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Why the Demand Response Events in August 2019 Affirm Texas’s Market Design

April 20, 2020

It was hot in Texas on August 13 last year. Real hot. Nolan-Ryan-fastball-under-your-chin-hot. Roasting-armadillos-on-the-driveway-hot. Electric demand across the state predictably spiked. Voluntary (i.e. non-incentivized) calls to curtail issued by ERCOT went largely unanswered. (Would you volunteer to shut your A/C off when it’s 103 ̊ F?)

Then, at 3:10 pm ERCOT dispatched its first wave of demand response. The event lasted less than two hours. Balance was restored to the grid. All was well. So what makes Texas’s market superior (at least in the mind of Texans) to other regions that feature capacity markets? Two reasons:

  1. By not having to bolster a capacity market, Texan ratepayers don’t have the inflated electricity bills lamented by consumers hailing from markets that procure more capacity than needed.
  2. By having an economic trigger whereby the wholesale price of electricity in times of scarcity surges to $9,000/MWh, Texas provides an irresistible incentive for organizations to help the grid in times of need.

In short, the Texas energy market is driven by economics not regulation. 

As a result, the market’s demand response resources are robust. Why shouldn’t they be? Event calls are few and far between and participants are cashing in when called upon by the grid.

 Exactly the opposite is happening in California, where participants who are already paying high electricity rates are fatigued from the number of demand response calls they’ve received over the years. They’re not being rewarded much for their curtailed megawatts, either. Capacity prices in the Golden State dipped below the national average years ago and have been stuck there ever since. 

The economic-driven design of the Texas energy market doesn’t just incentivize emergency capacity in times of need. When it comes to integrating distributed energy resources (DERs) onto its grid, economics are leading the way in the Lone Star State.


This post was excerpted from the 2020 State of Demand-Side Energy Management in North America, a market-by-market analysis of the issues and trends the experts at CPower feel organizations like yours need to know to make better decisions about your energy use and spend.

CPower has taken the pain out of painstaking detail, leaving a comprehensive but easy-to-understand bed of insights and ideas to help you make sense of demand-side energy’s quickly-evolving landscape.

Download Your Copy

ERCOT Establishes the Covid-19 Electricity Relief Program – Market Minute (Video)

April 16, 2020




On March 26, 2020, the Public Utility Commission of Texas (PUCT) established the COVID-19 Electricity Relief Program, providing eligible residential ratepayers in the state with a temporary exemption from disconnections due to non-payment of electricity bills. 

According to the PUCT’s draft of the Order, the program is to be funded by a rider implemented by Transmission and Distribution Utilities (TDUs).

The rider will collect funds to be utilized to reimburse TDUs and REPs for unpaid bills from eligible residential customers experiencing unemployment due to the impacts of COVID-19 and to ensure continuity of electric service for those residential customers. 

All customer classes are obligated to pay this charge. The initial rider will be based on $0.33 per megawatt-hour (MWh). 

The rider will have an immediate effective date upon being implemented by the TDU. 

It’s not known at this time how long the charge will exist. In its Order, the PUCT has reserved the right to supplement and/or modify the relief program by a subsequent order.

This is something we’re monitoring closely, so check back with The Current or sign up to learn more as it happens. 

ERCOT: ERS program criteria to remain in 2020 – Market Minute (Video)

 



In a recent letter to Qualified Scheduling Entities in Texas, ERCOT asserted that while the grid operator is sensitive to the distress organizations are feeling due to the current pandemic, ERCOT does NOT have the authority to alter the criteria applicable to Emergency Response Service (ERS) resources currently under contract.

If your organization is currently participating in the ERS program in 2020, you will be contractually obligated to perform under the program’s established criteria. 

Some organizations in Texas are asking what happens if they can’t perform DR due to the COVID-19 pandemic. 

ERCOT has stated that it DOES have the discretion to “consider mitigating factors, including Force Majeure Events, that may have impacted ERS event performance or availability when determining whether to suspend a QSE or ERS Resource that fails to meet performance or availability criteria.”

ERS participants who think they may be unable to adequately provide ERS resources as contracted should contact their Curtailment Service Provider to discuss their situation.

If you have any questions about this or any other Texas related energy question, contact CPower and we’ll help you in any way we can.

2020 State of Demand-Side Energy Management in North America

March 25, 2020
Last year, nearly 2000 organizations nationwide downloaded the State of Demand-Side Energy Management in North America book by CPower’s energy experts.
This year, we pick up where we left off with a market-by-market analysis of the issues, trends, and regulations organizations like yours should understand in 2020 to make better decisions about your energy use and spend.

ERCOT’s Protocol for Dispatching Demand-Side Resources

March 24, 2020

As the state’s grid operator, ERCOT maintains a sophisticated system of levers and triggers that dispatch increasingly potent demand-side resources designed to help maintain balance when the demand for electricity outpaces the grid’s ability to supply it. 

Understanding ERCOT’s system provides a context to help understand not only how demand-side resources are used in Texas, but also which of the demand response programs might be best for a given organization. 

ERCOT’s arsenal for grid defense

When the grid is stressed, ERCOT takes the following steps to avoid blackouts across the state:

Real Time Pricing–this relies on basic economics to deter electricity consumption. As demand rises and approaches the reserve margin, prices start to rise. Large consumers monitor the real time price and determine it’s more economically sound to stop consuming (and producing in the commercial sector) given the escalating electricity prices.

If demand continues to rise…

4CP–At any given point, there are about 1,500 MW of “peak-chasing” load that can be curtailed by a collection of consumers seeking to lower their 4CP charges the following year. Typically, this load will come off the grid between 3-6pm during the hottest days of the year. 

 If demand continues to rise…

Utility Demand Response Programs–Utilities (Oncor, CenterPoint, et al.) have roughly 200 MW that can be called for a three-hour dispatch. 

 If demand continues to rise…

Voluntary Curtailments–when demand infringes the 3,000 MW mark of the reserve margin, ERCOT issues a series of public address announcements urging consumers to voluntarily shed their load.

 If demand continues to rise…

Energy Emergency Alert 1 (EEA1)–ERS 30 demand response resources are called. 

 If demand continues to rise…

Energy Emergency Alert 2 (EEA2)–ERS 30, ERS 10, and Load Resources are called. 

 If demand continues to rise…

Rolling blackouts–ERCOT will instruct utilities to rotate power outages in an effort to avoid statewide blackouts.


This post was excerpted from the 2020 State of Demand-Side Energy Management in North America, a market-by-market analysis of the issues and trends the experts at CPower feel organizations like yours need to know to make better decisions about your energy use and spend.

CPower has taken the pain out of painstaking detail, leaving a comprehensive but easy-to-understand bed of insights and ideas to help you make sense of demand-side energy’s quickly-evolving landscape.

Download Your Copy

ERCOT Demand Response: How to Maximize Your Revenue and Resilience in America’s Most Interesting Energy Market.

December 12, 2019



In August 2019, ERCOT, the Texas-area independent system operator (ISO), initiated an unprecedented two demand response events–the first in Texas since 2015.

These demand response events helped prevent brownouts and blackouts on the grid and protected the community as well as the state’s economy from suffering losses due to power outages.

Organizations that participated in these demand response events earned significant revenue. While the events this summer were the first in many years in the Lone Star State, they likely won’t be the last.

SOTM 2019 Webinar Series

August 08, 2019
60 minutes with CPower Experts. Energy Insights to Plan Your Year. At CPower, we know that running your organization’s…

How to hedge against Load Resource proration in ERCOT

April 10, 2019

Of the demand response programs that ERCOT offers, Load Resource offers the most lucrative potential–particularly during the summer months when demand on the grid is at or near its peak.

Simply put, ERCOT’s tight reserve margin is brought about by diminished supply and growing electrical demand, which in turn causes high energy prices in Texas during the summer.

These high prices are welcomed by participants in the Load Resource program, which pays organizations for being available to curtail their energy loads when called on by the grid operator.

The LR program attracts a lot of interest, so ERCOT places a cap on the total amount of Load Resource it buys, typically ranging from 1,400-1,750 MW.

Suppose the cap is projected to be 1,500 MW.

If more than 1,500 MW of Load Resource offer into the market, ERCOT prorates ALL of the MWs down to its 1,500 MW threshold.

Suppose 3,000 MW offer into the market as part of the LR program. ERCOT can only buy 1,500 MW of load resource. In this case, an organization that could otherwise curtail 10 MW would only be awarded five and be paid for those 5 MW. Another organization that could contribute 4 MW will only be awarded two and so forth until the total sum of all LR participants is 1,500 MW.  This example illustrates 50% proration.

Historically, LR proration in the ERCOT market hovered around 90%, meaning a 10 MW offering is prorated down to 9 MW.

That started to change in 2017 when proration worsened as more resources sought to enter the market. In 2018, proration averaged about 50%, irritating many participating organizations accustomed to earning more revenue for being available to curtail if needed.

Fixed vs Index Load Resource Offerings

The standard Load Resource offering is indexed based on dynamics in the market, grid conditions, and weather conditions.

These conditions vary in their extremism and therefore cause the price ERCOT pays for load resources to fluctuate.  

Historically (at least before 2018) the Load Resource program has offered participants a potential windfall to be available when the grid was most in need.

Now, proration is threatening that windfall for a lot of LR participants.

That there are a lot of participants in the LR program is the reason why proration is rising and earnings in the program are diluted.

Enter fixed LR.

Fixed LR takes proration out of the picture for participants by locking in an average, weighted return for a specified period of time. Locking into a fixed LR contract can guarantee a more attractive rate of return than the historical indexed LR average.

The averaged indexed LR return was between $6 and $7 per MW/hour in 2017 and around $9.50 in 2018.  Heading into the 2019 summer season, fixed LR offerings are being secured with a 20-30% return above the indexed average.

To Fix or not to Fix?

Fixed LR tends to appeal to the more risk-averse participant compared with standard indexed LR. The former is more stable, the latter essentially a bet that the summer will include a couple of days when LRs driving contributors present a blowout scenario.

As any wise investor will attest, a balanced portfolio has the best chance to succeed.

Consider breaking your load into increments and determine a strategy to hedge against those different scenarios with a combination of fixed and indexed LR.

Lock in certain rates above the historical averages with fixed LR and position yourself for a nice reward during the few scorching days during the summer and extremely cold days during the winter with indexed LR.


This post was excerpted from the 2019 State of Demand-Side Energy Management in North America, a market-by-market analysis of the issues and trends the experts at CPower feel organizations like yours need to know to make better decisions about your energy use and spend.

CPower has taken the pain out of painstaking detail, leaving a comprehensive but easy-to-understand bed of insights and ideas to help you make sense of demand-side energy’s quickly-evolving landscape.

Get Your Copy