Texas power market’s ancillary service rule changes could have big impact: IMM

The Electric Reliability Council of Texas proposed a 2026 ancillary service methodology that would result in acquiring two key types of ancillary service capacity at more than twice the level the independent market monitor proposes, stakeholders learned Aug. 6.

At issue are ERCOT Contingency Reserve Service and non-spinning reserve service, for which ERCOT proposes to change the capacity procurement parameters to be based on probabilistic modeling, rather than on deterministic modeling, Luis Hinojosa, ERCOT manager of ancillary services and operations analytics, said.

ECRS is a type of ramping ancillary service designed to mitigate risk from sudden loss of supply, such as can occur with wind resources, on short notice. NSRS is an ancillary service comprising offline resources that can be synchronized to the grid within 30 minutes to operate for at least one hour.

Probabilistic modeling takes into account uncertainty and randomness -- for example, weather or equipment failure -- that is ignored in deterministic modeling that relies solely on known inputs and relationships.

In its probabilistic modeling, ERCOT assumed a six-hour net-load forecast error, which would mean that long-lead time generation would need to be committed for ancillary service at least that long before the riskiest net-load operating hour.

That riskiest net-load -- i.e., demand minus wind and solar output -- hour has become the hours just before dawn and around sundown since ERCOT's solar nameplate operational capacity has surged to almost 40 GW as of the end of June. That level was 20 times the system's solar capacity of less than 2 GW as of the end of 2005.

High reserve threshold

In its modeling, ERCOT also set a threshold for action when reserve levels fall to a level equal to the maximum of either 3 GW or the sum of previously acquired regulation and responsive reserve ancillary services. Both regulation and responsive reserve services are designed to maintain system frequency at 60 hertz, with regulation service being for shorter timelines and RRS being for backup and potential longer-term frequency needs.

This threshold level is designed to ensure that an incident of operating reserves falling below 3 GW -- an "emergency condition" -- would occur no more than one day in 10 years, Hinojosa said.

ERCOT also set its assumed energy storage resource minimum duration at four hours, Hinojosa said.

Based on these assumptions, Potomac Economics, ERCOT's independent market monitor, concludes that the system operator would have to procure ECRS and NSRS capacity totaling 8.3 GW.

In comparison, the IMM proposes setting thresholds and assumptions that would result in procuring ECRS and non-spinning reserve service capacity totaling less than 3.6 GW.

"ECRS and non-spin are meant to manage more or less forecast error or the probability of forced outages over a relatively short time scale," Andrew Reimers, the IMM's deputy director, said, noting that they are more oriented toward resolving short-term frequency issues than serving demand longer term.

For example, "demand is so high under winter storm conditions, everything that can be online is online," Reimers said. "We might have risks in terms of gas supply disruptions, things like that, but it's not really the type of thing that non-spin and ECRS are meant to manage."

Therefore, the IMM proposes reducing the net-load forecast error timeline to one hour and the ESR duration to one hour, because "during that one hour, there is a significant amount of uncommitted capacity that could typically come online to provide energy," Potomac Economics staffer Camron Berati said.

Setting the forecast error timeline at six hours contributes more than 2 GW to the much larger total procurement of ECRS and NSRS in the ERCOT plan, Berati said.

Also, setting the ECRS/NSRS action threshold for whenever reserve levels fall to a level equal to the maximum of either 3 GW or the sum of previously acquired regulation and responsive reserve ancillary services is the second-largest single factor contributing 2.8 GW to raising ECRS and NSRS procurements to such a high level, Berati said.

'Not aligned with reliability outcomes'

An Aug. 5 memo to the ERCOT Ancillary Service Methodology Team from IMM chief Jeff McDonald and Reimers in anticipation of the Aug. 6 meeting asserted the methodology is "not aligned with reliability outcomes, resulting in excessive AS procurements and ... will undermine the performance of ERCOT's energy-only market."

Ultimately, WMS Chairman Blake Holt decided to give members some time to consider the materials and discussion in the Aug. 6 meeting with an eye toward an email vote about the AS methodology before consideration by the ERCOT Technical Advisory Committee, which meets Aug. 12 and Aug. 27.

However, no stakeholder committee endorsement is required for the ERCOT board of directors to approve or reject the methodology.