Post: Regulators debate proposals to overhaul ERCOT market

Regulators debate proposals to overhaul ERCOT market

A report assessing proposals to boost the Texas power grid’s dependability has recommended requiring electricity providers to procure a certain amount of advance reliability credits.

Published on 10 November by E3 Consulting, the report provided an independent assessment of potential long-term market design options to increase reliability. 

Currently, ERCOT operates an energy-only market, under which generators get paid only for power that’s actually delivered. Price spikes during periods of high demand are expected to provide sufficient incentive for companies to build enough power plants to meet that demand. But the key recommendation was the creation of a system based on reliability credits, called a forward reliability market. Power providers would be required to buy “performance credits” from power generators, which are intended to guarantee that both have enough electricity to meet increased demand when power demand is high enough to stress the electrical grid. Performance-based credits would be earned after the fact based on a generator’s availability to provide power during periods of high demand, rather than in advance. If providers don’t buy the credits or generators don’t meet their commitments, both could face financial penalties.

The report noted that such a mechanism “has not been implemented in any market in the world to date,” meaning there could be challenges in getting such a system up and running. But if successful it would have a “total system customer cost” of about $22.8B in 2026––$460M more than what the current energy-only system is expected to cost in that year.

PUCT Chairman Peter Lake said: