To grasp what the Electrical Reliability Council of Texas (ERCOT) is, it helps to know how the North American electrical energy system is configured. The contiguous U.S. is comprised of three energy grids or “interconnections.” The Japanese Interconnection reaches from central Canada eastward to the Atlantic coast (excluding Québec), south to Florida, and west to the foot of the Rockies (excluding most of Texas). The Western Interconnection stretches from western Canada south to Baja California in Mexico, reaching eastward over the Rockies to the Nice Plains. In the meantime, the Texas Interconnection covers a lot of the state of Texas.
In lots of elements of the nation, together with most of Texas, California, New York, New England, and the Midwestern states, unbiased system operators (ISOs) and regional transmission organizations (RTOs) handle grid operations (Determine 1). ISOs grew out of Federal Vitality Regulatory Fee (FERC) Orders 888 and 889, each of which have been issued on April 24, 1996. Within the orders, the fee urged the idea of an ISO as a method for present tight energy swimming pools to fulfill the requirement of offering non-discriminatory entry to transmission. Subsequently, in FERC Order No. 2000, issued on Dec. 20, 1999, the fee inspired the voluntary formation of RTOs to manage the transmission grid on a regional foundation all through North America, together with Canada.
Nonetheless, conventional wholesale electrical energy markets nonetheless exist, primarily within the southeastern, southwestern, and northwestern U.S. In these areas, utilities have remained largely vertically built-in, which means, they personal the technology, transmission, and distribution programs used to serve electrical energy customers. Thus, they’re liable for system operations and administration, and, usually, for offering energy to retail prospects.
The Texas Interconnection
ERCOT was based in 1970. It was designated as an ISO in 1996, and ERCOT offered the platform upon which Texas’ electrical utility business made the transition to retail competitors on Jan. 1, 2002.
Because the ISO for the Texas Interconnection, ERCOT at the moment manages the movement of electrical energy to greater than 26 million Texas prospects—representing about 90% of the state’s electrical load. ERCOT schedules energy for an electrical grid that connects greater than 52,700 miles of transmission strains and 1,100 technology models, together with non-public use networks. It additionally performs monetary settlement for the aggressive wholesale bulk-power market and administers retail switching for 8 million premises in aggressive selection areas, in response to a reality sheet printed by ERCOT in November 2023.
ERCOT is a membership-based 501(c)(4) nonprofit company, ruled by a board of administrators and topic to oversight by the Public Utility Fee of Texas (PUCT) and the Texas Legislature. Its members embody customers, cooperatives, mills, energy entrepreneurs, retail electrical suppliers, investor-owned electrical utilities, transmission and distribution suppliers, and municipally owned electrical utilities.
“At its core, ERCOT is about dependable system operation,” Scott Bruns, director of Energy Markets with Enverus, stated throughout a webinar hosted by POWER. “What meaning is that ERCOT maintains the grid and makes positive that probably the most treasured commodity that we’ve in Texas, which is the power and electrical energy grid, by no means goes down.”
Whereas the first purpose of ERCOT could also be to take care of the reliability of the grid, as Bruns urged, which includes balancing electrical energy provide and demand in real-time and making certain steady grid operation (Determine 2), it additionally performs a number of different capabilities. In his presentation, Bruns outlined 5 extra roles ERCOT performs, that are:
- To Facilitate Competitors. ERCOT operates a aggressive wholesale electrical energy market. It goals to foster competitors amongst mills and different market individuals, which reduces prices for customers.
- To Handle Electrical energy Move. A key operate of ERCOT is managing the movement of electrical energy from mills to customers.
- To Guarantee Grid Modernization. ERCOT is liable for the planning and examine of recent technology, hundreds, and the transmission strains that allow a contemporary dependable energy grid.
- To Affirm Regulatory and Requirements Compliance. ERCOT should guarantee compliance with nationwide and state rules. In partnership with market individuals, ERCOT codifies the requirements.
- To Reply to and Handle Emergency and Disaster Conditions. ERCOT is liable for implementing emergency procedures throughout crises, corresponding to excessive climate occasions, making certain the continuity of energy and minimizing disruptions to the grid.
What ERCOT Doesn’t Do
Bruns stated many customers have misconceptions about ERCOT. As such, he wished to clear the air regarding among the issues ERCOT doesn’t do. For instance, ERCOT doesn’t set retail electrical energy charges. Charges are decided in Texas by retail electrical suppliers (REPs) and are influenced by numerous market elements. Moreover, ERCOT doesn’t invoice customers—that’s additionally dealt with by particular person REPs.
ERCOT doesn’t personal any energy technology amenities. It merely coordinates unbiased energy producers, who personal and function these amenities. ERCOT additionally doesn’t promote electrical energy on to customers. It merely calculates the worth at which consumers and sellers within the wholesale market conform to commerce the following unit of electrical energy.
Whereas ERCOT manages grid stability, it doesn’t immediately management energy outages on the client stage. Outages are managed by native utilities, and/or transmission and distribution service suppliers. ERCOT doesn’t resolve the power combine utilized in Texas both. That is decided by market dynamics and generator proprietor choices.
ERCOT doesn’t construct or keep the bodily electrical energy grid. This accountability lies with transmission and distribution utilities. And final, however not least, ERCOT doesn’t create power insurance policies. It operates throughout the framework of the PUCT, federal regulation, and insurance policies set by the Texas Legislature.
The ERCOT System
The technology combine in ERCOT’s system depends closely on pure gasoline–fired energy and wind power. On its November 2023 reality sheet, ERCOT reported 41.8% of its greater than 98-GW producing capability in the summertime of 2023 was fueled by pure gasoline. Wind accounted for 28.6% of the capability, whereas photo voltaic (11.0%), coal (10.8%), and nuclear (4.0%) stuffed nearly all of the remainder.
Nevertheless, it’s essential to know that energy capability doesn’t equal power manufacturing. The intermittency of photo voltaic and wind assets imply they don’t produce on the similar capability elements as a baseloaded nuclear plant, for instance, or among the extra frequently dispatched gasoline and coal models.
Bruns famous that power consumption from ERCOT’s grid has modified fairly dramatically over time. Coal-fired technology is down 38% since 2018, now filling solely 14% of the combo as a consequence of retirements and stiff competitors from renewables. Photo voltaic manufacturing has climbed from 1% in 2018 to 10% of the daytime combine right now. Wind manufacturing averages about 24% of the entire combine, however varies from 21% by day to about 32% in a single day. In the meantime, nuclear has been a constant filler of 9% to 10% of the power combine for the reason that early Nineties.
Enverus stories greater than 15 GW of recent photo voltaic technology has been added to the ERCOT grid since 2020. “ERCOT has had a bloom of photo voltaic over the previous 18 months, and with that bloom of photo voltaic, it has shifted our night peak, which is the time of day the place the online demand is the best,” stated Bruns. In his presentation, Bruns revealed a chart displaying the impression of this shift on wholesale costs (Determine 3).
Managing Potential Shortfalls
One mechanism the PUCT directed ERCOT to implement in an effort to enhance reliability was a reliability adder, often called ORDC, which stands for Working Reserve Demand Curve. ERCOT doesn’t have a capability market to incentivize technology for being accessible when it’s wanted. In lieu of a capability market, the ORDC was developed to incentivize extra capability. In the long run, this mechanism acts as a worth sign for funding into new technology that may benefit from these adders.
Bruns defined that the ORDC rewards conventional capability and funding in new applied sciences, corresponding to batteries, and nimble quick-start thermal models, corresponding to LM6000 gasoline generators, which are sometimes used as peaking models. The calculation of ORDC is advanced and took a few years of workshops to be formalized. In its essence, Bruns stated, as system reserves start to fall, the ORDC adder begins to kick in. It begins in small quantities—pennies added to the systemwide wholesale worth. As reserves get nearer to a predefined stage, referred to as the minimal contingency stage, the adder grows rapidly to prime out on the worth cap.
To deal with the intermittency problem, ERCOT launched the ERCOT Contingency Reserve Service (ECRS) in June 2023. In rolling out the service, ERCOT stated the ECRS will “complement and supply assist to the 4 procured Ancillary Providers ERCOT at the moment makes use of: Regulation Up, Regulation Down, Responsive Reserve Service and Non-Spin Reserve Service.”
Bruns defined the ECRS permits ERCOT to carry offline a sure phase of technology that has the flexibility to dispatch for a minimum of two hours to be accessible to take care of system reliability when photo voltaic goes offline at nightfall. Previous to ECRS implementation, it was a big problem for thermal property to backfill the hole.
The Price of Reliability
The ORDC calculation has been tweaked a couple of instances since implementation on Jan. 1, 2022. Michael Enger, interim vice chairman of Vitality Market Operations and Useful resource Planning with Austin Vitality, who additionally participated within the webinar hosted by POWER, stated the ORDC has had much less of an impression on prospects than the ECRS, which has brought about retail costs to extend.
“A generator can solely go from 50 MW to 100 MW so quick. So, oftentimes, the solar is coming down possibly sooner than we’ve ramping capability, which then permits the batteries to set the worth,” Enger defined. “What we noticed this 12 months was a big proportion of these batteries have been placing their supply curves proper on the cap or close to the cap at $5,000.” Enger stated this habits elevated the associated fee to all Texans by $1.8 billion over 4 days through the summer time of 2023, primarily based on an ERCOT report that he cited, which in contrast costs to the associated fee related to a $150 cap.
Enger additionally famous that the associated fee for ancillary companies (AS) have skyrocketed as a consequence of ECRS. “In August, the price of all of the AS was $808 million in ERCOT. Should you look again at August 2022 and August 2021, every a kind of months was proper round $75 to $80 million—so, 10x has occurred—$400 million of that was ECRS,” he stated. “These are prices borne by load. Load is the one which has obligations for ancillary companies. So, it’s just a little little bit of a boon for a few of these mills, which can assist make them extra financial, however for all of the customers in Texas, it’s elevated prices.”
Room for Enchancment
Bruns urged future adjustments may resolve a few of ERCOT’s issues. He stated implementing Actual-Time Co-optimization (RTC), which is a key market design characteristic that almost all different ISOs have already got in place, may assist. RTC would create a market through which ERCOT dispatches power and ancillaries on the similar time with the identical mannequin. RTC doesn’t seem like a fast repair, nevertheless. In a presentation given through the Expertise and Safety Committee Assembly on Dec. 18, 2023, by ERCOT Vice President and Chief Data Officer Jayapal Parakkuth, the timeline for RTC to go dwell was March 2026.
Bruns additionally talked about the Efficiency Credit score Mechanism (PCM) electrical market design choice, which the PUCT voted unanimously in January 2023 to undertake. In an announcement issued by the PUCT, it says, “the PCM market design meets the necessities of Senate Invoice 3, as handed by the 87th Texas Legislature and signed into regulation by Governor Greg Abbott, which directs the PUCT to create grid reliability requirements that guarantee on-demand technology is on the market ‘throughout instances of low non-dispatchable energy manufacturing.’ ” Whereas the specifics are nonetheless imprecise, Bruns expects the PCM to probably be an offset to among the ORDC changes which were made.
ERCOT has endured a number of weather-related challenges in latest historical past, however its system appears to have emerged stronger and extra resilient in consequence, having integrated many corrective actions primarily based on the teachings discovered. ERCOT says its imaginative and prescient is to “lead with unbiased perception on the way forward for electrical energy reliability, markets and expertise in Texas as a way to facilitate grid and market change for the good thing about all stakeholders.” The ability grid is continually altering, with renewable power assets being added day by day. ERCOT will undoubtedly be required to proceed altering with it.
—Aaron Larson is POWER’s govt editor (@POWERmagazine).
