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Highlights

'Very tight' market failed to hit offer cap

West Texas congestion totals $30 million

Houston —

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Strong wind generation helped the Electric Reliability Council of Texas system cope with the mid-July heat wave with high prices, but such wind capacity is unlikely to be available if another heat wave strikes in August, board members were told Tuesday.

ERCOT set a new all-time power demand record of 73,259 MW on July 19 and a new all-time weekend demand record of 71,444 MW of July 22. In the latter half of July, ERCOT President and CEO Bill Magness said that "we saw a real test of the system."

Dan Woodfin, ERCOT's senior director for system operations, added that "renewable output during that week was anywhere from four to seven gigawatts," which was roughly at or above what ERCOT's final Seasonal Assessment of Resource Adequacy for summer 2018 projected for wind and solar output at peak this summer.

Issued April 30, the final SARA forecast 2,556 MW of non-coastal wind generation, 1,546 MW of coastal wind and 829 MW of utility-scale solar capacity.

Beth Garza, who heads Potomac Economics' independent market monitor operation in ERCOT, said "August is always less windy," and wind output "will get smaller."

Good wind conditions tend to coincide with extreme heat in West Texas and cooler temperatures on the coast, said ERCOT Chief Meteorologist Chris Coleman, but the differences from West Texas and Gulf Coast appear to be narrowing in August, Coleman said.

'VERY TIGHT' MARKET

While the market has been "very tight," said Kenan Ogelman, ERCOT vice president for commercial operations, the supply-demand balance has not ascended near ERCOT's systemwide offer cap of $9,000/MWh, because "the incentives are there for people to put their resources online when they are needed."

The key factor in ERCOT's ability to cope with the late July heat wave, Woodfin said, was that generation outages were about 2GW lower than they were during 2017's peak period, which Magness described as "extremely low."

"Everyone in the market was very aware of what we needed to do," Magness said. Coleman said Texas heat waves regularly occur as late as mid-September, but temperatures so far in August have been relatively mild, and "it looks like next week is not much different."

Nevertheless, he added, "We have had some really hot Labor Days in Texas."

WEST TEXAS CONGESTION

Persistent around-the-clock demand in West Texas, associated with oil-and-gas exploration and development, have driven up the area's congestion costs this summer by more than $30 million, which has been uplifted to the market as a whole, Ogelman said.

ERCOT's transmission and distribution service providers "have been really working very hard on this issue," Ogelman said. "There's a new line that has come into service, and that seems to make a pretty big difference. We've seen a drop in the really high prices by a factor of ten."

While the late July heat wave did not produce prices as high as the systemwide cap, it did coincide with a data input error, resulting in a need to correct prices, which the board approved Tuesday.

It occurred because of a mishandling of a change in double circuit contingencies. As a result, settlement prices needed to be revised upward by as much as $739.50/MWh at some nodes, downward by as much as $161.92/MWh at others, and downward by an average of $8.78/MWh overall.

--Mark Watson, markham.watson@spglobal.com

--Edited by Christopher Newkumet, christopher.newkumet@spglobal.com