The new ERCOT Contingency Reserve Service represents another effort to shore up grid reliability.
ERCOT in June launched a new Ancillary Service — the first in more than two decades. Known as the ERCOT Contingency Reserve Service, or “ECRS,” the new product represents another effort among several by policymakers to shore up reliability in response to the growing use of renewables. However, as noted below, questions remain as to the effect of this new service on other Ancillary Services and the market overall.
Ancillary Services — What are they?
Provided by generators and other resource entities, Ancillary Services are acquired by ERCOT on a regular basis to maintain minute-by-minute system reliability. In the most basic sense, they are capacity reserves. ERCOT purchases Ancillary Services in advance and holds them out of the market for possible next-day use in case ERCOT needs to deploy it if system conditions warrant. ERCOT purchases Ancillary Services every day at 2:00 for the next day’s market.
For years, ERCOT has operated four ancillary service products: Regulation Service-Up, Regulation Service-Down, Responsive Reserve Service, and Non-spinning Reserve Service. The new ECRS Ancillary Service becomes the fifth.
ERCOT Contingency Reserve Service
Any generation resource or qualifying large load with the capacity of delivering power for two hours can provide ECRS. Quick-start generation units that can ramp up in a few minutes likely will provide ECRS, as well as qualifying “Controllable Load Resources” (such as crypto mining operations) that can drop off the system rapidly and stay off for at least two hours. Batteries are not expected to provide ECRS—at least initially—because of their insufficient run time.
The new service should play an important role within ERCOT because of the grid’s growing reliance on solar power, and because ECRS can fill the gap in the late afternoon as solar production drops off.
ERCOT purchased ECRS for the first time on June 9 for next-day availability, and prices for it during its initial deployment have been the highest among all Ancillary Services. However, because unusually warm weather has been blanketing the state, analysts remain unsure as to what to make of the early price differential. Another open question is whether ECRS procurements will affect the prices of other Ancillary Services in the long term. A sample of prices from June 13 include $1 to $10 per megawatt for following-day use until noon and after 9:00 p.m.; and $23 to $45 for following-day use from noon until 9 p.m.
Creating the new service has been no small task given that the grid operator, generators, qualified scheduling entities and traders all needed to modify their processes to accommodate the new bidding process and procurement. However, judging from initial reports, implementation appears to have gone smoothly.