market continues to attract needed investment.

The IMM also curiously says, in discussing projected reserve margins in other RTOs, "[e]ven with the forecasted additions, ERCOT is projected to sustain lower reserve margins than all other RTOs, and less than its target reserve margin after 2016."

However, the only data cited in the IMM report itself is 2014 reserve margins, ignoring the capacity retirements (and shortages in some cases) facing ISO New England, MISO, and PJM, which in some cases are driving projected reserve margins to levels similar to ERCOT for years beyond 2014.

The IMM links to a December 2013 NERC report which includes NERC projections of future reserve margins, and notably, even this December 2013 NERC report notes that reserve margins in ISO-NE with its capacity market were, at that time, projected to be 16% in 2017, and 15% in 2018. Importantly, the cited NERC study was published before the 2017/18 ISO-NE capacity auction resulted in a shortage of resources, despite a tripling in costs.

More specifically on net revenues, the IMM said that for a new natural gas-fired combustion turbine in ERCOT, the estimated net revenue requirement is approximately $80 to $105 per kW-year. The estimated net revenue in 2013 for a new gas turbine was approximately $26 per kW-year.

For a new combined cycle unit, the estimated net revenue requirement is approximately $105 to $135 per kW-year. The estimated net revenue in 2013 for a new combined cycle unit was approximately $45 per kW-year, the IMM said.

Regarding market behavior and outcomes, the IMM said that its evaluation indicated small quantities of capacity at the highest loads that were potentially economically withheld by small suppliers.

"Almost all of these quantities reflect the conduct of GDF SUEZ," the IMM said.

"We observed many instances during 2013 where GDF SUEZ changed their offer curves intraday, increasing the offer price for hundreds of MWs of their capacity during the highest load hours, then reducing the price of their offered generation after the peak load period. The effects on real time energy prices of GDF SUEZ’s offer patterns were mixed and were only material after the changes to real-time mitigation went into effect on June 21, 2013. We estimate the overall impact that GDF SUEZ’s offer patterns on the ERCOT average real-time energy prices was less than $1.00 per MWh," the IMM said.

"GDF SUEZ is deemed not to have ERCOT-wide market power under P.U.C Subst. R. 25.504 (c) because they control less than 5 percent of the capacity in ERCOT and, therefore, are able to offer its resources at any price up to the system-wide offer cap. In evaluating this conduct, we estimated that the aggregate effect of its conduct was less than $1 per MWh and, therefore, does not raise substantial competitive concerns," the IMM said.

GDF SUEZ's actions, "did not meaningfully affect the competitiveness of the ERCOT market," the IMM said.

The IMM found very little evidence of potential physical withholding. "Based on our analyses above and the results of our ongoing monitoring, we find the overall performance of the ERCOT market to be competitive in 2013," the IMM said.

Among other things, the IMM continues to recommend that changes be implemented to ensure ERCOT deployments of load resources, Emergency Response Service (ERS), or the involuntary curtailment of firm load are reflected in the real-time dispatch energy and reserve prices. "Building on the Phase 1 efforts of Loads in SCED, this recommendation could be addressed in various ways. It may be possible to integrate load bids and emergency resources in the real-time dispatch software and allow them to set prices when they are effectively marginal. Alternatively, it may be adequate to address this concern through administrative shortage pricing rules," the IMM said.

Link to State of the Market Report

ADVERTISEMENT
NEW Jobs on RetailEnergyJobs.com:
• NEW! -- Pricing Manager -- Retail Supplier -- Houston
• NEW! -- Director of Channel Development
• NEW! -- Energy Sales Representative -- Texas -- Dallas
• NEW! -- Vice President, Operations
• NEW! -- Pricing Analyst
• NEW! -- Sr. Pricing Analyst -- Retail Provider -- Houston
• NEW! -- Regional Sales Manager - Texas -- Retail Supplier
• NEW! -- Vice President of Sales & Marketing
• NEW! -- Regional Sales Manager-PA -- Retail Supplier
• NEW! -- Regional Sales Manager- IL
• NEW! -- Regional Sales Manager - New England -- Retail Supplier
• NEW! -- Vista Energy Controller - Retail Energy Supplier -- Houston
• NEW! -- Energy Consultant
• NEW! -- Power and Natural Gas Scheduler L-1 -- Retail Provider -- Texas