Insight
The fog of volatility: will proper resource planning be increasingly challenged in the current ERCOT energy only market?
Report summary
Despite tightening reserves this year and higher forward pricing, ERCOT has seen a continuing trend of gas project cancellations from the ERCOT generation queue. Given this recent trend, participants appear more willing to accept the risk around new wind and solar projects, which are quicker and cheaper to build, rather than new gas fired projects, which will be needed for critical system reliability levels within the next 5 years, potentially jeopardizing reliability.
Table of contents
- Key takeaways
- Intermittent nature of increasing generation supply in ERCOT witnessed this summer
- ERCOT gas projects being cancelled and no new ones showing up -- even with reserve margins declining and high forward pricing
- Return to strong demand growth puts focus back on ERCOT reserve targets
- Current scarcity construct has yet to be fully tested
- Will energy only prices rise quickly enough incentivize proper investment decisions in the mid-term?
- Rising scarcity will need to incentive new gas capacity but increasing wind and solar penetration poses a challenge
- Price relationship to needed investment revenue
- System may have been closer to reliability events this July than currently thought
- 2018 summer wind and weather patterns could be a harbinger of things to come
- Upside to renewables provides some support in the immediate near term
- Additional demand response does not appear to be a significant short term solution
- Conclusions
Tables and charts
This report includes 7 images and tables including:
- Figure 1: 7-day rolling average load in ERCOT (GW)
- Figure 2: Historical and forecast ERCOT reserve margins
- Figure 3: Historical and projected ERCOT day ahead prices
- Figure 4: June through August 2018 real time ORDC price adders
- Figure 5: Historical and projected pricing contributions to NGCC CONE
- Figure 6: ERCOT net summer peak demand (MW)
- Figure 7: 2018 Average daily temperature readings and wind availability
What's included
This report contains:
