The Electric Reliability Council of Texas (ERCOT) is the system operator for most of Texas. The ERCOT Interconnection is an electric island grid with limited Direct Current (DC) Tie connections to the Mexican and Eastern US Interconnections. ERCOT today has more than 22 GW of installed wind and roughly 2 GW of utility-scale solar and is recognized worldwide for identifying best practices in reliably integrating and efficiently managing large amounts of renewables on an island grid. ERCOT’s best practices lie in what we call the four pillars of reliable and efficient integration of Inverter-Based Renewable Resources (IBRR): Grid Codes, Forecasting, Ancillary Services, and Real-Time Operation.
IBRRs bring increased levels of uncertainty to the conventional methods of operational planning analysis because output from IBRRs depends upon wind speed in the case of wind generation and irradiance in the case of solar generation. Both wind and irradiance are variable in nature but can be generally forecasted with reasonable accuracy. In the short term, the uncertainty associated with forecasting output from IBRRs increases almost linearly as you look further out (see Figure 1 Wind Forecast Uncertainty). A market design that supports re-dispatching resources as often as possible will reduce the magnitude of uncertainty drastically and will thereby reduce the cost of ancillary services needed to manage those uncertainties. Additionally, the magnitude of uncertainty is reduced by sending dispatch instructions to resources that are immediately effective.
ERCOT has an energy-only market design that contains a scarcity pricing mechanism which produces energy prices as high as $9,000/MWh during conditions when reserves are depleted. Figure 2 below depicts different components of ERCOT’s market design beginning with the Day-Ahead Market (DAM) and continues into real-time. In the DAM, market participants may submit offers to sell energy and bids to buy energy on an hourly basis for the next day. The energy and ancillary services are co-optimized in the clearing for a least-cost solution. Participation in DAM is voluntary. DAM is followed by the Day-Ahead Reliability Unit Commitment (DRUC), which looks at the market participants’ plans to commit resources to meet energy and ancillary services’ needs. It recommends additional unit commitments if sufficient resources are not committed, or if a non-committed resource is needed to resolve local reliability issues.
During the adjustment period, which is defined as the period within the operating day up to an hour before the beginning of an operating hour, ERCOT can make up for expected shortfalls in ancillary services or procure additional ancillary services using the Supplementary Ancillary Service Market (SASM). Similar to DRUC, an Hourly Reliability Unit Commitment (HRUC) runs every hour, with similar objectives as DRUC, up until the Operating Period. Although ERCOT-directed resource commitment is rare, both HRUC and DRUC function as checks to ensure market-committed resources are sufficient.
Preparations for Real-Time Operations are performed during the Hour-Ahead period. The purpose of Real-Time Operations is to ensure generation is matched with demand while operating within the established transmission limits. ERCOT’s Security Constrained Economic Dispatch (SCED) application performs this function every five minutes, taking a fresh scan of the system to come up with the least-cost dispatch solution to meet the system demand while maintaining transmission system reliability. Every five minutes, resources receive SCED base points (dispatch instructions) and locational marginal prices (LMPs), and both SCED base points and LMPs are immediately binding. Because the base points are immediately binding, the uncertainty associated with IBRRs is minimized (see Figure 1).
ERCOT market rules do not penalize IBRRs (wind & solar resources) for deviation from their SCED-instructed base points, except when they are curtailed either based on their economic offers or to resolve transmission reliability issues (see Figure 3). When curtailed, an IBRR is required to generate at or below its base point within five minutes of receiving the curtailment instruction. After the fact, performance measurements are conducted to assess IBRR compliance.
Another provision within the real-time market called the Power Balance Penalty Curve (PBPC) creates a penalty price for excess/shortage of ramping capability in real-time. The five-minute out up-ramping shortages or under generation in real-time are priced as high as $9,000/MWh (see Figure 4) and over-generation is priced as low as -$250/MWh.The combination of scarcity pricing and PBPC for real-time ramping shortfall creates opportunities for resources that can respond to real-time shortages of ramping flexibility by starting within five to 10 minutes when prices spike. As new wind and solar capacity has been added to the grid, there has also been a significant amount of gas-fired units added during the same period (see Figure 5).
Today’s competitive wholesale electricity markets operate under the principle of supply and demand. While the ERCOT market design is not unique in this sense, there are key elements of ERCOT’s market design that help ERCOT reliably and efficiently integrate more than 22 GWs of wind and almost 2 GWs of solar generation. These elements include re-dispatching every five minutes (reduces uncertainty associated with IBRRs), SCED base points being effective immediately (reduces uncertainty), the power balance penalty curve (incentivizes flexibility with high penalty price for lack of ramping capability), HRUC continually assessing sufficiency of committed resources in meeting demand using forecasted output of IBRRs, and a market-based approach (least cost) in dispatching IBRRs in real-time while taking transmission security into account. Additionally, ERCOT is currently working on enhancing its market design so that in real-time both energy and ancillary services can be co-optimized every five minutes using the ancillary service demand curves.
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