Ensuring Reliability in ERCOT Beth Garza Director, ERCOT IMM bgarza@potomaceconomics.com 512-225-7077 February 27, 2018
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Data Comparisons ERCOT Population (million) 24 80 Germany Annual electricity consumption (TWh) 350 500+ Typical residential annual consumption (kwh/year) 10000-12000 ~3400? 3
Geography D SA H Mexico 4
Annual Generation Mix ERCOT Annual Energy by Fuel Type 100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% Other Natural Gas Wind Coal Nuclear 20.0% 10.0% 0.0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 5
Installed Capacity (GW) Installed Capacity Vintage 6 5 4 3 BIOMASS-MB BIOMASS SOLAR WIND GAS-MB GAS COAL HYDRO NUCLEAR 2 1 0 1928 1954 1965 1975 1985 1995 2005 2015 6
Key ERCOT attributes Transmission unbundled from Generation and Retail since 2001 Sizable public sector ownership (20-25%) not required to unbundle or compete at retail Regulatory oversight rests with the State of Texas through the Public Utility Commission Energy-only market Low barriers for new generation 7
How does ERCOT ensure sufficient installed reserves? 8
Three sources of revenues for generators Energy during non-shortage conditions Energy during shortage conditions Capacity 9
High Offer Caps / $9000 per MWh in mid-2015 6 5 4 $9,000 $7,000-8,999 $5,000-6,999 $4,500-4,999 $3,000-4,499 $1,000-2,999 Hours 3 2 1 0 J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D 2014 2015 2016 14 15 16 10
Real-Time Energy Price ($ per MWh) ORDC Implemented as a cheap and easier * alternative to real-time cooptimization of energy and ancillary services Reserve Adder: mid-2014 Reliability Adder: mid-2015 $29 $28 $27 $26 $25 $24 $23 $22 Reserve Adder Reliability Adder $28.25 $26.77 $24.62 2015 2016 2017 * My words 11
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Peaker Net Margin ($000 per MW) Peaker Net Margin $140 gas price times 10 subtracted from real time price $120 $100 $80 $60 $40 $20 2011 2008 2006 2010, 2007 2009, 2014 2017 2012, 2013 2015 2016 $0 12
Projected Reserve Margin Outlook for 2018 25% Existing Capacity New Gas New Solar New Wind 20% 15% 11.7% 11.8% 11.1% 10% 9.3% 9.0% 5% 0% 2018 2019 2020 2021 2022 Source: ERCOT Capacity, Demand and Reserves Report - December 2017 13
Projected Reserve Margin 2017 Outlook 25% Existing Capacity New Gas New Solar New Wind New Coal New Storage 20% 16.9% 20.2% 19.6% 19.5% 19.0% 15% 10% 5% 0% 2017 2018 2019 2020 2021 Source: ERCOT Capacity, Demand and Reserves Report - December 2016 14
Projected Reserve Margin 2013 Outlook 16% 14% Existing Capacity New Gas New Wind (8.7% of installed capacity) New Coal New Other Target Reserve Margin: 13.75% 12% 10% 8% 6% 4% 2% 0% 2013 2014 2015 2016 2017 2018 Source: ERCOT Capacity Demand Reserve Reports / 2013 data from Winter 2012, 2014-2018 from May 2013 15
Projected Reserve Margin 2014 Outlook 16% 14% Existing Capacity New Gas New Wind (8.7% of installed capacity) New Coal New Other Target Reserve Margin: 13.75% 12% 10% 8% 6% 4% 2% 0% 2014 2015 2016 2017 2018 2019 Source: ERCOT Capacity Demand Reserve Report issued February 2014 16
In Conclusion To date, ERCOT s energy only market design has attracted sufficient investment in new resources. Will renewable resources will be sufficient to meet growing demand and/or will additional investment in thermal (gas) units be forthcoming? Which participants might be exposed to significantly higher prices? How will political and regulatory oversight respond? 17
Wind stuff If needed 18
Installed Wind Generation (GW) Annual Capacity Factor More wind producing more 20 18 16 14 12 10 8 6 4 2 0 Installed Wind Capacity Annual capacity factor 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 40% 35% 30% 25% 20% 15% 10% 5% 0% 19
Capacity Factor 2016 Unit Specific Wind Generation Capacity Factor 60% Coastal Panhandle All Other Wind 50% 40% 30% 20% 10% 0% 20
Wind Production & Curtailment (TWh) Wind Output and Estimated Curtailment 60 Estimated Curtailment Output 50 1.6% 40 30 8.5% 3.8% 1.1% 0.5% 1.0% 7.7% 20 8.4% 17.1% 10 1.2% 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 21
Improved Reliability Metrics 22
Reserve Quantities - GW Declining Requirements for Ancillary Services 6 5 4 3 2 1 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 RegDown NonSpin Responsive RegUp 23
Key Enablers Common carrier model for Transmission Centralized forecasting of wind output for every wind generator ramp events Real-time output variations accommodated 24
ERCOT Transmission All loads pay for all transmission Generators make no investment past their step-up transformer CREZ investment - $7B 25
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Rate ($ per kw - year) Average 4CP Load (GW) Annual TCOS ($Billion) Transmission Costs 80 70 60 $4.0 $3.5 $3.0 50 $2.5 40 30 20 10 $2.0 $1.5 $1.0 $0.5 $60 $50 $40 0 $0.0 $30 $20 $10 $0 26
$ per MWh $ per MBtu Transmission and Energy costs 90 80 70 60 50 40 30 20 10 9 8 7 6 5 4 3 2 1 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 RT Load weighted Avg price Average transmission cost Gas 0 27
ERCOT Wind Forecasts Hourly forecast of wind production potential for each Wind-powered Generation Resource (WGR) updated hourly, for next 168 hours. (STWPF) Determine probability distribution of the hourly production potential from all windpower in ERCOT for each of the next 168 hours. (TEWPF) WGR provide turbine availability via outage scheduler 28
ERCOT Wind Forecasts - WGR requirements Install and telemeter to ERCOT site-specific meteorological information necessary to produce the STWPF and TEWPF forecasts. ERCOT requires the following data be provided from each WGR every five minutes: MW Average Wind Speed Wind Direction Temperature Barometric Pressure HSL Average Num of Turbines On Num of Turbines Off Num of Turbines Unknown Curtailment Flag 29
Accommodating variable output ERCOT dispatch executes every 5 minutes WGR High Sustained Limit (HSL), when not curtailed, to be telemetered as equal to the WGR s current meter reading When curtailed, WGR s receive a curtailment flag from ERCOT along with their Base Point (dispatch level) When WGR is curtailed, the HSL to be telemetered is the expected output, but for the curtailment WGR ramping when curtailed limited to 20% per minute, unless installed before 2009 and have a good excuse 30
Hours Negative prices 1000 900 800 700 600 500 400 300 200 100 0 2011 2012 2013 2014 2015 2016 WEST Only ERCOT Wide Other 31