Why ERCOT's $5k Price Spikes Are Actually Good for Reliability (ERCOT)

Welcome to transmission, the podcast that uncovers the business of clean energy. I'm Alejandro Adiego, market analyst at Moto Energy. Before we start, I have something to ask you.

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And now back to the episode.

Recently, I was in Houston at the Reuters Energy Life Conference where I had the chance to sit down with Keith Collins, ERCOT's VP of commercial operations.

As longtime listeners will know, the lone star state, Texas, runs a lone star grid.

There's no national safety net and no neighboring system to lean on when things go wrong.

As winter storm URI proved in twenty twenty one, the consequences can be disastrous.

But that independence is the point.

It happens by design.

It keeps federal regulation light and lets markets move fast.

And it means Texas is a real time experiment in how much a grid can rely on price signals alone.

Right now, that experiment is being pushed hard. Electricity demand is rising fast and in bursts, mainly from AI data centers and electrification.

New reliability products pay specifically for resources that can show up on command.

New market redesign should, in theory, better incentivize the right technologies at the right time.

And Keith is at the heart of this design. He helps design these rules. He helps run the system, and he's navigating the tension between speed, reliability, and affordability every single day. So on the surface, this episode is about Texas, but it's really about the architecture of power markets everywhere.

What happens when demand surges, when renewables scale fast, and when markets, not mandates, are asked to hold the system together? Welcome back to transmission.

So Keith, thank you very much for joining us today to transmission by Motor Energy. Can you start by telling us about yourself, your role within ERCOT, and what ERCOT actually provides to its customers?

Sure. My name is Keith Collins. I'm the vice president of commercial operations at ERCOT. And ERCOT is the grid manager for most of the state of Texas.

Were think of us essentially as an air traffic controller for electricity. So we help manage supply and demand and ensure reliable grid.

But my role in that is is to function relative to the markets.

And as the air traffic controller, we use markets to promote reliable outcomes. And so my job is to design, analyze, operate, and to settle the markets. And that includes both the wholesale markets and includes the maintenance and the facilitation of the retail markets as well.

Okay, I see. So in simple terms, what levers do you control within our guts and what outcomes are you accountable for?

So specifically my the levers that I I manage has to do with the market design and how that can create new approaches in the event that current approaches aren't working effectively. So we analyze the current approaches for efficiency For reliability, and we determine if we're achieving those things. If we're not, then we can make changes to the market design to help improve outcomes and lead to better more efficiencies for for rate payers and consumers in in the end.

Okay. And that greater efficiency translates to lower prices for consumer, right?

Ultimately it creates more affordability for the consumer and more reliability as well. And just just to note that there is a balance between reliability and affordability. And what we we do is we try to achieve the highest level of reliability at the most affordable prices.

Okay. Great. Thank you for sharing that.

You joined ERCOT during a really wild period. Massive load growth, the boom of batteries, new reliability products.

What's one specific moment since joining when you thought, okay, this is reliability or economic tension we need to solve right now?

So there's there's actually two events. And the first one I will say most many people will be aware of is the winter storm Yuri that occurred back in twenty twenty one. There's been a lot of changes that ERCOT has made since then.

Most significantly winterization of resources so that resources are able to perform when it's cold.

There were additional studies to determine other changes and challenges that ERCOT faces And what we learned was that it's important to promote something that we call resource adequacy. And resource adequacy is is an evaluation of the set of resources that we have on our system isn't sufficient to meet the the growing needs of demand on the system.

And so that's one thing that was a surprise to me as as I came on board was it really is paramount that we focus on improving resource adequacy. The second item that was interesting is something that seems to be the talk of everything including this conference is the growth of data centers and artificial intelligence.

And what we're seeing is unprecedented demand for electricity at a time when we are trying to balance reliability and affordability. And so that is one of the biggest challenges and and as you said, most interesting moments of of interest because Texas seems to be the center of of a lot of this this interest in in data and AI unlike other parts of the country. And so if it's gonna happen, it's gonna happen here first. But we have to ensure that the grid is reliable and that we're doing so in affordable and economic manner as well.

I have two follow-up questions to what you just told us.

Sure.

First one being, if you can tell us a bit more what winterization is all about, how plants can get more ready to confront winter.

Sure.

And the second one, why from your perspective do you think all of the AI data center demand chose Texas ERCOT to develop?

Alright. So I'll take your first question first.

Yes.

With regards to winterization, unlike plants let's say in North Dakota, they generally in those regions where it gets colder, tend to place them in buildings. They'll have heaters to keep the equipment. There's certain equipment that's sensitive to temperature, particularly freezing temperatures.

And so in those types of facilities, they're already designed such that they'll keep those equipment warm. In Texas, a lot of the equipment is out in the open. So it is exposed to colder temperatures. So they do have heaters that they'll place around critical equipment. They do place wind breaks to help reduce wind and wind chill on various equipment. So that's some of the things they do to help improve with winterization.

With regards to your question in terms of why Texas, well Texas is a very business friendly state and we do want to help promote the economic development of the state.

The state is from from the governor to the legislature to the Public Utilities Commission are are very interested in in helping promote AI. And ultimately, what we've seen is the ability to acquire land, develop the the AI data centers, and to develop your your energy resources tends to be a lot faster here in Texas than it is in other parts of the country. So it is it is a very welcoming area and the the the regulations, the policies are are there to support that. And and that's why I see Texas as a place for for development of AI.

So ERCOT is quite unique in market design. Within the US, it's the last major energy only market. And what behavior does that create for investors and developers? What can you tell us about that unique behavior?

So what what we see with our energy only market design is that it definitely provides very strong price signals that encourage generation to to occur and and when we need it. And I'll I'll give you an example of this.

So what we've seen is the development over the last four years or so of energy storage resources. Very significant growth. And part of the reason for that is that we have very strong price signals that can reach up upwards of of five up to five thousand dollars per megawatt hour when on average they're more close closer to about thirty dollars a megawatt hour. So when you have that level of price signal in an energy only market, that does attract those resources to be a part of the market. And so that's really important is is to send the price signal to allow the the developers to make their own commercial decisions.

And then the other thing we do is is not necessarily a market thing, but it's how we integrate resources called connect and manage. So it's a very streamlined study process to allow resources to come onto the grid. And so when we combine those two things, strong price signals and easy a straightforward interconnection process, we definitely attract resources quickly. And that's that's something that does work as you said very beautifully in our market and does promote the integration of resources faster.

And so we talked about the positive things about the market design. Are there any areas where it starts to show strain in today's market conditions?

So the challenge that we we have in our market is is forward looking, and I'll give you an example of this. You can imagine a scenario where there's a wildfire occurring, and you have to make a decision as to when to leave.

Unfortunately, when you're in a in an energy only market, the signals are sent when the event happens. That's like leaving your house when it's on fire. And so one of the things that we wanna think about is how can we get better signals better signals in advance of of an event. And a good example of this is we see load potential load growth, significant load growth with AI and data centers. How do we incorporate those signals better into the market?

That's the big challenge that we see in our energy and the market.

Okay. Right. Thank you for sharing that perspective. You mentioned that one of the biggest advantages is price signals, and then you also mentioned that there's been a battery boom in energy storage boom in in ERCOT.

Have you seen an evolution of those price signals with incorporation of more and more batteries in the system?

Yes. What we've seen and and this is something that the storage developers, they seem to be a victim of their own success is that when you have very strong price signals, you attract a lot of resources. And so over the last couple years, we've added ten gig over ten gigawatts of new storage resources. And what that's done is that's reduced the price signals. So what we what we saw a few years ago were price signals closer to five thousand dollars.

Now they've come down and and are closer to, let's say, three hundred dollars on on a tight system day.

And if you would explain to the audience how do assets like batteries make money, become sustainable in the long term in a market? Also from an investor's perspective, how would you explain it?

How does batteries make So batteries make money by so batteries do not bring any generation to the market themselves.

What they do is they absorb generation earlier in in earlier parts of the day, and what they do is they discharge during when prices are high. So buy low, sell high. And so there are times when we have sufficient solar resources on the system. We'll see prices closer to zero dollars and potentially even negative, which provides a great opportunity to for these storage resources to potentially even get paid to charge. And so they'll charge during those periods and then wait for the periods when the prices spike up and they spike up to these up to several hundred or if not thousands of dollars, and that's when they'll discharge. So it's an opportunity to arbitrage the difference in prices over the course of the day.

So ERCOT not only has one single market, it has multiples. Out of all of them, which are the most important for batteries and during what times of the day would you say?

So there's so you you bring up a couple of good points here. One is in in the energy market. So we have energy markets and we have reserve markets. And so I'll speak to the energy market first.

And what we also can do with the energy market is much like you have highways, you can get congestion and so you can have different values depending on where you are in the grid much like where you are relative to how the the traffic is moving. You get the same challenge with with electrons. So ultimately what we see is the highest value tends to be during what we call the net peak hours which is different from peak load hours. And so traditionally, the highest peak demand hours are around four or five in the afternoon on a summer day.

That's when air condition that's where the temperatures tend to be the hottest. That's when people are getting home, turning on their air conditioning, and so you tend to have the highest peak demands. However, we've seen a significant increase in solar generation over the last several years, whereas we have over thirty five gigawatts of solar on our system. Our system peaks at at around eighty six gigawatts and thirty five gigawatts of of nameplate solar generation.

That's a lot. And so what we've seen is a shift of when prices are highest from that peak demand period to something known as the net peak demand. Well, what's net peak demand? Net peak demand is is essentially when the sun comes down and you don't have the the sun generating anymore.

This is the the amount of demand that needs to be met by nonrenewable resources. So you subtract out any wind and solar, and when is that the highest? That tends to be highest around eight PM to nine PM on a summer day. And so during that period of ramping off of the solar and that highest net demand is when prices are highest, and that's when the the storage resources are able to recover their able to to make the most value for the resource that they're providing.

Now we also have ancillary service markets. And those ancillary service markets, we have a few of them. There is something known as RRS, responsive reserve service. We have regulation service up and down, and we have something called ERCOT contingency reserve service, and we have something called non spinning reserves.

So what are all these reserves and what are they doing? Well, they're ultimately trying to ensure that the grid is is operating on a essentially four second level and able to manage any contingencies that happen.

Now what's interesting is ultimately reserves are a fraction of the energy price. Let's say it could be generally whereas energy is let's say thirty dollars a megawatt hour, you could have reserves let's say, ten dollars or less. And so what we've seen is that a very significant penetration in our regulation markets, almost a hundred percent at times of those markets are from storage resources. Some of the other products, a little less, but I'd say on average, fifty percent of all of our reserve markets come from energy storage, which is a significant shift over where we were just four or five years ago.

And so that's been a great story. They've helped reduce the cost. But when you're looking at opportunities, when you have, for instance, the regulation market, if a hundred percent at times of that market is made up of energy storage resources, then you have energy storage resources competing with energy storage resources rather than energy storage resources competing with other technologies like natural gas resources or coal resources. And so at that point, it changes it changes the value in which they can receive.

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Enjoy the conversation.

So as one of the key architects of market design in ERCOT, how do you approach the problem of keeping the market efficient, the price signals efficient, keeping some key technologies in the market when they are displaced by batteries, for example, ancillary services? How do you can you walk the audience through your approach on thinking about new markets and new price opportunities for participants?

Yeah. So what's what's interesting about this challenge is we need a range of resources to make the grid work effectively. And what we've seen over the last few years is a shift away from dispatchable resources, particularly thermal dispatchable resources. But there are times when the wind doesn't blow or the sun doesn't shine, and we need a range of resources to help maintain a reliable a reliable grid.

And that's one of and and just to look at the ERCOT mission, our mission is to provide a reliable grid and reliable power, but we do it through markets and efficient markets. So your question is, how do we create an efficient market? Well, we're very efficient in what we're doing today. However, what we've noticed is that the reliability is is not where we'd like it to be.

And so when we think about what we wanna do in design and markets is how do we change markets to improve improve that reliability. And so one of the ways we wanna do it is through a product known as dispatchable reliability reserve service or DRRS.

And so this DRRS has two pieces. The first piece is is what we're we call an uncertainty piece. And really it's designed to act like most traditional ancillary services And what it does is it measures the variability of resources such as wind and solar as well as demand and determine what resources do we need on the system to help manage that. And so we need resources that can start up within two hours and that have the ability to be online for four hours. So that is the nature of the uncertainty element of that product. And so in terms of inclusion, storage resources, at least right now, the the current design does not include energy storage resources. However, in the event that the Public Utilities Commission of Texas decides that that those resources will be a part of the solution, they will be a part of the solution.

The second piece of the DRS design is something that focuses on resource adequacy.

Resource adequacy, as I noted earlier, is when you have sufficient supply resources to meet the demand on the system. And so we're designing this DRS to also be capable of promoting resource adequacy on the system. And it does that through something known as a release factor. And this release factor allows resources to effectively provide DRS simultaneously with energy and and other ancillary services. So it's a unique feature that will allow it to to provide those signals for those dispatchable resources to allow the grid to to continue to promote reliability.

So that our audience truly understands it, if we look at it from another perspective, trying to see whether something similar exists in other markets and other ISOs in in the US, Is there any very similar product that already exists in other markets? And would it be, for example, comparable to the resource adequacy program in Kaizo or not? Fully different.

And it's a great question. And the answer is we are not aware of any product that is like this in any other market. And part of the reason for that gets to the unique energy only market that ERCOT has. So we do not have a capacity market. We do not have a capacity contract. We do not wanna create a capacity market or a capacity construct.

So what we've done through this product is to create a mechanism that is an Ansley service.

And through that Ansley service, we can promote resource adequacy.

Burkhart traditionally promotes resource adequacy through a mechanism that's known as the operating reserve demand curve. And so this creates what we call scarcity pricing. And so basically, it elevates prices during times of scarcity.

What we've found is that when you increase that price, you tend to to increase the value of all resources. That includes solar, wind, short duration storage. And the challenge that we've been seeing and that we just talked about is we need resources that have longer duration and have dispatchability characteristics. Dispatchable Reliability Reserve Service does that. And so this new mechanism, we're calling DRRS ANSLEY Service Plus or DRS AS Plus is what can provide that resource adequacy.

This is very interesting. So rather than going to the energy market, increasing the scarcity price, which allows all the participants to benefit from higher prices, You're putting a filter through a new market, this new ancillary service where only certain technologies can access to give them an additional revenue stream. Is that correct?

Correct. That's exactly correct. Because what we've seen and what our studies have shown is that there is while there is value of solar, there is value of wind and all resources. What we've seen is that we also can't ignore the value that resources like thermal dispatchable generation brings to us. That's why we've done this.

Great. And if I can ask you a follow-up question of why ERCOT is so opposed to establishing a capacity market. What is the reasoning behind? Could you tell me a little bit more about it?

There are a lot of historic reasons why this is the case. I think we've when we look at other markets, there are a lot of challenges these capacity markets have bring have brought to them.

There are they're always tweaking their markets.

They they they can create some political problems we've seen in some other other regions. And so ERCOT has has stayed away from that. And there is there is ultimately one of the things I've seen in the different regions that I've been in is that the environment or the cultural environment within which you you operate is what can drive market design. And the market design here is is is not one that would promote a capacity market like you would see in other regions. And so we've we've chosen to to focus on other solutions like like the DRRS.

Thank you for sharing that. So from what I've obstacle that ERCOT is facing is resource adequacy or one of the main key, not obstacle, but challenge that you will have in the future. Is there any other that you think would could become an obstacle that you're starting to think about for a new potential market design?

Well, I think it all seems to focus on resource adequacy and promoting that. But I think as I've said earlier, we want to promote all different types of resources. And a new design that we're also focusing on is something known as that we're calling residential demand response. And this residential demand response is we've identified when you look at the range of demand response products that we have, we've got crypto mining load. We've got industrial load that participates. We have programs that focus on virtual power plants.

For instance, Tesla Powerwalls can participate in in a what we call our a d ADER program, aggregated distributed energy resource program.

When you look at the range of programs, what we see is a gap in terms of programs that can promote residential participation, particularly things like thermostats, pool pumps, and how do we reach those resources.

And this is really critical when we look at the timeline it takes to develop other supply resources. So even with the DRS ancillary service plus, if we start sending price signals, the ability for supply resources because of supply chain issues, it could take several years before we reap the benefits.

However, residential demand response is something where people have access to smart thermostats today. People have the ability to control pool pumps today. So it's an easy ability to acquire that. But what we don't have is a market design that promotes the integration of these residential demand response resources. So we're working on a design that we believe can help promote that.

ERCOT has recently implemented I think it was last week, it became operational at RTC plus b, the new market design. Can you tell us a bit more about why you thought about implementing this new mechanism and what the expected results are from your perspective?

So RTC plus b or real time co optimization plus batteries is a project that's been under development by ERCOT for most recently the last six years, but it's actually been discussed for well over fifteen years. And really the history behind this program was ERCOT created a nodal market around two thousand nine, two thousand ten. And when that market was created, this was originally an element of it. But due to constraints, it was left out of that original launch of the nodal market. So what happened pre Yuri, so in twenty nine twenty eighteen, twenty nineteen period, there was a movement to to develop this. And a lot of the design that we see today was developed during that period. Unfortunately, what happened is we had COVID, We had winter storm Uri, and that put a pause on the development of this program.

Thankfully, we've picked up the torch over the last couple of years, and we've just recently we recently implemented this program on December fifth. So what this program does is it takes we talked about energy markets and ancillary service markets.

The way it was done in real time, it was not co optimizing. And what that means is it was not making trade offs between the energy market and the ancillary service market. Now what it's doing is the optimization of our model is trading off between whether a resource should be an energy provider or should it be a reserve provider. And when it does that, it creates a very efficient outcome.

And so we've estimated the potential savings on an annual basis to be in excess of two billion dollars for the market. So it's a it is the most significant event that ERCOT and implementation that ERCOT has done since we went nodal over fifteen years ago. So we're very excited. The launch was very successful.

We've we had some items that we've identified along the way, but nothing that we've deemed critical. And we're making those those corrections, and and we call it stabilization. So we expect to stabilize over the next few months, But nothing is is has been a showstopper, and we we've seen a very successful watch.

This is a very interesting moment for ERCOT. Is this new mechanism creating new opportunities for some technologies in the market?

So one of the things so as part of the real time co optimization, there's plus batteries. And with the batteries, what we've done is we've changed and enhanced the model in which batteries can participate in the market. And so this is a really great opportunity. Traditionally, what we've done is we had a battery can either charge or discharge, but we couldn't model it as a single resource.

And so we had a piece that a charging piece and a discharging piece. And so there were two elements. Now there's just one. And the ability for a participant to submit their offers into the market is much more efficient than it had been traditionally.

And so that's that's really a great opportunity. Now the other thing that we're allowing for that's different is we can, something that's known as virtual bids. And a virtual bid is the offer is the opportunity to arbitrage between day ahead ancillary services and real time ancillary services. So we've had energy virtual bids for a long time.

Now we also have virtual ancillary service bids. So this will allow participants to help converge and provide more efficient pricing signals for those ancillary services. So that's one of the changes that's occurred with the RTC plus P.

Thank you for explaining that. Another key, I wouldn't call it obstacle, characteristic of ERCOT's market is structural congestion, and maybe one the most famous case is Western Texas with the rest of the load zones where prices are usually a bit higher, there's more volatility in the prices throughout the day because of the high renewable penetration and high loads. How do you look at it from your perspective? Is it an issue from your perspective? And what potential levers would you think of to solve that in the future?

So congestion is, as we were saying, is when you have a region that has a price that's higher than an other region because of transmission limitations.

And historically, the western zone has been one where we've seen higher prices.

What we're seeing is the ability to we're also seeing a lot of load growth occurring in that region. So the question becomes how do we continue to meet that load growth with the set of resources we have in the west? And one of the ways we can do that is to access the the generation resources system. And the way to do that is to expand the transmission grid.

So we've done studies that have identified the need to enhance the grid in particularly the west, but throughout the throughout the east as well to enhance that. And so we have a project that is that our study has evaluated seven sixty five k v. So this is a higher voltage than what we see throughout the rest of Texas. And we see that by implementing this seven sixty five kV technology, we can more efficiently and at even though the at a total level, the cost may be more.

But over time, the benefits are higher. And so we can access those resources in other parts of the state and bring those resources to the west of the state. Ultimately, we see this as an opportunity to not only shore up and strengthen the grid in the west, but it'll also help to to provide the backbone for what we see in terms of meeting the needs of the growing needs of data centers.

And do we have already information about the timelines for those new transmission lines?

So we expect that the western part of our grid around two thousand and thirty is when those projects are likely to be developed. So we're still a few years out, but with those seven sixty five, that has been approved by the commission.

Yeah.

And with that approval, the development can commence and ultimately, we'll we'll start seeing the benefits of those projects in the early twenty thirties.

And the capacity of those transmission lines, are we talking about gigawatts? Yeah. How many?

Yeah. We're I off the top of my head, I I don't have the specific numbers, but we're gonna have the ability to maneuver gigawatts of electricity throughout the grid.

Right. Thank you. Now jumping to your past experience, you have a big repertoire of experience in many markets in the US, MISO, SPP, Kaiso.

Can you tell us some of the highlights of the experiences that you lived in those markets and lessons learned that you have brought to your current job here at ERCOT?

So starting with the the first role, I worked as a contractor with the New York Power Pool as they were transitioning to the New York ISO. So the the really interesting lessons that I learned there was really the birth of an ISO or the markets.

The the New York Power Pool was a reliability entity, but the market element was was where the New York ISO began. And to be a part of that process and to see those markets form was was eye opening for me because it was all new at the time.

In California, they had just re so in the early two thousands, folks may may remember Enron and the challenges that they faced. California had a market design that was not as efficient or effective. And so they were transitioning away from their original design and moving towards a nodal design, which is used throughout the country today.

And so when I joined them, they had just completed that transition, and they were moving moving into other parts of the West in their energy imbalance market. So bringing markets and expanding to the West is what I learned when I was with Cal ISO.

And what was interesting there was there was a lot of concern about the challenges that California had faced during those Enron periods. But when they were transitioning to the energy imbalance market, they saw the benefits of markets and were willing to essentially put a toe in the water and have since moved are moving beyond that. But when I was in California, they had were putting the toe in the water and seeing how things would develop from there. And the Southwest Power Pool, when I was there, I was also the independent market monitor, so I had an opportunity to, opine on market design and market improvements.

I was there during winter storm Uri, and that was an interesting challenge. The big difference between the ERCOT and the and the Southwest Power Pool is the Southwest Power Pool is interconnected with other parts of the United States. And that's what makes Texas very unique is that Texas is effectively an electrical island, but the Southwest Power Pool is not. And so during winter storm Urie, the Southwest Power Pool was able to benefit from its interconnections with other grids.

And, ultimately, the the challenges they faced were different than what they were in in ERCOT. Now I will say a lot of the lessons learned were that your market design is dependent on the nature and structure of the entities that make it up and their willingness to try different market designs versus others. I think that was an important lesson that I bring today to ERCOT is that there can be multiple solutions to an outcome, but trying to find a solution that works for that particular region is more effective than trying to use a solution created in another region and and imposing it within a particular region.

So that's one of the lessons learned that I've I've had. Now one of the things that the other regions tend to to do a little bit different from ERCOT is is they tend to forward look a little bit more in terms of how how resources and how markets need to forward look to send signals today.

So those markets all have elements that do that, and ERCOT is is very focused on the the here and now.

I see. Thank you for saying that. It's an admirable track record. Incredible experience. I must say that some people in the audience will be very jealous as your experience working so many ISOs. I know that every market faces different conditions, and you say that that makes for specific market designs.

But is there anything that you think could ERCOT could borrow from the other ISOs or that other ISOs could learn from ERCOT right now?

Well, I think the the the big thing that folks could learn from ERCOT and I I think the story particularly around storage, is the power of of price signals.

And what we've seen in ERCOT is the ability to send strong price signals and the ability to interconnect resources quickly.

Those two in combination have really transformed the ERCOT market from what we had seen. And to the extent that other resource other regions are trying to incorporate more storage, the power of pricing, the ability to interconnect resources is something that ERCOT does really well and things that they can learn from from ERCOT. In terms of what we can learn from other other regions, I think what's also interesting is other regions experience problems at different periods. And so for instance, in ISO New England, even though we haven't talked about that yet, their their reliance on, pipeline limitations.

Right? That's a big challenge they face. Well, what are the lessons that we could potentially take from them or PJM or New York? Texas doesn't face those same challenges, but understanding what those challenges are and and for instance, dual fuel capability.

That's something that's really big in ISO New England and New York ISO. That's important for meeting demand in in winter. And what are the lessons that we could potentially learn in terms of having an incentivizing dual fuel capability? That's a great example of how we could learn from that.

Thank you for sharing your perspective on that. Now for for ERCOT, from the perspective for ERCOT doing the exercise to look into the future, what do you think is the most underappreciated shift that is coming to ERCOT in the upcoming five to ten years?

I will say that in the in let's say the the three to five year period, the AI data center is is the big story. How much load are we gonna have?

What's it gonna look like? That's really gonna change the equation. But as but when we shift out to that five to ten year period, things change a little bit. And for instance, we talked about seven sixty five transmission.

That's going to change the equation once we have that. The other thing is when we start talking about new technologies like small modulated nuclear reactors, that becomes a part of the equation. Geothermal potentially becomes a part of the equation. There are new resources, hydrogen.

These are things and resources we're not talking about today.

But it makes me wonder when we think about that five to ten years from now, those those resources become possibilities along with the new transmission.

So new transmission, new resources, how do we how do we incorporate all of that in the market? That's gonna be a different challenge going forward. Also, when you look at the demand side, how are how are people's demands gonna change in their homes? We've seen we're starting to see those virtual power plants, those Tesla Powerwalls, being a part of the the the mix. That could be very different in five to ten years as as consumers become a more more a part of the solution as well.

How would you look at the extreme scenario where, let's say, most of the houses in Texas have their own battery installed and there would be a massive shift in demand shape throughout time. Right? Because demand would change. It's peak demand. Those batteries would be able to get into generation and shift the demand from the grids to those batteries.

Would that become a problem for ERCOT? Would it create a lot of complexity and constraints? How would you look at it?

I think it's an it's an opportunity. It's an opportunity to include them as a part of the ERCOT market and process. And we're seeing that through our ADER project. It's better to have those visibility on those resources than to lack the visibility on those resources. And if they're a part of a program where we're sending price signals, that's that that is something that can be a very a large opportunity for us going forward in the event that they're if they're it's opaque in terms of how they're operating, how they're participating, that would be a challenge. So our challenge is to incorporate them into the model.

Okay. Before jumping to the final section, is there anything that I didn't ask you that you think I should have asked?

I think you did a good job. We've we've covered quite a bit, so thank you.

Of course. Now jumping to the final section.

Would you like to promote or plug anything to our audience? Something that you're excited to be working right now in the future that you would like our audience to know?

I think the key things that we've been focusing on is the DRS, dispatchable reliability reserve service. We talked about residential demand program program. These are things that are really high on our list. But this also comes out of something that we've called as a market design framework. And over the past year, we've been working with stakeholders to to describe a framework to help us identify what attributes we want our market to have, flexibility, dispatchability, resiliency. This framework is how we're gonna be thinking about things moving forward, and that's where our market design choices come from.

Affordability, efficiency, this is how we make our decisions. And so when we talk about products like the DRS, we evaluate how it's going to improve, and we talked about adding dispatchable capacity. We said improving resource adequacy. These are things that we're thinking about, and they're gonna help guide our decision making from a market design moving forward.

And jumping to our final question, what is your contrarian view about the energy industry that many people would not share with you?

Well, I had the opportunity to listen to Alan Greenspan, the former Federal Reserve chair, oh, I'd say about fifteen, sixteen years ago.

And he was talking about the the credit the subprime loan credit crisis that occurred around that period. And one of the things that that really spoke to me was, as an economist, he said, I didn't think that that actors would act irrationally and would take on and unappreciated and underappreciate the risks they were taking on.

And it was that thought that stuck with me that as much as we believe in the power of markets and as much as Alan Greenspan believed in the power of markets, they can have their blind spots. And so it's it's important to recognize that as well. And so that I don't know if that's a contrarian view, but, I do believe in markets. But, at the same time, I recognize that there can be blind spots. And and for us, as we're promoting reliability, we need to ensure that the markets are effectively promoting reliability and to take actions when necessary.

Well, thank you for that, Contreras MU. It was a pleasure to have you here with us today, Keith, and thank you for coming.

Thank you for having me.