MARKET OVERVIEW: ERCOT

Energy Storage Development & Operations

Market Overview

The Electric Reliability Council of Texas (ERCOT) is a grid operator that manages the flow of electricity to about 90% of the state of Texas. ERCOT runs a competitive, energy-only market. Generators place bids to supply energy or reduce grid load at specific times, and ERCOT puzzles together the lowest cost way to maintain reliability and frequency.

There are a multitude of market products that generators can bid into. They all clear at different prices, in different periods, and on different days. This makes ERCOT one of the most complex - and also the most lucrative - market for energy storage operators. 

ERCOT is the most lucrative market for storage assets today
Large and growing peak load    Procures all energy from within    High volatility & frequent scarcity events 

Market Structure

ERCOT is a competitive wholesale market that compensates generators for the electricity that they produce. The market also has a nodal pricing system, meaning energy prices differ from location to location. There are 8K+ nodes in ERCOT, and each calculates prices based on local supply, demand, and transmission constraints.

Key Players:
01
Grid Operator

Maintains reliability and manages the market to balance energy demand with supply.

02
Generation Owner

Own and operate power generation and storage assets bid/sell to the grid.

03
QSE

Intermediary between electricity generators and ERCOT; submits bids on behalf of generators and handle financial settlements.

04
QSE Agent

Liaison between your operations and the QSE, handling day-to-day interactions and data submissions.

05
LSE

Load Serving Entities purchase power from wholesale market to serve end customers.

06
Optimizer

Your market navigator; a platform leveraging real-time data and predictive insights to help maximize revenue, ensure optimal performance and grid stability.

Market products

Generators submit offers to provide energy and ancillary services. ERCOT uses these bids/offers along with grid constraints to determine market clearing prices and provide dispatch instructions.

There are two categories of products available:

Energy Products

Bidding into energy products can see high returns from energy arbitrage, and provides flexibility to lock in returns through it's Day-Ahead energy auction, or capture sudden price spikes through Real-Time energy bidding.

Ancillary Services (AS)

This almost acts as offering insurance to the grid. You will get a payment for holding capacity, or offering to scale down generation, in moments where there is a mismatch between supply and demand. Bidding into AS can yield consistent returns, and can deliver outsized revenue during scarcity events.

Day-Ahead Energy
Real-Time Energy
RegUp
RegDown
ECRS
RRS
Non-spin

View additional details on ERCOT's market products, and insight into how they are best used.

GETTING STARTED

Developing a lucrative project

Project returns vary greatly depending on node selection and asset configuration.

Hone in on the optimal design by evaluating:

  • Locations
  • Asset configurations (ex. duration) 
  • Revenue drivers
Texas nodes

Hone in on a location
Compare achievable revenue outcomes across nodes.

revenue explorer
Understand the range of possible outcomes
Test various asset specifications and project configurations.
August output explorer
Deeply understand revenue drivers
Visualize which products your revenue is coming from, in which hours, and using what dispatch strategy.
Path to operations

Considerations prior to go-live

A successful launch doesn’t happen overnight. Set yourself up for success by allocating time for thoughtful integrations, and market assessment to hone in on the most lucrative bidding strategy.
Texas storage field
    1. Qualified Schedule Entity (QSE)
    2. QSE agent
    3. BMS/EMS
    4. SCADA
  • Submit all required documentation and technical details of your assets to ERCOT to be recognized within their system.

  • Run shadow bids as though your asset were live and review your performance. Assess how your optimizer operates, and how much revenue your strategy returns. Compare your performance to other assets in the area to benchmark results.

    If applicable, ensure you incorporate non-wholesale market applications or constraints (ie. offtake agreements, self-limiting facilities)

  • Hone in on how much risk you are comfortable taking, and adjust your approach to bidding and state of charge management accordingly. 

Dive deeper into the dispatch strategies of leading storage operators.

Operating live assets

Day-in-the-life of a storage asset operator.

Day ahead forecast
Day ahead bids
Day ahead awards
Real time forecasts
Real time optimization
Revenue growth
CASE STUDY Outperforming top ERCOT assets with dynamic daily bidding strategies

Accurate forecasts and proactive bid optimization enabled us to outperform top ERCOT assets by up to 40% in May 2024.

Learn more >>

State of charge management
CASE Study Balancing risk with reward during Winter Storm Heather

Maximizing revenue during tight grid conditions while minimizing performance risk to yield 20-50% higher revenue outcomes than top performing ERCOT assets.

Learn more >>

Evaluating performance

Review asset performance across operating days, hours, and products. 

Savvy operators consistently assess asset performance to ensure they are maximizing the value.

Check for:

  • Forecast accuracy
  • Revenue profile
  • Performance against market benchmarks and peer assets
Price forecast vs. Actuals

Price Predictions vs. actuals
Understand how accurate your forecasts were. 

Hourly revenue breakdown
Hourly Revenue Breakdown
Visualize revenue drivers by hour and product.
Strategy comparison
Performance Comparison
Evaluate how your strategy and revenue outcomes compared to peer assets.

Evolving regulations

Deep dives into recent policy and regulatory changes, and their impact on storage operations in ERCOT. The majority of new regulations are being built to ensure the market continues to run effectively, and support the realities of batteries.

Optimize my ERCOT assets