The Electric Reliability Council of Texas (ERCOT) manages the flow of electric power for about 90% of the state’s electric load. The ERCOT grid covers approximately 75% of the land area in Texas. ERCOT has the greatest wind capacity (installed) of any state in the US. Despite good wind resources, natural gas remains the leading technology, both for generation and installed capacity.
How is the market structured?
ERCOT is structured as a competitive wholesale market with energy transacted on a day-ahead and real-time (5 minute) basis. ERCOT also operates several markets for ancillary services. There is no capacity market in ERCOT.
What are the geographic boundaries of the market?
ERCOT covers the majority of the state of Texas. ERCOT is not interconnected to neighboring markets except for DC Ties to the Southwest Power Pool (SPP) and Mexico.
What are the relevant price and delivery zones?
The main pricing hub in ERCOT is the North Hub. Nodal pricing exists throughout ERCOT with pricing varying with local supply/demand conditions as well as transmission considerations more generally. Nodal pricing is aggregated to calculate energy prices for 4 separate energy zones, as well as the energy price at the DC Ties.
Can I buy long-term power in the traded markets?
Buyers and sellers can hedge their exposure in the forward market within a ~5 year window via over the counter trading platforms.
Who do I need to contract with to buy power?
Many consumers receive power from their local utility (the utility covering the geographic area in which the load is located). Consumers can also opt to buy power directly from a generator, or through a retailer (in states where competitive retail markets exist) though the utility will continue to charge certain fees (i.e. transmission/distribution/other system fees).
Retail choice is available in Texas.
How are system costs and other social charges levied?
In general, a bill can be broken into three components: generation, transmission and distribution. Generation costs are broadly correlated with wholesale energy prices, transmission costs are socialized across all consumers, and distribution costs vary based on the local cost of each utility. Other system and social charges (such as to support energy efficiency programs) are generally socialized across consumers and are also reflected on the bill from the local utility.
How do I prove I've bought renewable power?
In the US, renewable generation is certified and tracked using RECs (Renewable Energy Certificates). One REC is issued for every MWh of eligible renewable energy that is delivered to the electric grid. A REC contains unique identifying details of the energy generated, including the renewable fuel type, project name and location, the vintage of the project and the generation, and serial number.
Within Texas, ERCOT administers its own tracking system to track generation ownership and attributes, including RECs.
How are RECs (Renewable Energy Certificates) procured? Through market transactions or long-term contracts.
Are renewable Power Purchase Agreements (PPAs) available? Yes
Are Green Tariffs available? No
What are the key institutions?
Key Government Department:
- The Public Utility Commission of Texas regulates and oversees the electricity industry in the state.
- Unlike other markets, ERCOT is not regulated by the Federal Energy Regulatory Commission (FERC) due to its lack of interconnections.
- The North American Electric Reliability Corporation (NERC) is a not-for-profit international regulatory authority whose mission is to assure the reliability and security of the bulk power system in North America