Uncertainty for ERCOT Markets

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AURORAxmp data is ready to take on the unpredictable nature of ERCOT’s markets.

The ERCOT reserve margin is by no means certain in 2016. According to the latest NERC 2015 Long-Term Reliability Assessment, ERCOT is showing a healthy reserve in the summer of 2016. However, NERC and others have had a tendency to miss the target in regards to reserve margin in this region. Reviewing projections for the 2015 summer period, the NERC Summer Reliability Assessment showed anticipated reserves in ERCOT of 16.24%, and the final Seasonal Assessment of Resource Adequacy (SARA) from ERCOT agreed that the region was expected to have sufficient capacity to meet peak demands with a 14.26% margin. Interestingly, the final forecast was an abrupt change from the preliminary forecast issued only 2 months prior which anticipated an 11.45% margin, or a 2% shortfall of the NERC reference margin of 13.75%. According to the final report:

The ERCOT Region is expected to have sufficient installed generating capacity to serve forecasted peak demands in the upcoming summer season (June – September 2015)… The primary reason for this change is the summer weather forecast, which generally indicates milder conditions than the 12-year normal forecast used in the Preliminary Summer SARA. As a result, the demand forecast for summer has decreased…

However, a few months later, ERCOT announced in a press release that it experienced its highest peak demand on record, “For the first time in this grid operator’s history, hourly demand within the Electric Reliability Council of Texas (ERCOT) system today broke the 69,000 MW threshold…”. Days later, in another press release, ERCOT reported the record peak was broken again by over 800 MW. Ultimately ERCOT missed the mark in its final, more optimistic report, and this shows how volatile projections can be. Not to say that NERC, FERC, ISO or RTO assessments aren’t excellent tools for understanding some of the fundamentals of a market, it’s just important to remember how significantly reality can differ from constantly changing expectations and how important it is to do analysis around the key fundamental drivers.

Once again, ERCOT has released its latest demand forecast. Has it overstated its margin once again? That question is enough to make one pause. Compliance extensions filed in 2015 for over 5 GW of Mercury and Air Toxic Standards (MATS) forced retirements, expire in 2016. Will they all be compliant and stick around or were they just hoping to operate one more year before finally deciding to retire? A lot of unknowns, but certainly the situation in ERCOT could be much tighter than some of these assessments suggest. With so much going on in 2016 for ERCOT, this year could be a pretty wild ride.

We are in the midst of a large ERCOT update of resources and demand that will be coupled with the latest ERCOT nodal case. Our data is net up in supply, but this is accompanied by an increase in the demand forecast. We have also added demand response units to capture their paramount importance to proper modeling of the system.  This database release is due out in Q1 2016 and is ripe for 2016 summer analysis.  Couple this with AURORAxmp’s risk analysis and you’ll be prepared for the market’s uncertainties.

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