Vistra: Solutions In NRG/Calpine Whitepaper On ERCOT Market Would Not Address Cited Problems, Instead Benefit Houston-Area Generators
Vistra Suggests Price Adder When Thermal Resources Needed To Serve Load, But Are Not Price-Setting
October 2, 2017 Email This Story Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • firstname.lastname@example.org
Commenting on a whitepaper on price formation issues in the ERCOT market commissioned by NRG and Calpine, Vistra Energy said that rather than addressing the drivers of low energy prices in ERCOT, the proposals from the NRG/Calpine whitepaper would not address such drivers and instead the proposals champion, "significant market changes," to the, "benefit of generators in and around Houston."
Vistra notes that the NRG/Calpine whitepaper cites federally subsidized renewables as well as persistently low natural gas prices as drivers of low wholesale prices in ERCOT
"Interestingly, while the NRG/Calpine Whitepaper outlines the above-mentioned sources of pricing pressures on traditional generators statewide, the NRG/Calpine Whitepaper does not address those causes directly, but instead champions significant market changes such as marginal losses, locational reserves, and other policies -- all of which would pick winners and losers among existing market participants to the benefit of generators in and around Houston, as well as raise prices for Houston customers," Vistra said in its comments
"And the NRG/Calpine Whitepaper approach would do so without meaningfully addressing the impact that subsidized renewable generation has on the market," Vistra said in its comments
"Vistra Energy is not convinced that such significant adjustments to pricing rules and policies are needed, especially since the solutions proposed seem designed to benefit only one group of generators (and primarily at the expense of others). Markets will, over time, work towards a financially rational balance for their given circumstances, and even with our current conditions the nodal market is working to incentivize new investment where it is needed and push old investment out where it is not," Vistra said in its comments
Vistra instead proposed that ERCOT should create a "pricing mechanism" to address, "the current failure of LMPs to recognize the costs of traditional dispatchable resources when renewable resources are the marginal unit."
"To address this, one possible refinement would be to create a price adder on the real-time price during intervals where dispatchable thermal resources are needed to serve load, but are not price-setting. Such an adder would be calculated based on the highest cost traditional resource whose minimum output is needed to serve load in any affected interval. Creating a price adder would allow the LMP to reflect those costs to serve load that today are masked by the SCED optimization that treats all LSL capacity as price taking. Vistra Energy proposes that such an adder be paid only to those thermal resources whose LSL is needed to serve load, both to minimize the cost of the adder to loads and to avoid creating an incentive for unnecessary flexible thermal generation to stay online when it is not cost effective. The adder should not be paid to renewable resources because they are already compensated in the form of their federal subsidies, and paying the adder would exacerbate, rather than address and resolve, the price distortions caused by their negative offers," Vistra said in its comments
Vistra also said that ERCOT should implement a requirement for new generation to self-fund some or all of the cost of interconnecting to the transmission grid.