ERCOT MARKET EDUCATION

Basic Training Program

Module 2: Fundamentals of the Nodal

Market

Module Overview

Slide 3

Upon completion of this module, you will be able to:

• Identify major components of the ERCOT

Wholesale Market, including:

– Day-Ahead Market

– Reliability Unit Commitment

– Real-Time Operations

• Describe other processes that support the ERCOT

Wholesale Market:

– Registration

– Network Modeling

– Settlements

Module Objectives

Slide 4

ERCOT Wholesale Market

Slide 5

Overview: Registration

Registration

Slide 6

Registration Basics

All Market Participants are

required to register and sign a

Standard Form Market

Participant Agreement to

participate in the ERCOT market.

Slide 7

Roles of Registrants

Each Market Participant

must register with

ERCOT by submitting

the applicable

registration application.

Slide 8

Roles of Registrants

Next, registrants

demonstrate they are

qualified to perform the

functions they’ve

registered for.

Slide 9

Requirements for QSEs with Resources

QSEs must complete Qualification tests

• User Interface/API

• 24x7 Scheduling Center

• Telemetry Connectivity

• Ancillary Services as needed

Slide 10

Requirements for QSEs with Resources

Resource Entities must complete a Resource Asset

Registration Form for each Resource they own.

• Available at http://www.ercot.com/services/rq/re/index

• Subject to Network Modeling timeline

Slide 11

Requirements for QSEs and CRR Account Holders

ERCOT settles financially with QSEs and CRR

Account Holders. QSEs and CRR Account Holders

must satisfy ERCOT’s creditworthiness

requirements.

Slide 12

Additional Registration Information

Registration Information

Additional information is available at:

http://www.ercot.com/services/rq/index.html

Slide 13

Overview: Network Modeling

Network Modeling

Slide 14

Network Model Management System (NMMS)

• Produces a Network Operations Model

• Provides model information for all other network

models

• Provides a single repository for model

information and management of model changes

Network Model Management System

Slide 15

Network Operations Model Operational Impacts

• Real-Time Dispatch

• Reliability Unit Commitment

• Used to produce other Network Models

Network Operations Model

Slide 16

Network Operations Model Financial Impacts

• Real-Time Locational Marginal Prices

• Day-Ahead Market

• Used to produce other Network Models

Network Operations Model

Slide 17

What does Network Operations Model reflect?

• Transmission Elements including Resources

• Connectivity

Network Operations Model

Slide 18

Electrical Busses

Transmission Lines

Circuit Breakers

Transformers

Disconnects

Reactive Devices

Generation Resources

Load Resources

Protection Schemes

Telemetry mapping

Who is responsible for providing modeling input?

• TSPs model Transmission facility changes

• Resource Entities provide Resource changes

• Model data submitted via NOMCR process

Network Operations Model

Network Operations Model Change Requests (NOMCR)

are the mechanisms used to submit modeling changes.

Slide 19

Network Operations Model

Network Operations Model Change Requests

(NOMCR)

• Must be submitted three months in advance

• Schedule outlined in Protocols

Slide 20

Planning Models:

• Project long-term system growth

• Identify Transmission or Generation needs

• Released to the Market every October

Network Planning Model

Planning Model

updates must be

coordinated with

Operations Model

Slide 21

CRR Network Models

• Based on Operations Model

• Used for CRR Auction & Allocation processes

• Released to the Market before each Auction

CRR Network Model

Slide 22

Overview: CRR Auction

CRR

Auction

Slide 23

Congestion Revenue Rights

What is a Congestion Revenue Right (CRR)?

• A financial instrument that may be used as a

hedge against congestion costs.

More information available at:

http://www.ercot.com/services/training

Slide 24

Overview: Day-Ahead Operations

Day-Ahead

Market

Slide 25

Day-Ahead Market

Day-Ahead Market (DAM)

• Daily, “co-optimized” process

• Voluntary participation

• Financially binding

Slide 26

Day-Ahead Market

Day-Ahead Market Co-Optimization

Evaluates Offers & bids to ensure best overall cost

Slide 27

Energy Awards

PTP Obligation

Awards

Ancillary

Service Awards

Energy Bids &

Offers

PTP Obligation

Bids

Ancillary

Service Offers

Co-

Optimization

Engine

Overview: Reliability Unit Commitment

Reliability Unit

Commitment

Slide 28

Day-Ahead Reliability Unit Commitment (DRUC)

Fundamentals

• One instance of RUC

• Ensures reliability - physically and financially

binding

• Executed daily after the Day-Ahead Market

Day-Ahead Reliability Unit Commitment

Slide 29

Hourly Reliability Unit Commitment (HRUC)

Fundamentals

• Another instance of RUC

• Ensures reliability - physically and financially

binding

• Executed at least hourly

Hourly Reliability Unit Commitment

Slide 30

Overview: Adjustment Period

Adjustment

Period

Slide 31

QSE Activities during the Adjustment Period

• Submit offers, trades, schedules

• Request Resource

decommitments

Adjustment Period

Offers

Trades

Schedules

Slide 32

Supplemental Ancillary Service Market

Supplemental Ancillary Services Market (SASM)

• If insufficient AS capacity, ERCOT executes a

SASM during the Adjustment Period

Slide 33

Overview: Real-Time Operations

Real-Time

Operations

Slide 34

Purpose of Real-Time Operations

• Match generation with demand

• Operate transmission system within established limits

Slide 35

Real-Time Operations

Real-Time Operations

Process used to determine optimal dispatch:

• Security Constrained Economic Dispatch (SCED)

Every 5 minutes, SCED calculates:

• Resource-specific Base Points

• Locational Marginal Prices

Slide 36

Load Frequency Control (LFC)

• Matches generation with demand

• Responds to frequency deviations

• Deploys Regulation Reserve Service

Frequency (Hz)

6 0. 0000

Real-Time Operations

5 minutes 5 minutes

Base point

Base point

Base point

Slide 37

Overview: Settlements

Settlement

Slide 38

Day-Ahead Settlement

• Daily statements include all Payments due and

Charges incurred

• Statements posted to MIS Certified Area for

applicable Market Participant

Day-Ahead Settlements

Slide 39

When are Day-Ahead Market Statements available?

Operating Day

Day 2 Day Ahead

DAM Statement

Real-Time Settlements

Real-Time Settlement

• Daily statements include all Payments due and

Charges incurred

• Statements posted to MIS Certified Area for

applicable Market Participant

When are Real-Time Statements available?

Day 180 Operating Day

Day 5

Initial Statement

Final Statement

True-Up Statement

Day 55

Slide 40

Operating Day

Day 5 Day 6

ERCOT Issues DAM

Statement & Invoice Payment Due

(to ERCOT)

Payment Due (to Market Participant)

Day 2

1700 1700

Day Ahead

Settlement Invoices

Single Daily Settlement Invoice

• Daily invoices include

• DAM statements

• RTM statements

Slide 41

Invoice Day + 2

Invoice Day + 3

ERCOT Issues Invoice • DAM • RTM initial • RTM final • RTM True-Up

Payment Due (to ERCOT)

Payment Due (to Market Participant)

Invoice Day

1700 1700

Settlement Pricing

Settlement Point Prices:

• Resource Nodes

• Load Zones

• Hubs

Posted on MIS

• LMPs

• Settlement Point Prices

Resource Nodes

Load Zones

Hubs

Slide 42

Settlement Pricing

Slide 43

ERCOT is an energy-only market

… but what does that mean?

In ERCOT, these costs must be

recovered with revenues from

energy production and

operating reserves.

It’s all about the recovery of costs to build generation.

Settlement Pricing

Slide 44

Energy Pricing must support investment in new generation

Scarcity pricing – higher

energy prices during periods

where energy reserves are

scarce

ERCOT is an energy-only market

… but what does that mean?

Overview: Market Information System

Market Information

System (MIS)

Slide 45

Market Information System

Three MIS Security Levels

• Information accessible by the

general public

• Also available on ERCOT.com

• Restricted access to protected

information

• Accessible by applicable Entities

• Requires digital certificate

• Information accessible only by

individual Market Participant

• Requires digital certificate

Slide 46

Module Summary

You have learned about:

• The major components of the ERCOT

Wholesale Market

• Other processes that support the ERCOT

Wholesale Market

Slide 47

Module Conclusion