Real-time co-optimization in Jan spike would have saved ERCOT $58 million: IMM

Houston (Platts)--22 Feb 2018 658 am EST/1158 GMT

Real-time co-optimization of energy and ancillary services would have saved the Electric Reliability Council of Texas $58.5 million when a ramping capacity shortage on January 23 caused real-time prices to hit $9,000/MWh, board members learned Tuesday.

During Tuesday's ERCOT Board of Directors meeting, Beth Garza, who heads Potomac Economics' independent market monitor office at ERCOT, said her colleague Steve Reedy had composed a software program to model real-time prices during the January 23 event, in which the systemwide offer cap of $9,000/MWh was hit for 10 minutes, as if real-time co-optimization of energy and ancillary services had already been implemented.

For the 35 minutes that included the actual real-time price spike, real-time co-optimization would have shown substantially lower prices, including about $4,500/MWh and $7,500/MWh for the 10 minutes when systemwide average dispatch prices actually hit $9,000/MWh, Garza said.

The "magic," Garza said, was in moving the reserves that had to be held back for a contingency from fast-ramping resources to units that would take more time to respond, but could still meet system reliability requirements, thus freeing up the fast-ramping resources to respond to the extraordinarily steep increase in load that happened that bitterly cold January morning.

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While this one incident provided an extraordinarily large potential benefit, "every five minutes, there are nickels , dimes, quarters and dollars" of production cost savings that could be had with real-time co-optimization, Garza said.

"There's a lot of value that can be bought there," Garza said.

Board member Peter Cramton, an economics professor at the University of Maryland and the University of Cologne, said real-time co-optimization would increase market efficiency. "What you are doing is getting closer to the ideal of reliability at least cost," Cramton said.

In April, the Public Utility Commission of Texas directed ERCOT to restart an effort to study the potential costs and benefits of real-time co-optimization of energy and ancillary services.

A 2013 study provided a high-level cost estimate of about $40 million to implement the project and a time estimate of four to five years. ERCOT and the IMM are currently working on an updated cost-benefit analysis of a full-year's implementation, which is expected to be complete by mid-summer.

West project 'critical for reliability'

The board also learned that significantly increasing oil-and-gas exploration and production in far West Texas' Delaware sub-basin of the Permian Basin have increased demands on ERCOT's transmission system, which prompted ERCOT to ask the board to designate as "critical for reliability" a 345 kV transmission project linking the Odessa, Texas, area to the Riverton area, northwest of Pecos and near the New Mexico state line.

According to Jeff Billo, ERCOT senior manager for transmission planning, "If you think of the Permian Basin as the hot spot of the world in terms of oil exploration, that Delaware basin is kind of the hot spot of the hot spot."

In June, the board approved a transmission project in the area based on an expectation that its load would be about 533 MW by the time the project came online in 2021, Billo said. Oncor Electric Delivery is the transmission company serving the area.

"Since that time, Oncor has had a number of additional customers that has far exceeded our expectations," Billo said.

The latest 2019 forecast is for load in the area to hit 775 MW in 2019, 950 MW in 2020 and 964 MW in 2021. In 2010, the peakload for that area was about 22 MW, Billo said.

Oncor is "investigating load shed schemes" to maintain reliability until grid capacity can be expanded in the area, and the company said it can get the Odessa-Riverton project into service in 2020.

"To say that this is load growth like we have never really experienced before is kind of an understatement," Billo said.

Designating the project as "critical for reliability," according to PUC rules, requires the commission to act on a request for a certificate of necessity within 180 days of application, unless a "good cause" is shown for extending that period.

--Mark Watson,

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