How ERCOT Dispatches Power
ERCOT has multiple mechanisms for ensuring sufficient power plants are online to match demand in any given interval, including the Long Term System Assessments (LTSA) (which spans years and decades) to sub-second frequency response. However, the bulk of the energy managed by ERCOT is managed through the Security Constrained Economic Dispatch (SCED) of power plants. One can think of SCED as an energy auction that ERCOT holds every five minutes. Participating power plants bid how much power and at what price they are willing to sell into the market. ERCOT takes all the bids and sorts them from lowest to highest price. This sorted arrangement is often called a “bid-stack”. Then ERCOT sums the power plants’ capacities, stopping at the amount needed to meet demand. The most expensive dispatched generator is referred to as the marginal generator and its bid is the marginal clearing price of energy (mcpe). All the power plants at this threshold and below are awarded the right to put their power into the system and everyone is paid the marginal clearing price set by the marginal generator in that interval. The remaining power plants that bid higher than the marginal price are not dispatched, are not allowed to put power into the system, and are not paid. Figure 3 illustrates an example bid-stack for ERCOT sorted from lowest-to-highest price (in $/MWh along the yaxis) with the power plants’ capacities denoted by each bid’s width (in GW along the x-axis). At the time represented in Figure 1, ERCOT system-wide demand is about 40 GW, represented by the vertical black line in the figure. Thus, everything to the left of the black line (a mix of renewables, nuclear, coal, and natural gas) is sending power to the grid while everything to the right of the line is not. This auction is re-run every five minutes and the whole process starts over.
Changes to ERCOT
There have been some significant changes to ERCOT’s market that have changed the dispatch and operations of the market. ERCOT incorporates changes to its protocols through a stakeholder committee-driven Nodal Protocol Revision Requests (NPRR) process. Summarized below are a few of the recent changes that have directly affected ERCOT’s ability to leverage data and incorporate more wind and solar into the grid mix. One significant change was ERCOT’s transition from a zonal to a nodal market. ERCOT’s previous Zonal market only allowed ERCOT to balance supply and demand between four zones (West, North, South, and Houston), but not within each zone. Under this system, it was not always guaranteed that the cheapest generation source would be dispatched. The Nodal market divided the four zones into thousands of nodes and, because Nodal allowed for congestion pricing, power plant dispatch became more efficient.
Beyond ERCOT’s energy market, there are ancillary service markets that provide critical services for grid operations. These services, defined by FERC,10 include Scheduling, System Control and Dispatch, Reactive Supply and Voltage Control, Regulation and Frequency Response, Energy Imbalance; and Operational Reserves. Each of these services meets a specific need and has a different response time ranging from seconds to hours. Because reliable operation of a power system means that no component should function outside its safe operating range, even in the event of disturbances, and because of recent increases in variable renewable generators, the roles of ancillary services and operational reserves are receiving more scrutiny. Table 1 shows a summary of selected grid services, including longer planning assessments.
Dispatch of power plants was also reduced from 15 to 5-minute intervals allowing for more precise matching of load to generation. Because more changes in the market could be met with energy dispatch (turning power plants up and down every 5 instead of 15 min), lower levels of ancillary services (power plants on quick standby to make up for differences in load and generation) were needed. Having access to more data and computing ability enabled these rule changes that made the grid more finely-resolved in place and time. Because of the grid’s higher fidelity, it was easier to accommodate increasing levels of variable renewables without driving up reliability costs. Figure 5 (below) shows this reduction in Regulation-Up requirements (blue line) even as wind capacity (red line) continued to increase, with a big step-down in costs in 2010 when ERCOT’s methodology changed.