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ERCOT, IMM File Reports On Benefits Of Real-Time Co-optimization

Marginal Losses Report Filed As Well

July 2, 2018

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Reporting by Paul Ring • ring@energychoicematters.com

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ERCOT and the Independent Market Monitor have filed with the Public Utility Commission of Texas separate reports on the benefits of Real-Time Co-optimization (RTC) of Energy and Ancillary Services (AS).

"ERCOT anticipates significant operational benefits from the implementation of RTC, including more timely procurement of additional AS when necessary, more effective congestion management, a reduction in manual actions by operators, and an improved management of Resource-specific capabilities in assigning and deploying AS," ERCOT said in its report

"Regarding RUC [Reliability Unit Commitment] activity, a study of 165 historical RUC cases from 2016 indicates that co-optimization would have eliminated Resource commitments in at least 9 of the cases," due to the optimization engine having the flexibility to use all of the on-line capacity to meet the energy and AS requirements of the system, ERCOT said in the report

ERCOT noted in the report that, "ERCOT has executed 391 SASMs [Supplemental Ancillary Service Market] covering more than 2,200 operating hours since the beginning of the nodal market at clearing prices averaging approximately $100/MWh more than the corresponding Day-Ahead Market (DAM) price for the same operating day, hour, and AS product. The number of MW procured in these SASMs, when priced at the $100/MW premium, is a cost difference of approximately $11 million. RTC would eliminate the need for these SASMs."

"Also related to SASMs, the ability of Market Participants to buy back their AS in Real-Time under RTC and reduce their risk of a Day-Ahead AS obligation due to a SASM would likely increase the liquidity of the Day-Ahead AS market," ERCOT said in the report

In its report, the IMM stated that a simulation of RTC based on 2017 data showed:

• A significant reduction in production costs (as measured by offer curves) to serve load ($11.6M);

• A significant improvement in system reliability due to reduced overloading of network constraints and reduced use of Regulation Up Service ($4.3M);

• A significant reduction in system congestion costs ($257M);

• A significant reduction in AS costs ($155M): and

• A significant reduction in energy costs ($1.6B or approximately $4/MWh).

The IMM said in its report that, "ERCOT has estimated a total cost of $40M and a project duration of 4 to 5 years to implement RTC if the Commission decides to move forward with the implementation of RTC and after applicable Protocol changes have been approved by the ERCOT Board of Directors. This simulation of RTC for operating year 2017, and in particular the projected production costs savings of $10M-$12M annually, provides quantitative evidence of the benefits and improved market efficiencies of RTC that more than justify the implementation costs. Therefore, we recommend the Commission and ERCOT move forward with implementation of RTC as expeditiously as possible."

The reports were filed in Docket 47199

Marginal Losses

ERCOT also filed a report on the use of Marginal Losses in Security-Constrained Economic Dispatch

ERCOT reported that, under a base case, the annual changes in total consumer costs by load zone from marginal losses were quantified to be as follows under an analysis:

Annual Changes in Total Consumer Costs 
  by Load Zone
                   Base Case
Houston Zone ($M)    -21.8
North Zone ($M)      -73.6
South Zone ($M)      -18.5
West Zone ($M)       -21.1
Total ($M)          -135.0

"These results are calculated by subtracting the average loss result from the marginal loss result, so negative numbers indicate savings to consumers," ERCOT said in its report

ERCOT also presented results for a low gas price case and high gas price case. All of the zones saw low consumer costs under all cases, except for the Houston Zone in the low gas price case, in which the consumer cost increased by $22 million

"The one positive number, for the Houston zone in the low gas price case, indicates that consumer costs would be expected to rise in the Houston zone following implementation of marginal losses if gas prices are low," ERCOT said in its report

ERCOT reported that under its analysis, both production cost savings and reductions in consumer costs are likely results of incorporating marginal losses in system dispatch decisions.

However, ERCOT also reported that its model results also project increases in unit make-whole payments and unit startup costs under a marginal loss scenario, "which could indicate possible additional costs if marginal losses are implemented," ERCOT said in its report.

Under a base case scenario, unit start-up costs were about $35 million higher under marginal losses

The report was filed in Docket 47199

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