2019 S MARKET REPORT FOR THE ERCOT …

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2019 STATE OF THE MARKET REPORT

ERCOT

FOR THE

ELECTRICITY

MARKETS

Independent Market Monitor

for ERCOT

May 2020

David B. Patton, Ph.D.

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Contents

TABLE OF CONTENTS

Executive Summary ................................................................................................................. i

I.

Review of Real-Time Market Outcomes ......................................................................... 1

A.

B.

C.

D.

E.

F.

G.

II.

Demand and Supply in ERCOT ................................................................................... 21

A.

B.

C.

D.

E.

III.

Day-Ahead and Real-Time Congestion.....................................................................47

Real-T ime Congestion ............................................................................................49

CRR Market Outcomes and Revenue Suffic iency ......................................................54

Reliability Commitments ............................................................................................. 63

A.

B.

VI.

Day-Ahead Market Prices .......................................................................................33

Day-Ahead Market Volumes ...................................................................................35

Point-to-Point Obligations .......................................................................................38

Ancillary Services Market .......................................................................................40

Transmission Congestion and Congestion Revenue Rights............................................ 47

A.

B.

C.

V.

ERCOT Load in 2019 .............................................................................................21

Generation Capacity in ERCOT ...............................................................................22

Imports to ERCOT .................................................................................................24

Wind Output in ERCOT ..........................................................................................24

Demand Response Capability ..................................................................................27

Day-Ahead Market Performance ................................................................................. 33

A.

B.

C.

D.

IV.

Real-T ime Market Prices.......................................................................................... 1

Zonal Average Energy Prices in 2019........................................................................ 6

Evaluation of the Revenue Neutrality Allocation Uplift............................................... 8

Real-T ime Prices Adjusted for Fuel Price Changes ....................................................10

Aggregated Offer Curves ........................................................................................12

ORDC Impacts and Prices During Shortage Conditions .............................................14

Real-T ime Price Volatility.......................................................................................19

RUC Outcomes ......................................................................................................64

QSE Operation Planning .........................................................................................65

Resource Adequacy ...................................................................................................... 69

A.

B.

C.

D.

E.

Net Revenue Analys is .............................................................................................69

Net Revenues of Existing Units ...............................................................................72

Planning Reserve Margin ........................................................................................75

Effectiveness of the Shortage Pric ing Mechanism......................................................77

Reliability Must Run and Must Run Alternative ........................................................81

VII. Analysis of Competitive Performance ........................................................................... 83

A.

B.

C.

D.

Structural Market Power Indicators ..........................................................................83

Evaluation of Supplier Conduct ...............................................................................84

Voluntary Mitigation Plans......................................................................................90

Market Power Mitigation ........................................................................................91

Appendix ............................................................................................................................ A-1

2019 State of the Market Report

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Contents

LIST OF FIGURES

Figure 1: Average All-in Price for Electricity in ERCOT ......................................................... 2

Figure 2: Comparison of All-in Prices Across Markets............................................................. 4

Figure 3: Prices by Time of Day.............................................................................................. 5

Figure 4: Average Real-Time Energy Price Spikes.................................................................... 6

Figure 5: Zonal Price Duration Curves .................................................................................... 8

Figure 6: ERCOT RENA Analysis .........................................................................................10

Figure 7: Monthly Average Implied Heat Rates ......................................................................11

Figure 8: Implied Heat Rate and Load Relationship ................................................................12

Figure 9: Aggregated Generation Offer Stack - Annual and Peak .............................................13

Figure 10: Winter and Summer Peak Operating Reserve Demand Curves ................................15

Figure 11: Average Operating Reserve Adder .........................................................................16

Figure 12: Average Reliability Adder .....................................................................................17

Figure 13: Duration of High Prices .........................................................................................18

Figure 14: Annual Load Statistics by Zone .............................................................................21

Figure 15: Annual Generation Mix in ERCOT ........................................................................23

Figure 16: Annual Energy Transacted Across DC Ties............................................................24

Figure 17: Wind Production and Curtailment ..........................................................................25

Figure 18: Top and Bottom Deciles (Hours) of Net Load ........................................................26

Figure 19: Daily Average of Responsive Reserves Provided by Load Resources ......................28

Figure 20: Convergence Between Day-Ahead and Real-Time Energy Prices ...........................34

Figure 21: Volume of Day-Ahead Market Activity by Month..................................................35

Figure 22: Day-Ahead Market Three-Part Offer Capacity .......................................................37

Figure 23: Daily Collateral Held by ERCOT...........................................................................38

Figure 24: Point-to-Point Obligation Charges and Revenues ...................................................39

Figure 25: Average Profitability of Point-to-Point Obligations ................................................40

Figure 26: 2019 Ancillary Service Prices ................................................................................42

Figure 27: QSE-Portfolio Net Ancillary Service Shortages......................................................44

Figure 28: Day-Ahead Congestion Costs by Zone ...................................................................48

Figure 29: Real-Time Congestion Costs by Zone ....................................................................48

Figure 30: Most Costly Real-Time Congested Areas ...............................................................51

Figure 31: Percentage Overload of Violated Constraints .........................................................53

Figure 32: CRR Revenues by Zone ........................................................................................55

Figure 33: 2019 CRR Auction Revenue..................................................................................56

Figure 34: CRR Auction Revenue, Payments and Congestion Rent .........................................57

Figure 35: CRR History .........................................................................................................59

Figure 36: CRR Balancing Fund ............................................................................................61

Figure 37: Real-Time Congestion Rent and Payments .............................................................62

2019 State of the Market Report

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Contents

Figure 38:

Figure 39:

Figure 40:

Figure 41:

Figure 42:

Figure 43:

Figure 44:

Figure 45:

Figure 46:

Figure 47:

Figure 48:

Figure 49:

Figure 50:

Capacity Commitment Timing ¨C July and August Hour Ending 12 through 20 ........66

Combustion Turbine Net Revenues........................................................................70

Combined Cycle Net Revenues..............................................................................71

Net Revenues by Generation Resource Type ..........................................................74

Projected Planning Reserve Margins ......................................................................76

Peaker Net Margin ................................................................................................79

Summer Month Outage Percentages ......................................................................81

Pivotal Supplier Frequency by Load Level .............................................................83

Reductions in Installed Capacity ............................................................................85

Derating, Planned Outages and Forced Outages......................................................86

Outages and Deratings by Load Level and Participant Size, June-August ................88

Incremental Output Gap by Load Level and Participant Size ¨C Step 2 .....................89

Mitigated Capacity by Load Level .........................................................................92

LIST OF TABLES

Table 1: Average Annual Real-Time Energy Market Prices by Zone ........................................ 7

Table 2: Zonal Price Variation as a Percentage of Annual Average Prices................................19

Table 3: Share of Reserves Provided by the Top QSEs in 2018-2019........................................43

Table 4: RUC Settlement ........................................................................................................64

Table 5: Settlement Point Price by Fuel Type ..........................................................................73

Table 6: Effect of ORDC Shift on Price...................................................................................80

2019 State of the Market Report

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