{"id":2921,"date":"2012-07-19T16:00:40","date_gmt":"2012-07-19T16:00:40","guid":{"rendered":"http:\/\/blogs.edf.org\/energyexchange\/?p=2921"},"modified":"2012-07-23T17:15:20","modified_gmt":"2012-07-23T17:15:20","slug":"the-texas-electric-market-isnt-being-manipulated-its-just-built-that-way-and-thats-not-a-good-thing","status":"publish","type":"post","link":"https:\/\/blogs.edf.org\/energyexchange\/2012\/07\/19\/the-texas-electric-market-isnt-being-manipulated-its-just-built-that-way-and-thats-not-a-good-thing\/","title":{"rendered":"The Texas Electric Market Isn\u2019t Being Manipulated, It\u2019s Just Built That Way (\u2026And That\u2019s Not A Good Thing)"},"content":{"rendered":"

\"\"<\/a>Last week, the Independent Market Monitor\u00a0for the Electric Reliability Council of Texas (ERCOT) released a report showing that the violent prices fluctuations of June 25 and 26 were not the result of market manipulation<\/a>, as asserted by earlier reports<\/a>.\u00a0 Most have greeted this as welcome news, but the finding could spell rocky years ahead with wild swings in electric prices from day to day, which makes it difficult for investors, generators and most importantly customers to plan ahead.\u00a0 To understand why, let\u2019s back up a second and talk about what these findings mean.<\/p>\n

Wild Mood Swings<\/strong><\/p>\n

If the market isn\u2019t being manipulated, it is at least feeling a little bipolar: one hot summer day with high demand prices are up slightly but everything was working fine. The next day however, a 2 percent uptick in demand combined with an unexpected loss of 1.6 percent sent prices soaring.\u00a0 The peak price on June 25 hit $438\/ megawatt hour (MWh<\/a>), but on June 26 prices\u00a0maxed out at $3,000\/MWh, meanwhile average prices skyrocketed to 640 percent above the average for the 25th.\u00a0<\/p>\n

In a well functioning market these price swings wouldn\u2019t be so dramatic and unpredictable, and those swings point to fundamental problems with the electric markets in Texas.\u00a0 In extreme situations prices and profits may increase enough to support new investment but those extremes are so unpredictable that no power company can plan well for them, much less finance new investments.\u00a0 As Brattle Group says in their report to ERCOT, \u201creliance on scarcity prices is unlikely to achieve ERCOT\u2019s current reliability objectives.\u201d\u00a0 The solution?\u00a0 Reduce our reliability standards or implement reforms that will\u00a0lead to\u00a0reliable electricity over the long term without the need for emergency regulatory intervention.<\/p>\n

The reason for these swings is pretty simple, and outlined in the Brattle Report: the ERCOT supply curve does not efficiently reflect current or upcoming scarcity conditions in the market.\u00a0 The supply curve is dominated by low price resources like wind, efficient natural gas power plants, along with nuclear power and some cheaper coal, all of which come in at or under about $30\/MWh.\u00a0 But as the chart shows, when you start getting near the 100 percent peak demand level there\u2019s a sharp \u201chockey stick\u201d curve upwards in price.\u00a0 This means that when we\u2019re in that high demand territory, a single power plant going offline or an unexpected spike in demand can send electric prices from $30\/MWh to $3,000\/MWh without warning, like we saw in late June.\u00a0 Other regions have a more gradual supply curve of price increases during scarcity conditions, providing a kind of \u2018warning\u2019 to the market that the Brattle Report suggests as part of its suite of recommended market reforms.\u00a0 That gradual curve is important because it allows demand-side resources to help stabilize prices and at the same time it provides potential investors with the kind of predictable certainty that allows them to consider investing in Texas.<\/p>\n

Solving the Problem<\/strong><\/p>\n

As we said above scarcity pricing by itself, especially when it\u2019s so dependent on weather extremes, is not enough to keep the lights on in Texas.\u00a0 To do so, regulators and stakeholders will need to roll up their sleeves, put politics aside and find a solution that works for all Texans.\u00a0 As a many have pointed out, the Public Utility Commission (PUC) made the decision to raise the offer cap without even a cursory analysis of the impact on ratepayers, an oversight that hopefully won\u2019t happen again.\u00a0<\/p>\n

If and when ratepayer impacts are taken into account, demand-side resources will be seen as playing a key role not only in maintaining reliability, but also in reducing the impact to ratepayers.\u00a0 According to the Brattle Report we can reduce our peak demand needs 15 percent with such demand-side resources, with residential customers and small businesses making up 72 percent of the reduction during the hottest days of the year, but only if serious changes are made to the market.\u00a0 In PJM (another grid operator) , where demand-side resources are allowed to participate in energy and capacity markets, participants have received over $174 million<\/a> for over 10,000 MW of customer provided demand-side resources, over $20 million of the payments went to residential customers. In Texas, as we consider implementing new policies that improve reliability and provide stable predictable market signals it will be critical to include demand response, and to tap into growing residential and small business markets.<\/p>\n","protected":false},"excerpt":{"rendered":"

Last week, the Independent Market Monitor\u00a0for the Electric Reliability Council of Texas (ERCOT) released a report showing that the violent prices fluctuations of June 25 and 26 were not the result of market manipulation, as asserted by earlier reports.\u00a0 Most have greeted this as welcome news, but the finding could spell rocky years ahead with …<\/p>\n","protected":false},"author":1508,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[38678,1,181],"tags":[],"coauthors":[],"class_list":["post-2921","post","type-post","status-publish","format-standard","hentry","category-demand-response","category-uncategorized","category-texas"],"acf":[],"yoast_head":"\nThe Texas Electric Market Isn\u2019t Being Manipulated, It\u2019s Just Built That Way (\u2026And That\u2019s Not A Good Thing) - Energy Exchange<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/blogs.edf.org\/energyexchange\/2012\/07\/19\/the-texas-electric-market-isnt-being-manipulated-its-just-built-that-way-and-thats-not-a-good-thing\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Texas Electric Market Isn\u2019t Being Manipulated, It\u2019s Just Built That Way (\u2026And That\u2019s Not A Good Thing) - Energy Exchange\" \/>\n<meta property=\"og:description\" content=\"Last week, the Independent Market Monitor\u00a0for the Electric Reliability Council of Texas (ERCOT) released a report showing that the violent prices fluctuations of June 25 and 26 were not the result of market manipulation, as asserted by earlier reports.\u00a0 Most have greeted this as welcome news, but the finding could spell rocky years ahead with ...\" \/>\n<meta property=\"og:url\" content=\"https:\/\/blogs.edf.org\/energyexchange\/2012\/07\/19\/the-texas-electric-market-isnt-being-manipulated-its-just-built-that-way-and-thats-not-a-good-thing\/\" \/>\n<meta property=\"og:site_name\" content=\"Energy Exchange\" \/>\n<meta property=\"article:published_time\" content=\"2012-07-19T16:00:40+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2012-07-23T17:15:20+00:00\" \/>\n<meta property=\"og:image\" content=\"http:\/\/blogs.edf.org\/energyexchange\/wp-content\/blogs.dir\/38\/files\/2012\/07\/ERCOT-2-300x225.jpg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/blogs.edf.org\\\/energyexchange\\\/2012\\\/07\\\/19\\\/the-texas-electric-market-isnt-being-manipulated-its-just-built-that-way-and-thats-not-a-good-thing\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/blogs.edf.org\\\/energyexchange\\\/2012\\\/07\\\/19\\\/the-texas-electric-market-isnt-being-manipulated-its-just-built-that-way-and-thats-not-a-good-thing\\\/\"},\"author\":{\"name\":\"\",\"@id\":\"\"},\"headline\":\"The Texas Electric Market Isn\u2019t Being Manipulated, It\u2019s Just Built That Way (\u2026And That\u2019s Not A Good Thing)\",\"datePublished\":\"2012-07-19T16:00:40+00:00\",\"dateModified\":\"2012-07-23T17:15:20+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/blogs.edf.org\\\/energyexchange\\\/2012\\\/07\\\/19\\\/the-texas-electric-market-isnt-being-manipulated-its-just-built-that-way-and-thats-not-a-good-thing\\\/\"},\"wordCount\":750,\"commentCount\":2,\"image\":{\"@id\":\"https:\\\/\\\/blogs.edf.org\\\/energyexchange\\\/2012\\\/07\\\/19\\\/the-texas-electric-market-isnt-being-manipulated-its-just-built-that-way-and-thats-not-a-good-thing\\\/#primaryimage\"},\"thumbnailUrl\":\"http:\\\/\\\/blogs.edf.org\\\/energyexchange\\\/wp-content\\\/blogs.dir\\\/38\\\/files\\\/2012\\\/07\\\/ERCOT-2-300x225.jpg\",\"articleSection\":[\"Demand Response\",\"General\",\"Texas\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\\\/\\\/blogs.edf.org\\\/energyexchange\\\/2012\\\/07\\\/19\\\/the-texas-electric-market-isnt-being-manipulated-its-just-built-that-way-and-thats-not-a-good-thing\\\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/blogs.edf.org\\\/energyexchange\\\/2012\\\/07\\\/19\\\/the-texas-electric-market-isnt-being-manipulated-its-just-built-that-way-and-thats-not-a-good-thing\\\/\",\"url\":\"https:\\\/\\\/blogs.edf.org\\\/energyexchange\\\/2012\\\/07\\\/19\\\/the-texas-electric-market-isnt-being-manipulated-its-just-built-that-way-and-thats-not-a-good-thing\\\/\",\"name\":\"The Texas Electric Market Isn\u2019t Being Manipulated, It\u2019s Just Built That Way (\u2026And That\u2019s Not A Good Thing) - Energy Exchange\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/blogs.edf.org\\\/energyexchange\\\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\\\/\\\/blogs.edf.org\\\/energyexchange\\\/2012\\\/07\\\/19\\\/the-texas-electric-market-isnt-being-manipulated-its-just-built-that-way-and-thats-not-a-good-thing\\\/#primaryimage\"},\"image\":{\"@id\":\"https:\\\/\\\/blogs.edf.org\\\/energyexchange\\\/2012\\\/07\\\/19\\\/the-texas-electric-market-isnt-being-manipulated-its-just-built-that-way-and-thats-not-a-good-thing\\\/#primaryimage\"},\"thumbnailUrl\":\"http:\\\/\\\/blogs.edf.org\\\/energyexchange\\\/wp-content\\\/blogs.dir\\\/38\\\/files\\\/2012\\\/07\\\/ERCOT-2-300x225.jpg\",\"datePublished\":\"2012-07-19T16:00:40+00:00\",\"dateModified\":\"2012-07-23T17:15:20+00:00\",\"author\":{\"@id\":\"\"},\"breadcrumb\":{\"@id\":\"https:\\\/\\\/blogs.edf.org\\\/energyexchange\\\/2012\\\/07\\\/19\\\/the-texas-electric-market-isnt-being-manipulated-its-just-built-that-way-and-thats-not-a-good-thing\\\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/blogs.edf.org\\\/energyexchange\\\/2012\\\/07\\\/19\\\/the-texas-electric-market-isnt-being-manipulated-its-just-built-that-way-and-thats-not-a-good-thing\\\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/blogs.edf.org\\\/energyexchange\\\/2012\\\/07\\\/19\\\/the-texas-electric-market-isnt-being-manipulated-its-just-built-that-way-and-thats-not-a-good-thing\\\/#primaryimage\",\"url\":\"http:\\\/\\\/blogs.edf.org\\\/energyexchange\\\/wp-content\\\/blogs.dir\\\/38\\\/files\\\/2012\\\/07\\\/ERCOT-2-300x225.jpg\",\"contentUrl\":\"http:\\\/\\\/blogs.edf.org\\\/energyexchange\\\/wp-content\\\/blogs.dir\\\/38\\\/files\\\/2012\\\/07\\\/ERCOT-2-300x225.jpg\"},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\\\/\\\/blogs.edf.org\\\/energyexchange\\\/2012\\\/07\\\/19\\\/the-texas-electric-market-isnt-being-manipulated-its-just-built-that-way-and-thats-not-a-good-thing\\\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\\\/\\\/blogs.edf.org\\\/energyexchange\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"The Texas Electric Market Isn\u2019t Being Manipulated, It\u2019s Just Built That Way (\u2026And That\u2019s Not A Good Thing)\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/blogs.edf.org\\\/energyexchange\\\/#website\",\"url\":\"https:\\\/\\\/blogs.edf.org\\\/energyexchange\\\/\",\"name\":\"Energy Exchange\",\"description\":\"Accelerating the clean energy revolution\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\\\/\\\/blogs.edf.org\\\/energyexchange\\\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"\",\"url\":\"https:\\\/\\\/blogs.edf.org\\\/energyexchange\\\/author\\\/\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"The Texas Electric Market Isn\u2019t Being Manipulated, It\u2019s Just Built That Way (\u2026And That\u2019s Not A Good Thing) - Energy Exchange","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/blogs.edf.org\/energyexchange\/2012\/07\/19\/the-texas-electric-market-isnt-being-manipulated-its-just-built-that-way-and-thats-not-a-good-thing\/","og_locale":"en_US","og_type":"article","og_title":"The Texas Electric Market Isn\u2019t Being Manipulated, It\u2019s Just Built That Way (\u2026And That\u2019s Not A Good Thing) - Energy Exchange","og_description":"Last week, the Independent Market Monitor\u00a0for the Electric Reliability Council of Texas (ERCOT) released a report showing that the violent prices fluctuations of June 25 and 26 were not the result of market manipulation, as asserted by earlier reports.\u00a0 Most have greeted this as welcome news, but the finding could spell rocky years ahead with ...","og_url":"https:\/\/blogs.edf.org\/energyexchange\/2012\/07\/19\/the-texas-electric-market-isnt-being-manipulated-its-just-built-that-way-and-thats-not-a-good-thing\/","og_site_name":"Energy Exchange","article_published_time":"2012-07-19T16:00:40+00:00","article_modified_time":"2012-07-23T17:15:20+00:00","og_image":[{"url":"http:\/\/blogs.edf.org\/energyexchange\/wp-content\/blogs.dir\/38\/files\/2012\/07\/ERCOT-2-300x225.jpg","type":"","width":"","height":""}],"twitter_card":"summary_large_image","twitter_misc":{"Written by":"","Est. reading time":"4 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/blogs.edf.org\/energyexchange\/2012\/07\/19\/the-texas-electric-market-isnt-being-manipulated-its-just-built-that-way-and-thats-not-a-good-thing\/#article","isPartOf":{"@id":"https:\/\/blogs.edf.org\/energyexchange\/2012\/07\/19\/the-texas-electric-market-isnt-being-manipulated-its-just-built-that-way-and-thats-not-a-good-thing\/"},"author":{"name":"","@id":""},"headline":"The Texas Electric Market Isn\u2019t Being Manipulated, It\u2019s Just Built That Way (\u2026And That\u2019s Not A Good Thing)","datePublished":"2012-07-19T16:00:40+00:00","dateModified":"2012-07-23T17:15:20+00:00","mainEntityOfPage":{"@id":"https:\/\/blogs.edf.org\/energyexchange\/2012\/07\/19\/the-texas-electric-market-isnt-being-manipulated-its-just-built-that-way-and-thats-not-a-good-thing\/"},"wordCount":750,"commentCount":2,"image":{"@id":"https:\/\/blogs.edf.org\/energyexchange\/2012\/07\/19\/the-texas-electric-market-isnt-being-manipulated-its-just-built-that-way-and-thats-not-a-good-thing\/#primaryimage"},"thumbnailUrl":"http:\/\/blogs.edf.org\/energyexchange\/wp-content\/blogs.dir\/38\/files\/2012\/07\/ERCOT-2-300x225.jpg","articleSection":["Demand Response","General","Texas"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/blogs.edf.org\/energyexchange\/2012\/07\/19\/the-texas-electric-market-isnt-being-manipulated-its-just-built-that-way-and-thats-not-a-good-thing\/#respond"]}]},{"@type":"WebPage","@id":"https:\/\/blogs.edf.org\/energyexchange\/2012\/07\/19\/the-texas-electric-market-isnt-being-manipulated-its-just-built-that-way-and-thats-not-a-good-thing\/","url":"https:\/\/blogs.edf.org\/energyexchange\/2012\/07\/19\/the-texas-electric-market-isnt-being-manipulated-its-just-built-that-way-and-thats-not-a-good-thing\/","name":"The Texas Electric Market Isn\u2019t Being Manipulated, It\u2019s Just Built That Way (\u2026And That\u2019s Not A Good Thing) - Energy Exchange","isPartOf":{"@id":"https:\/\/blogs.edf.org\/energyexchange\/#website"},"primaryImageOfPage":{"@id":"https:\/\/blogs.edf.org\/energyexchange\/2012\/07\/19\/the-texas-electric-market-isnt-being-manipulated-its-just-built-that-way-and-thats-not-a-good-thing\/#primaryimage"},"image":{"@id":"https:\/\/blogs.edf.org\/energyexchange\/2012\/07\/19\/the-texas-electric-market-isnt-being-manipulated-its-just-built-that-way-and-thats-not-a-good-thing\/#primaryimage"},"thumbnailUrl":"http:\/\/blogs.edf.org\/energyexchange\/wp-content\/blogs.dir\/38\/files\/2012\/07\/ERCOT-2-300x225.jpg","datePublished":"2012-07-19T16:00:40+00:00","dateModified":"2012-07-23T17:15:20+00:00","author":{"@id":""},"breadcrumb":{"@id":"https:\/\/blogs.edf.org\/energyexchange\/2012\/07\/19\/the-texas-electric-market-isnt-being-manipulated-its-just-built-that-way-and-thats-not-a-good-thing\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/blogs.edf.org\/energyexchange\/2012\/07\/19\/the-texas-electric-market-isnt-being-manipulated-its-just-built-that-way-and-thats-not-a-good-thing\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/blogs.edf.org\/energyexchange\/2012\/07\/19\/the-texas-electric-market-isnt-being-manipulated-its-just-built-that-way-and-thats-not-a-good-thing\/#primaryimage","url":"http:\/\/blogs.edf.org\/energyexchange\/wp-content\/blogs.dir\/38\/files\/2012\/07\/ERCOT-2-300x225.jpg","contentUrl":"http:\/\/blogs.edf.org\/energyexchange\/wp-content\/blogs.dir\/38\/files\/2012\/07\/ERCOT-2-300x225.jpg"},{"@type":"BreadcrumbList","@id":"https:\/\/blogs.edf.org\/energyexchange\/2012\/07\/19\/the-texas-electric-market-isnt-being-manipulated-its-just-built-that-way-and-thats-not-a-good-thing\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/blogs.edf.org\/energyexchange\/"},{"@type":"ListItem","position":2,"name":"The Texas Electric Market Isn\u2019t Being Manipulated, It\u2019s Just Built That Way (\u2026And That\u2019s Not A Good Thing)"}]},{"@type":"WebSite","@id":"https:\/\/blogs.edf.org\/energyexchange\/#website","url":"https:\/\/blogs.edf.org\/energyexchange\/","name":"Energy Exchange","description":"Accelerating the clean energy revolution","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/blogs.edf.org\/energyexchange\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Person","@id":"","url":"https:\/\/blogs.edf.org\/energyexchange\/author\/"}]}},"_links":{"self":[{"href":"https:\/\/blogs.edf.org\/energyexchange\/wp-json\/wp\/v2\/posts\/2921","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.edf.org\/energyexchange\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.edf.org\/energyexchange\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.edf.org\/energyexchange\/wp-json\/wp\/v2\/users\/1508"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.edf.org\/energyexchange\/wp-json\/wp\/v2\/comments?post=2921"}],"version-history":[{"count":0,"href":"https:\/\/blogs.edf.org\/energyexchange\/wp-json\/wp\/v2\/posts\/2921\/revisions"}],"wp:attachment":[{"href":"https:\/\/blogs.edf.org\/energyexchange\/wp-json\/wp\/v2\/media?parent=2921"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.edf.org\/energyexchange\/wp-json\/wp\/v2\/categories?post=2921"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.edf.org\/energyexchange\/wp-json\/wp\/v2\/tags?post=2921"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/blogs.edf.org\/energyexchange\/wp-json\/wp\/v2\/coauthors?post=2921"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}