Tuesday, January 22, 2019

ERCOT Monitor Relieved by End of Summer; Concerned for 2019

By Rich Heidorn Jr.

WASHINGTON — ERCOT’s energy-only market survived the summer of 2018 with surprisingly modest prices and no generation shortfalls, but 2019 may be a tougher challenge, the RTO’s market monitor said Wednesday.

ERCOT Market Monitor Beth Garza AWEA

Garza | © RTO Insider

Beth Garza, director of ERCOT’s independent market monitoring unit, credited better-than-expected generation performance and an early summer system peak that took advantage of above-normal wind for the positive results.

Coal plant retirements reduced ERCOT’s installed reserve margin to below 11%, by far the lowest in the market’s history, leading on-peak forward prices for August to rise as high as $250/MWh. But although real-time prices briefly peaked at more than $2,000/MWh, average real-time prices in July were about $50/MWh and about $38/MWh in August, Garza said.

She acknowledged one competitive retailer was forced to surrender tens of thousands of customers to the provider of last resort when it was unable to meet collateral requirements in early summer. But disruptions were minimal, Garza told the inaugural Future Power Markets Summit, sponsored by the American Wind Energy Association and several other trade groups.

“There was certainly a high level of awareness across the market, across the state legislature, across the regulators [of the tight market], and with that high level of awareness I think came a high level of preparedness, certainly from the generators,” she said. “As it turned out … generator availability was higher than normal this summer. We also had — I think because of the timing when our system peak was — we had the … contribution from higher-than-expected wind generation this summer.”

ERCOT recorded its summer peak at 73,259 MW on July 19, while loads in August — normally the peak month — never exceeded 71,110 MW. The 2018 Long-Term Demand and Energy Forecast projected a 2018 summer peak of 72,974 MW.

Garza said generators responded to the potential for prices up to ERCOT’s $9,000/MWh cap. “Having that opportunity for our energy price to rise to very high levels creates that natural incentive for availability at the time when we need generation resources the most.”

But it won’t get any easier for ERCOT in 2019, Garza said, as its load — unlike that of other markets — continues to grow. In addition, two announced coal plant retirements will reduce capacity by more than 1 GW by the end of the year. The system has added no significant thermal capacity although there have been wind and solar additions.

“So, I think we’ll go into 2019 in a very similar state as we went through this summer,” Garza said. “And that raises all kinds of questions about outcomes … if generation availability [is] lower than expected, if wind [is] average, if load [is] a little higher.”

“The good part about this job is I get to monitor the market,” she laughed. “I don’t have to forecast the market.”

In addition to AWEA, the summit was sponsored by the American Council on Renewable Energy, the Solar Energy Industries Association, the American Public Power Association, the National Rural Electric Cooperative Association, the Large Public Power Council and the Energy Systems Integration Group, a non-profit educational association for engineers, researchers, technologists and policymakers.

[Editor’s Note: RTO Insider will have additional coverage from the conference later in Tuesday’s newsletter.]