Ercot_logoIt would have been a big, big change — one that would have impacted behind-the-scenes operations in the Texas wholesale power market.

But for now it’s not happening.

ERCOT, also known as the Electric Reliability Council of Texas, operates the state’s primary power grid. Since 2013 staff members there have been working with stakeholders to redesign the state’s “ancillary services” market — a market in which power generators receive payments to stand ready to produce energy and in which energy consumers stand ready to curtail usage.

ERCOT administers the ancillary services market. The proposed overhaul would have resulted in dramatic changes both for the organization’s operations, and for wholesale market participants.

But on May 26 a key committee of ERCOT stakeholders voted to reject the proposed changes. The no-vote was overwhelming — 23 to 3 — and marked the second rejection from an ERCOT stakeholder panel on the issue in less than a month. The newest rejection also suggests the effort is dead — at least in its current form.

Ancillary services lie at the heart of what ERCOT does every day. Without ancillary services, the grid operator would lack some of its most important tools for maintaining grid stability. Ancillary services also impact the overall wholesale power market, and Texas generators depend upon ancillary services for some of their revenue.

But what are they exactly? As noted above, generators and some other wholesale market participants can collect payments to stand ready to either produce energy or to curtail usage.  There exist a number of different ancillary services. For instance, “non-spinning reserve” is a service in which an off-line generation unit commits to stand ready to provide electricity within 30 minutes, or in which wholesale power consumers commit to have their service interrupted, if necessary, with 30 minutes of notice.

TCP-793-Homepage-Banner-A-1ERCOT procures a particular amount of ancillary services every day, and the resulting cost is charged to consumers.  As might be surmised, ancillary services permit ERCOT to respond to unforeseen events on the grid. They also provide daily backup power to help prevent blackouts.

Ancillary services have been modified in relatively few instances since the beginning of the modern ERCOT market 15 years ago. But new technologies have arisen since then and the generation resource mix also has changed considerably.  For instance, vast amounts of wind power now exist in Texas.

ERCOT staff proposed the ancillary services redesign with an eye towards these changing conditions. “We have a whole lot of new resources … that have changed both the needs and the ability of resources to provide (ancillary) services,” said Dan Woodfin, ERCOT’s director of system planning.

But in arguing against the changes, Luminant’s Amanda Frazier said no current or future reliability need for the redesign had been demonstrated. She also said the potential implementation cost to market participants had not been adequately addressed.  “ERCOT has expressed a preference to vote on (the proposed changes) before examining alternatives,” she said.

The proposal was earlier rejected by the “Protocol Revision Subcommittee” — a panel of ERCOT stakeholders — on May 12. ERCOT staff then appealed that decision to another stakeholder panel, the “Technical Advisory Committee,”  but that panel on May 26 also rejected the proposal.

Representatives from various market segments — including generators and consumer representatives — joined in rejecting the ancillary services redesign. Such a rejection of an ERCOT staff appeal is rare. However, stakeholders also signaled their willingness to consider future modifications to ancillary services on a more piecemeal basis.

In specific terms, ERCOT staff had proposed replacing “non-spinning reserve” and “responsive reserve service” with four new ancillary services: “fast-frequency response,” “primary frequency response,” “contingency reserve” and “supplemental reserve.”

More information about ERCOT’s ancillary services can be found on the ERCOT website, found here.  A summary of the now rejected redesign proposal can be found here.

— R.A. Dyer

What is the Texas Coalition for Affordable Power?

R.A. Dyer is a policy analyst for TCAP, a coalition of more than 160 cities and other political subdivisions that purchase electricity in the deregulated market for their own governmental use. Because high energy costs can impact municipal budgets and the ability to fund essential services, TCAP, as part of its mission, actively promotes affordable energy policies. High energy prices also place a burden on local businesses and home consumers.

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