Introduction to the ERCOT Power Market
Unique U.S. Power Market Design
- The Electric Reliability Council of Texas (“ERCOT”) is the independent system operator that manages the flow of electric power to more than 25 million Texas customers, representing about 90% of the state’s electric load
- ERCOT is not synchronously connected to the rest of the U.S. power grid and as a result is not subject to oversight by the Federal Energy Regulatory Commission (“FERC”), but is instead regulated by the Public Utility Commission of Texas (“PUCT”) and the Texas Legislature
- Another unique feature of the ERCOT market design is the energy-only market structure which does not have bifurcated energy and capacity markets as most of other organizes regional transmission organizations (“RTOs”) within the US.
- Instead, ERCOT uses real-time co-optimization of energy and ancillary services that responds to real-time shortages of operating reserves
- This structure is called the Operating Reserves Demand Curve (“ORDC”)
- As a result of the energy-only structure, real-time prices are allowed to spike up to $9,000/MWh to incentivize new generation - Natural gas is the marginal fuel in ERCOT and accounts for over 44% of generation, followed by coal, which represents 25% of generation
- ERCOT has the largest amount of installed intermittent renewable generation (more than 24 GW of combined installed wind and solar resources)
- The wind penetration record is 56% of load, which was achieved in January 2019
