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.

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Mike Hourihan

Mike Hourihan is market development manager and analyst for the ERCOT market. He is a long-time advocate for demand-side resources participation as a reliable low-cost alternative to traditional generation assets. He has extensive experience in analyzing and developing market rules in multiple energy markets across North America.

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Mike Hourihan

Mike Hourihan is market development manager and analyst for the ERCOT market. He is a long-time advocate for demand-side resources participation as a reliable low-cost alternative to traditional generation assets. He has extensive experience in analyzing and developing market rules in multiple energy markets across North America.