Texas REPs, Industrials Seek Reduction In ERCOT System-Wide Offer Cap Under Real-Time Co-optimization
April 16, 2019 Email This Story Copyright 2010-19 EnergyChoiceMatters.com
Reporting by Paul Ring • email@example.com
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Several Texas retail electric providers and industrial customers sought a reduction in the ERCOT system-wide offer cap (SWOC) under implementation of real-time co-optimization (RTC) in ERCOT
Changes to the SWOC have been proposed due to the operation of RTC and interaction with the value of lost load (VOLL)
As noted by the Solar Energy Industries Association (SEIA) and Texas Solar Power Association, if the current cap values are additive, the sum could create a total market price of up to $18,000/MWh.
Alternatively, if the VOLL of $9,000/MWh remains the cap on the total market price, then, as the price of energy increases, the amount available for payment to providers of ancillary services (AS) would potentially decrease during periods of scarcity. For example, if the price of energy were to reach $9,000/MWh, no payments to providers of AS could be made, the solar groups noted
The REP Group said in comments to the Texas PUC that it, "supports a SWOC of $2000 and a VOLL of $9000."
"This combination is more likely to produce energy prices closer to the VOLL during scarcity. Other options may not provide the kinds of scarcity pricing similar to the current ORDC that would incent further generation build. A key aspect of the decision on implementation of the new RTC rules is to allow for the construction of the ancillary service demand curves that reflect the instruction on ORDC as closely as possible," the REP group said. The REP Group was comprised of Texas Energy Association for Marketers (TEAM) and Direct Energy, LP.
In separately filed comments, Texas Industrial Energy Consumers (TIEC) also recommended setting the SWOC at $2,000/MWh and maintaining the current Value of Lost Load (VOLL) at $9,000/MWh.
Texas Competitive Power Advocates (TCPA) said that it is "premature" for the Commission to decide on the key
RTC variables (such as SWOC) without the aid of an independent consultant to inform the Commission of the trade-offs
inherent in such decisions.
TCPA cited an example from ERCOT's RTC concept paper, as well as its presentation at the recent March 6, 2019 workshop regarding RTC, at which ERCOT provided a spreadsheet example of an RTC design with a $2,000 SWOC, a $7,000.99 ASDC [ancillary service demand curve] maximum, and a $9,001 PBPC [Power Balance Penalty Cap] value. "ERCOT has represented that a $2,000 SWOC would cover most competitive offers, and the $9,001 PBPC was based on today's VOLL plus $1. The $7,000.99 ASDC maximum was ostensibly selected to ensure that the SWOC plus the ASDC maximum would be coordinated with (and not exceed) the PBPC maximum under the most extreme scenario. Under this example (using ERCOT's spreadsheet model to calculate potential RTC outcomes), prices would reach $9,000 in extremely rare instances when a substantial amount of energy offers cleared at $2,000/MWh (i.e., at the SWOC) and reserves were significantly diminished, driving the ASDC to the maximum of $7,000.99/MW, or if the PBPC set the price due to total demand exceeding all available supply (again, a highly unlikely practical outcome). That would represent a significant departure from the current ORDC design, where prices reach $9,000 (with the ORDC adder) any time the available operating reserves dip below the MCL [minimum contingency level] of 2,000 MW. In ERCOT's example spreadsheet, if you set the demand such that the system is 1 MW short of running out of all energy and reserves (i.e., if you set the demand parameter in ERCOT's spreadsheet to 57,999 MW), energy prices clear only at $7,060.99 with those parameters. In other words, under this example, the ERCOT grid would already be shedding firm load, and yet energy prices would be well below the current $9,000 VOLL," TCPA said
The ERCOT Independent Market Monitor reviewed all offers submitted into the ERCOT real-time market during 2018 and found that the vast majority of megawatt-hours, roughly 98%, were offered at or below $2,000/MWh. The IMM recommended that the maximum price for energy offers in ERCOT be no lower than $2,000/MWh.
The IMM recommended eliminating the current "small fish swim free" rule
TCPA said that the small fish swim free rule should continue to apply