What’s in the graph? 📈
- This summer, extreme pricing was often driven by high energy offer prices, with batteries offering power at $5,000/MWh at times.
- On Aug 30, 2023, Day-Ahead prices averaged at $1,321/MWh and Real-Time prices averaged at $2,636/MWh between 6-10 pm as the peak load was forecasted to top 76GW.
- The ERCOT nodal protocols currently allow batteries to offer energy at prices up to the cap in both Day-Ahead and Real-Time markets. With commercially operable batteries earning 93% of total gross margins in ancillary markets in 2022, batteries often bid high into the energy market to avoid covering potential high charging cost if they are cleared in both markets.
- This is illustrated in potentially scarce hours, with starting offers for batteries to average $2,000/MWh in the afternoon of August 30th in the Day-Ahead market. Between 6 and 10 pm, 79MW of battery capacity cleared at $1,304/MWh in the Day-Ahead market while 2,184MW was cleared at an average price of $2,979/MWh in the Real-Time market.
- High energy prices caused by inflated battery offer curves shifted value out of the ORDC adder and caused extreme basis risk.
What shall we watch for next?
- How ERCOT will update their protocols in the face of this new phenomenon, given that high prices generated by high energy offers creates more risks across the system compared with high prices produced by ORDC adders.
- The interplay of ancillary and energy markets, as the introduction of ECRS and expansion of ancillary procurement has led to more “false scarcity” events where capacity that is in ancillary markets is not considered by a SCED solve, leading to higher generator offers being cleared while ORDC value is still low.
- How initiatives like NPRR 1186 could impact this behavior over the next few months. Designed to give ERCOT more insight into battery state of charge in market operations, this measure hopes to enforce state of charge requirements more strictly across energy and ancillary markets, as well as ensure that batteries are not “double-committing” capacity into both of the respective markets.
Please feel free to comment or reach out if you have any questions.
#ercot #battery
Managing Director Business Development | Ascend Analytics Leading the Energy Transition | Revenue Generator | Operational Leadership | Team Builder
1moAs the heat of summer turns up and demand goes even higher this is an update you will NOT want to miss. Come listen in and "get the goods" on ERCOT. Drs. Nelson & Dorris know the drill.