Texas power market to start price floors Nov. 1, helping dispatchable resources

The Electric Reliability Council of Texas notified market participants Oct. 16 that price floors of $10/MWh and $20/MWh for its Operating Reserve Demand Curve go into effect Nov. 1, and will be triggered when reserves fall below 7 GW and 6.5 GW, respectively.

Studies show this would mainly help dispatchable generation.

The Public Utility Commission of Texas approved Oct 12 a rule change for ERCOT to set the ORDC price adder in such a way that the lowest clearing price would be $10/MWh when the Real-time On-Line Reserve Capacity falls below 7 GW and a floor of $20/MWh when that reserve number falls below 6.5 GW. The 7 GW and 6.5 GW triggers are well above what qualifies as scarcity conditions in ERCOT.

For example, the PUC also approved Oct. 12 a related rule change affecting the levels of reserves known as Physical Responsive Capability that would trigger the issuance of various types of Energy Emergency Alerts. Nodal Protocol Revision Request 1176 changes those PRC trigger levels in the following ways:

• EEA Level 1: now declared when PRC falls to 2.5 GW, compared with the previous standard of 2.3 GW
• EEA Level II: now when PRC falls to 2 GW, previously 1.75 GW
• EEA Level III: now when PRC 1.5 GW, previously 1.43 GW

ERCOT staff and stakeholders advanced the ORDC multi-step price floor change as a "bridging solution," which will be implemented until ERCOT completes the evaluation and implementation of long-term solutions to mitigate the risk of widespread power outages such as what occurred during the deadly mid-February 2021 winter storm.

The long-term solution the PUC favored is the proposed Performance Credit Mechanism, which would retroactively reward dispatchable generation that performs during periods of high-reliability risk from funds collected from load-serving entities that must meet a yet-to-be-determined reliability standard.

If the new multi-step ORDC price floors had been implemented in 2022, the market would have generated $491 million more for resources, mainly natural gas-fired generation, according to ERCOT's own analysis.

The price adders boost payments to all types of resources operating during periods with Real-Time On-Line Reserve Capacity levels of 7 GW or lower, but the benefit accrues more to dispatchable generation than intermittent renewable resources. For example, during such periods of 2022, 53% of energy came from gas generators, compared with less than 43% for the entire year. In contrast, wind resources supplied less than 14% of system power during periods with a sub-7-GW RTOLCAP, compared with almost 25% for all of 2022.