11 Apr 2024
Neil Weaver

ERCOT: The Energy Academy - How do power markets in Texas work?

When it comes to power markets across the globe, Texas is pretty unique. With its diverse mix of generation sources, lack of federal regulation, and extreme weather periods, the system operator - ERCOT (the Electric Reliability Council of Texas) - faces a huge challenge.

It needs to ensure that the grid runs smoothly, and that the market operates competitively. And, to do this, ERCOT oversees a number of different markets, mechanisms, and services. Each of these presents an opportunity for generators - as well as large load and/or storage resources - to make money.

But how do they all work? What happens at each stage of the process - to ensure that the supply and demand of electricity remain balanced? Who takes part in these markets? What actually determines the price of power in different locations? And how can participants earn revenues?

In this ten-episode, 30-minute season of The Energy Academy: ERCOT, written and presented by Brandt Vermillion (Modo Energy’s ERCOT Market Lead), you’ll learn the answers to these questions - and much more. Let’s dive in.

Episode 1: ERCOT’s place in North America’s power system

In the first episode of The Energy Academy by Modo Energy, explore how the Electric Reliability Council of Texas (ERCOT) fits into the larger North American electricity system. Learn about the role of Independent System Operators and Regional Transmission Organizations, what federal oversight looks like, and ERCOT's unique position as an independent grid operator.

Episode 2: ERCOT’s responsibilities

Delve into ERCOT's crucial role in overseeing the flow of power across Texas. Discover how ERCOT manages a diverse energy landscape, balances supply and demand in real time, and runs a competitive power market to ensure reliable electricity delivery.

Episode 3: QSEs, LSEs, REs, TSPs, and more

Explore the different market participants in ERCOT - and how they interact. Discover the roles of Transmission Service Providers, Resource Entities, Qualified Scheduling Entities, and Load Serving Entities - in the complex web of electricity delivery and consumption.

Episode 4: Long-term power contracts

Dive into the world of longer-term power contracts in ERCOT. Learn how these agreements provide stability for both generators and consumers, and why they are crucial in a system without a Capacity Market. Uncover the significance of Power Purchase Agreements (PPAs) and Congestion Revenue Rights (CRRs) in shaping the electricity landscape in ERCOT.

Episode 5: Price formation in ERCOT - System Lambda

Learn how prices are determined in ERCOT, a nodal power market with around 17,000 nodes. Find out about Locational Marginal Prices (LMPs), Settlement Points, and the role of System Lambda in shaping electricity prices across the system.

Episode 6: The impact of congestion on LMPs

Explore how congestion influences prices in ERCOT's power market. Excessive power flow on the transmission system causes congestion, which leads to price disparities between different locations.

Learn how ERCOT factors congestion into Locational Marginal Prices (LMPs), using shift factors and shadow prices. Also, discover how LMPs are calculated at various settlement points.

Episode 7: ERCOT’s Day-Ahead Market

Delve into the workings of ERCOT's Day-Ahead Market, where participants submit bids and offers for power to be delivered the next operating day. Learn how supply and demand curves intersect to determine prices at each Settlement Point, and discover the hourly granularity and timing of market operations.

Episode 8: ERCOT’s Ancillary Services

Uncover the crucial role of Ancillary Services in ERCOT's power grid management. Learn how these services help maintain frequency stability, respond to significant deviations, and provide fast-acting capacity during scarcity conditions.

Discover the four main types of Ancillary Services and how they are procured through ERCOT's market mechanisms.

Episode 9: Real-Time operations in ERCOT (SCED)

Explore the Real-Time Market in ERCOT, where actual physical dispatch of generation and load resources occurs every five minutes - to meet demand at the lowest cost.

Discover how the Security Constrained Economic Dispatch algorithm evaluates bids, constraints, and system conditions to optimize resource dispatch. Learn about ERCOT's state estimation process and contingency analysis, crucial for maintaining grid reliability in Real-Time operations.

Episode 10: Price adders in ERCOT (and the ORDC)

In the final episode of this season of The Energy Academy, delve into the concept of price adders in ERCOT. Discover how these mechanisms, based on system reserves and reliability actions, influence electricity prices across the grid.

Want to learn about battery energy storage operations in ERCOT?

With a Benchmarking Pro USA subscription, your whole team can stay up to date with all the latest data, insights, and market movements for battery energy storage systems in ERCOT.

You’ll get full access to the ERCOT BESS Index, which breaks down the latest battery energy storage revenues across ERCOT, and the entire Asset Directory, so that you can compare individual battery performance on a system-by-system basis.

And you’ll be able to read all of our Research, such as:

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