As Texas swelters through hotter and hotter summer temperatures, the demand on the power grid continues to skyrocket. The state experienced a high permeation of intermittent renewables, with green energy sources, including wind and solar, accounting for 30% to 40% of the power used during the latest heatwave.
In June 2023, the Electric Reliability Council of Texas (ERCOT) responded to the demand and intermittent generation by introducing the ERCOT Contingency Reserve Service (ECRS). The first daily procured ancillary service introduced to ERCOT since 2002, ECRS aims to address net load uncertainties and ensure the grid in Texas remains stable by creating a backup energy source that can be quickly accessed during sudden demand spikes.
If the ECRS sounds familiar, it’s because it is similar to ERCOT's existing Responsive Reserve Service (RRS) program. Both programs share several objectives: responding within 10 minutes of being dispatched, sustaining performance for the duration of their obligation of the service, and restoring to pre-deployment conditions within three hours. However, the ECRS differs from RRS in one key area: under-frequency relays. While the RRS requires an under-frequency relay to participate, the ECRS does not. This opens the market for new entrants.
The results so far
Initial reports from Ascend Analytics suggest that ECRS is an attractive opportunity for new actors and investors because it can generate more revenue than all other ancillary services under certain conditions. Essentially, participants make revenue when they are on standby AND when their contingency reserves are called upon.
However, it's not all positive news. ECRS comes with its own complexity and risk.
It is still early days, but the financial gains are unpredictable, swinging between seasons, time of day, and the volatility of resources. For example, ECRS revenue dwarfed other ancillary services in the summer months, but revenue differentials between the ancillary services leveled out as Texas headed into winter.
ECRS has been in service for less than a year, so the macro trends are yet to become evident. But the underlying message is clear: the more we decarbonize, the more volatility we will see in both the physical grid and the financial markets. A balance must be struck between high financial returns and grid stability. Nonetheless, there is certainly opportunity in this volatility. Participants can adopt strategies to maximize returns through revenue stacking, such as pivoting between ECRS and RRS depending on the assets and market conditions.
Flex is the future
The collective shift towards a sustainable path built on renewable energy means the grid's future hinges on flexibility.
According to ERCOT, renewables accounted for 30% of the generation in 2021, 33% in 2023, and current estimates show it at 37% in 2024. Long-term, this is good news for the planet. Short- and medium-term, it creates challenges. Renewable energy sources such as solar and wind introduce variability and volatility to the grid, and these additions are increasing year over year. New regulations, such as ECRS, demonstrate market regulation and financial structures working to keep up with the renewable increase. Complexity is growing rapidly, so the strategies of market participants must adapt rapidly as well.
A more agile approach to meeting varying energy needs powers a more resilient, secure, and reliable grid, creates a more financially stable environment for energy suppliers, and ensures affordability for customers. It also facilitates the sensible transition towards a sustainable, low-carbon future.
However, to herald this sustainable future, it isn’t only energy supply that needs to be flexible. Business strategies and operating models must also be modified to become less rigid. ECRS demonstrates that even a singular ancillary service in a single market in the US has a roster of nuances and data points that must be considered to maximize effectiveness and revenue potential. On a wider scale, there is a catalog of critical decisions that need to be made at all levels of the physical grid and across energy participation markets by everyone, from governments and authorities to grid operators and asset manufacturers.
These decisions require the energy community to embrace flexible solutions, powered by digital.
Sustainable Energy Management solution
My team at Nokia is creating the Sustainable Energy Management (SEM) suite to address these challenges. SEM is an innovative digital toolset designed to provide knowledge and understanding to enable informed, agile decision-making that considers a variety of factors and objectives.
With SEM, grid operators and market participants can understand the impact of existing and newly connected assets and evaluate opportunities for demand and supply side flexibility.
This flexible solution results in enhanced grid orchestration planning, a reduction in complexity and risk, and the opportunity to set a clear path towards a smarter and greener future.
Contact us to understand how you can take advantage of DER* flexibility.
*Distributed Energy Resources