2 min read

The Texas Supreme Court and Winter Storm Uri

By 5 on February 22, 2024

On January 30, 2024, the Texas Supreme Court heard oral arguments in a ground-breaking case related to Winter Storm Uri. At the heart of the case is the question of whether the Texas PUC had the authority to manually set the ERCOT rates paid by electricity suppliers to $9,000 per MWh during the four days of Winter Storm Uri. Attorneys representing the PUC (supported by attorneys representing numerous energy companies, including NRG, Calpine, and Talen Energy) stated that this action was necessary to avoid a weeks-long blackout for much of the state.  In response, attorneys for numerous energy companies suffering losses as a result (including Luminant and Pattern Energy) argue that the PUC acted outside of the authority granted by the Texas legislature in taking such action.  The Texas Third Circuit Court of Appeals in Austin previously ruled against the PUC in March, and the PUC appealed to the Texas Supreme Court. 

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Topics: Markets ERCOT
1 min read

Webinar Recording: ERCOT'S Growing Pains, December 2023

By 5 on December 11, 2023

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Topics: Markets ERCOT Videos Education
3 min read

ERCOT Contingency Reserve Service

By 5 on September 19, 2023

This summer, temperatures in Texas have been significantly higher than average, with record-breaking ERCOT demands and Real-Time prices reaching their maximum cap on multiple days in both June and August. In fact, between June and August, ERCOT eclipsed the 2022 maximum demand of 80,148 MW on 47 different days, with this summer’s maximum of 85,464 MWs set on August 10. Figure 1 shows the effect of the record breaking heat on spot electricity prices in North Texas in the months of June through August, 

With growing energy demand in Texas, there is a need for more power-generating resources to maintain the grid's reliability and to ensure there is a balance between available power supplies and demand. Intermittent sources like wind and solar cannot be dispatched on-demand, making it unreliable during hours when electricity supplies are tight.

This summer, the grid’s vulnerability to insufficient reserve margins was demonstrated multiple times after the sun set, solar output dropped to zero, and wind output was low due to insufficient wind speeds across the state. Ancillary services are ERCOT’s market mechanism to ensure that power-generating assets are on standby and available to produce electricity on days when solar and wind outputs are low and demand on the grid is high.

Before this summer, there were four market-procured ancillary services: Regulation Up, Regulation Down, Responsive Reserve Service, and Non-Spin Reserve Service. A few years ago, ERCOT and the Public Utility Commission (PUC) decided these four services were insufficient to provide adequate levels of responsive reserves. To address this need, ERCOT added a fifth ancillary service, the first to be added since the market opened in 2002, called ERCOT Contingency Reserve Service (ECRS), which went into effect on June 10, 2023.

ECRS can be seen as an intermediate product between Non-Spin and Responsive Reserve capacity that can respond within 10 minutes to address operational issues. These services secure additional power capacity beyond regular supply and are purchased in the Day-Ahead Market. This new ancillary service is intended to address unforeseen disruptions like generator failures or sudden demand spikes and to provide a rapid response backup to the grid. These contingency reserves are provided by power plants (or other resources such as load) that are capable of quickly ramping up their generation (or reducing their consumption) to help balance the grid during times of reduced reserves.

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Topics: Markets ERCOT
14 min read

September 2023 - Energy Market Letter

By Jon Moore on September 18, 2023

On behalf of the team at 5, I am pleased to forward our September market letter. If you had any doubts that the energy transition is happening, recent events in Texas and New York confirm that the answer is yes. As discussed below, these states have very different approaches to energy regulation, and both have struggled to incorporate intermittent resources in the energy mix. For clients in Texas, New York, or any other deregulated market, planning for the challenges of the energy transition, including increased regulatory risk, should be a key component of your energy management strategy.

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Topics: Markets Natural Gas NYISO ERCOT Sustainability Newsletters Education Renewables
4 min read

Choosing the Best Term Length for Your Electricity Contract

By 5 on September 18, 2023

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Topics: Markets PJM NYISO ERCOT
4 min read

Mid-Summer Market Update: ERCOT, PJM & NYISO

By 5 on July 17, 2023

Given that we are halfway through July, we thought it would be appropriate to provide an update on how major power markets have performed as they relate to each ISO’s coincident peak demand management program.

So far, both weather and demand on the PJM and NYISO grids have been mild compared to recent summers and average summer temperatures. The mean temperature, compared to the average over the last thirty, fourteen, and seven days for the period ending July 13, is shown in Figures 1, 2, and 3 below. These charts show that summer has not really arrived in the middle of the country and that temperatures in the Northeast are only 2º to 3º F above the average.

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Topics: Markets PJM NYISO ERCOT Demand Response Resiliency
1 min read

Webinar Recording: ERCOT - This Summer and Beyond Strategy

By 5 on June 2, 2023

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Topics: Markets ERCOT Videos Education
3 min read

Coincidental Peak 2023 Alerts

By 5 on May 22, 2023

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Topics: Markets PJM NYISO ERCOT Demand Response Resiliency
3 min read

Summer Reserve Margin Forecasts

By 5 on May 22, 2023

Early this month, ERCOT released the Seasonal Assessment of Resource Adequacy (SARA) report detailing market conditions as they exist going into the summer of 2023. This report takes into consideration the power output from all current, new, and planned generation that will be available comparing it to the forecasted peak load.

On the same day that ERCOT released the SARA report, the Chairman of the Public Utility Commission of Texas (PUCT), Peter Lake, released the following statement “Data shows, for the first time, that the peak demand for electricity this summer will exceed the amount we can generate from on-demand, dispatchable power." While the initial shock of these words is quite alarming and was quickly picked up by regional news agencies, we believe ERCOT is still better off this summer than last, and that the evolution of the grid to larger and larger percentages of renewable generation is not a new story. And while the statement of the Chairman is not technically false, it is somewhat misleading. Here is more of the whole story.

Figure 1 below is a summary of the report’s findings, demonstrating the load forecast scenarios on the left and a breakdown of the generation by type on the right, rated for this and last year’s summer capacity (the expected generation capacity during peak hours) as well as the current nameplate capacity (theoretical maximum output). Lastly, the reserve margin is a measure of the difference between the summer capacity and the maximum forecasted peak in the summer season. 

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Topics: Markets ERCOT
2 min read

Texas Court Invalidates PUC's Decision on Winter Storm Uri Electricity Prices

By 5 on April 17, 2023

On March 17, 2023, the Texas Court of Appeals added significant uncertainty to the state’s electricity market. The Court sided with Luminant in their ruling that the Texas Public Utility Commission’s (PUC) decision on February 15, 2021 and February 16, 2021 (in the middle of Winter Storm Uri) to unilaterally set the market price at the cap ($9,000 per MWh) was invalid. The Court’s decision creates unprecedented uncertainty in the electricity market and could lead to ERCOT resettling Real-time Settlement Point Prices for multiple days during that week because of the PUC’s order. 

This case takes us back to Winter Storm Uri, which devastated Texas in February 2021. The storm caused a significant portion of the generation fleet (both natural gas and renewables) to fail. Without sufficient generation, ERCOT was forced to institute widespread outages to avoid a total grid collapse.  The widespread outages reduced demand for electricity, and as result, the energy market started clearing well below the $9,000 per MWh cap.  

On February 15, 2021, the PUC, after a short hearing, unilaterally determined that the market price must artificially be set at the cap in the event of widespread forced outages. This increased market prices from around $1,200/MWh to $9,000/MWh (see Figure 1). On the next day, the PUC met again, and effectively confirmed its earlier ruling. Those orders on February 15th and 16th, dramatically increased electricity market prices until the energy supply shortage ended on February 19th.

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Topics: Markets ERCOT