NOTICE DATE: February 14, 2021

NOTICE TYPE: M-D021421-01 Operations

SHORT DESCRIPTION: High DAM Responsive Reserve Service Market Clearing Prices for Capacity for Operating Day February 15, 2021

INTENDED AUDIENCE: All Market Participants

DAYS AFFECTED: February 15, 2021

LONG DESCRIPTION:  ERCOT has received questions from Market Participants regarding high Market Clearing Prices for Capacity (MCPCs) in the Day-Ahead Market (DAM) for Ancillary Services (AS) for Operating Day (OD) February 15, 2021. To address these questions, ERCOT is issuing this Notice to explain the pricing dynamics that can lead to high MCPCs for AS, using as an example the MCPC for Responsive Reserve Service (RRS) for Hour Ending 10 for OD February 15, 2021.

As an initial matter, there were no DAM offers in excess of the applicable System-Wide Offer Cap (SWCAP) of $9,000/MWh for OD February 15, 2021.  Per Protocol Section 4.5.1(9), the Day-Ahead MCPC for each hour for each AS is the Shadow Price for that AS for the hour, as determined by the DAM algorithm.  This DAM algorithm takes into account lost opportunity costs associated with capacity providing RRS.  Because the AS MCPC takes into account lost opportunity costs, it can exceed the SWCAP of $9,000/MW/hr. 

For example, for Hour Ending 10 for OD February 15, 2021, the marginal Resource awarded RRS had an offer price of $5,790.96/MW/hr. As a result of being awarded RRS for Hour Ending 10, the capacity was precluded from being awarded offers for energy and Down Regulation Service (DRS) for that hour, resulting in lost opportunity costs for the Resource of $7,746.96/MW/hr and $8,281.46/MW/hr, respectively. Adding the marginal RRS offer price to the lost opportunity costs associated with the awarded capacity not providing energy or DRS resulted in an RRS MCPC for Hour Ending 10 of $21,819.38/MW/hr ($5,790.96 + $7,746.96 + $8,281.46).  

At this time, and subject to further review, ERCOT has not identified a need to correct DAM prices for OD February 15, 2021. 

CONTACT: If you have any questions, please contact your ERCOT Account Manager. You may also call the general ERCOT Client Services phone number at (512) 248-3900 or contact ERCOT Client Services via email at ClientServices@ercot.com.

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