Recent information on the ERCOT wholesale market

1. The Wholesale Market
In ERCOT
November 2020
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Overview of ERCOT
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ERCOT: By the Numbers
• 90% of the electric load in Texas is in ERCOT
• 75% of ERCOT’s load is in the competitive
market, including 24 million customers
• Over 680 generating units, providing 82,000
MW of generating capacity during peak
demand
• 46,500 miles of high-voltage transmission
ERCOT Responsibilities
• System reliability – planning and operations
• Wholesale market settlement for electricity
production and delivery
• Retail switching process for customer choice
• Open access to transmission
ERCOT region

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ERCOT: Separate Companies Provide Retail, Transmission &
Distribution and Generation Services
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• In competitive markets, consumers have multiple retail electric providers (REPs) and service plans to
choose from.
• Wholesale and retail prices are set by competitive market forces, while the PUC sets transmission and
distribution rates.
Power Flow
Financial Flow
Regulated
Generation Companies Retail Electric Providers

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The ERCOT Wholesale Market Design
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• Energy-Only Market vs. Capacity Market
• Impacts on resource adequacy (supply investment)
• Real-time price signals drive short term operational decisions and long-
term investment decisions
• Scarcity Pricing Mechanism
• Operating Reserve Demand Curve (ORDC)

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Flat, Endemically Low Power Prices in ERCOT
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Source: Potomac Economics, 2019 State of the Market Report (May 2020)
53.23
28.33
33.71
40.64
26.77
24.62
28.25
35.63
47.06
2011 2012 2013 2014 2015 2016 2017 2018 2019
Average Annual Real-Time Energy Market Prices ($/MWh)
Despite a one-year increase in 2019, persistently low power prices since 2011 have not sent
price signals to prompt significant investment in thermal generation in ERCOT

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ERCOT’s Changing Generation Mix
slide
06Sources: ERCOT (2013 and 2019 data)
20192013
20192013

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60000
65000
70000
75000
80000
85000
90000
95000
100000
2021 2022 2023 2024 2025
RESOURCES LOAD
Long-Term Outlook for ERCOT Generation Resources
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Source: ERCOT, “Report on the Capacity, Demand and Reserves in the ERCOT Region”, May 2020
RESERVE
MARGIN17.3%
19.7%
18.0%
14.1%15.9%
ERCOT Summer Resources and Load Forecast: 2021-2025

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The New Normal: Reliability, Pricing Volatility
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EEA EEA
Data Source: ERCOT`S AUGUST 2019 PRELIMINARY REVIEW OF ERCOT OPERATIONS PRESENTATION AT THE AUGUST 29, 2019 PUCT OPEN MEETING.
Summer 2019 Highlighted Increased Dependence on Renewables

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ERCOT Forward Prices
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Investment Decisions Rely on Forward Prices
Coronavirus and
Saudi oil price war

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Future Supply Investment in ERCOT
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ERCOT Generation Interconnection Queue: Batteries are coming!
Solar boom
Natural gas declining Batteries on
the rise

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How to Reach Us
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AECT.net
@aectnet
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