Pricing
20 Jun 2024
Brandt Vermillion

New ECRS triggers: What will NPRR 1224 mean for batteries in ERCOT?

The introduction of the ERCOT Contingency Reserve Service (ECRS) led to as much as $8 billion in increased costs in the Wholesale Market, between June and August 2023. This is according to the Independent Market Monitor for ERCOT.

By procuring more reserves, ERCOT actually increased the potential for ‘artificial scarcity’. This happens when prices are high across the system, despite ERCOT having sufficient available capacity.

To combat this, ERCOT has proposed an additional trigger to release ECRS capacity earlier - via a Nodal Protocol Revision Request: NPRR 1224.

Brandt explains why NPRR 1124 is happening - and what it could mean for batteries.

On the morning of June 18th 2024, the ERCOT Board approved NPRR 1224. If approved by the Public Utility Commission of Texas (PUCT), this change will be implemented by ERCOT.

  • So, why is this change happening?
  • And how might NPRR 1224 affect battery energy storage systems carrying ECRS responsibility?

What is artificial scarcity - and how does it happen in ERCOT?

Artificial scarcity occurs when prices increase to relatively high levels, despite ERCOT having sufficient capacity available.

Ramping constraints can partially explain some of these price increases. However, the main cause of these price spikes is the fact that ERCOT has excess capacity being held in reserve. When this happens, that capacity is effectively invisible to SCED (ERCOT’s Real-Time economic dispatch).

When ECRS launched, it led to an increase in the volume of reserve Ancillary Services that ERCOT procures for each operating hour. And, in particular, peak-hour Ancillary Service procurement.

In fact, in August 2023, ERCOT procured 32% more Ancillary Service volume between 2pm and 6pm than it had in 2022 - and 109% more than in 2020.

Even when reserve Ancillary Services were undeployed, the economic dispatch was unable to use that additional capacity.

As a result, prices regularly rose above $1,000/MWh - despite ERCOT actually having healthy levels of available reserves.

Let’s look at the afternoon of August 25th 2023.

Real-Time Online Capacity (RTOLCAP) and Physical Responsive Capability (PRC) are two useful indicators of the additional capacity ERCOT has to resolve supply and demand imbalances.

Both values remained above 5,000 MW through the afternoon of August 25th. This is generally normal operating conditions for ERCOT.

However, prices rose above $1,000/MWh on seven different occasions between 2pm and 6pm. This was, in part, due to the economic dispatch being unable to use the additional capacity held for ECRS.

This became an issue as ERCOT’s five-minute dispatchable capacity (HDL minus Generation) decreased throughout the afternoon. Despite healthy reserves, the economic dispatch had limited access to that additional generation - which pushed prices up.

What are the proposed trigger’s parameters?

Because of this, ERCOT has determined that it needs an additional trigger to release ECRS capacity - ahead of potential artificial scarcity conditions.

Currently, ERCOT deploys ECRS when:

  • There’s a severe deviation in frequency - i.e., below 59.91 Hz.
  • Physical Responsive Capability is projected to fall below 3,200 MW.
  • There’s not enough capacity to meet the next ten-minute net load ramp.

The proposed trigger will allow the ERCOT control room to release up to 500 MW of ECRS capacity to the economic dispatch when the Power Balance Penalty Curve is violated by at least 40 MW for ten minutes or more.

Additionally, any ECRS capacity made available to the economic dispatch must be priced at no lower than $750/MWh. (There is a precedent for an offer floor on Ancillary Service capacity - Non-Spinning Reserve capacity must be priced at no lower than $75/MWh.)

What will the new ECRS trigger actually mean?

The new trigger will cause ERCOT to deploy ECRS earlier and more often on high net demand days (like August 25th last year). This will mean higher cycling rates for batteries that are carrying ECRS responsibility - due to more frequent deployments.

Increased ECRS deployments should also reduce instances of artificial scarcity. This will mean fewer instances of prices above $1,000/MWh when system reserves are healthy (i.e. 5,000 MW+).

The proposed offer floor will mitigate this drop in prices to some degree - and keep prices high during deployments. However, increased deployments of ECRS should reduce overall system costs.

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