Among the benefits, in 2024, renewable generation in ERCOT
will deliver $6 billion in net system operating cost savings and
more than 18,000 MW of reliable capacity contributions.
A new report published by NERA Economic Consulting (“NERA”) and Astrapé Consulting (“Astrapé”) objectively evaluates the impact of renewable energy generation on ERCOT system reliability and the prices consumers in the ERCOT region pay for electricity.
The impact of renewable generation on the ERCOT system was calculated by Astrapé using the comprehensive hourly dispatch, system production cost, and reliability modeling capabilities of the SERVM model. Using publicly available data, Astrapé conducted over 700,000 Monte Carlo simulations of the annual hourly dispatch of the ERCOT system across scenarios that varied system load, generator outages, fuel prices, generator technology mix, energy storage additions, and other inputs. The SERVM model and its use of Monte Carlo simulation generates robust results that provide an effective way to analyze and understand the complex interdependencies that affect cost and reliability of electric systems like ERCOT.
Astrapé’s modeling calibrates ERCOT system reliability to a 1:10 Loss of Load Expectation (“LOLE”) and calculates the associated cost of meeting that standard over the long-term by adjusting the quantity of ancillary services and installed capacity, setting a proxy capacity value (the “capacity premium”) to a level at which the combined profits for the marginal dispatchable generation technology from the energy market, ancillary services market, and capacity premium is equal to the cost of new entry (“CONE”). In near to medium-term (transitional) scenarios, the capacity premium was calibrated to meet the forward-looking cost of existing marginal units that would otherwise retire because they do not recover their costs from the energy only market. When calculating the cost of meeting a 1:10 LOLE, the capacity premium is assumed to be paid to all capacity resources.
The costs of serving ERCOT system load at the 1:10 LOLE standard with and without renewable generation capacity were compared to determine the effect of renewable capacity on system costs and reliability.
Of note, the projected benefits of 2024 renewable generation on ERCOT system operating costs and capacity sufficiency include:
- $6 billion in net system operating cost savings in 2024 (Figure 1);
- $2 billion in sustained, annual long-term net system operating cost savings;
- Savings from lower energy prices that are orders of magnitude higher than any ancillary service cost increases associated with integrating renewable generation;
- Significant savings are realized across a range of gas prices and future renewable generation additions;
- Over 18,000 MW of reliable capacity contributions.
A copy of the full report and analysis is available here: https://poweralliance.org/wp-content/uploads/2023/04/NERA-Astrape-White-Paper-20230405_Final.pdf
