Sunday, September 02, 2012

Energy market uncertainty boiling up in Texas

Sunday, September 02, 2012
To resolve the problem, Commission of Texas (PUCT) has a set of rules, the increase in the maximum amount, the market of public utility pricing pays scenarios for power during shortages include the system-wide offer CAP (SWOC) adopted - called. On August 1, 2012 the SWOC for the second time this year raised and now sits at the $4,500 per megawatt-hour (MWh). While some concerns this could lead, centered to market manipulation, the PUC will appear goals to improve will "signals for new Peaker generation investment forward". In fact, ERCOT published analysis on the impact of rule changes on Peaker net margins (PNMs) in 2011. As shown below PNMs would have improved 42% in the year 2011 in the new rule changes, which was currently in force ($ 4,500 / MWh SWOC).

Energy market uncertainty boiling up in Texas

Given the difficulties in forecasting of future scenarios spot market prices and market behaviour, is great disagreement on both of the rules proposed level and implications. Commissioner Anderson shows map against increasing the SWOC fires again so soon after it a recent report by the Brattle Group was found while ERCOT would still "several thousand megawatts [demand response] under a $9,000 cap price need."

Although discussion of the large market construct a challenge for ERCOT the construct of the market itself could changes could discourage investment because of insecurity. The construct "just energy" pays only resources for the energy and related services that they deliver, not installed capacity, makes it difficult for investors to calculate the bankability of such assets, rarely shouting adequacy for the Midwest ISO energy market according to Midwest ISO discussion paper resource.

Previous comments stored with the PUCT of the proposed multi-state energy company Exelon, "there is no perfect adaptation to the only energy market [because it] is inherently short-term and volatile and preparation of the investment is generally long term and capital intensive."

Former DOE Secretary Susan Tierney believes that markets the capacity make more sense. In a recent keynote address on the Gulf Coast power Association she noticed "a competitive market enables the determination of the capacity as efficiently as possible... and is the winner of the auction for capacity, to bring their resources online." She went on to say: "A market capacity... can induce distributed generation."

But what markets such as ERCOT with "just energy"? Can they promote not distributed generation (DG)?

Only energy markets prefer clearly redistribution makes with the spot prices explode. But the uncertainty of this occurrence favours a more risk-averse - and therefore longer-lasting - investment strategy that may include the development of small, scalable, load following solar generation. As evidenced by the lack of Peaker dangerous fumes in ERCOT market uncertainty is antithesis to the long-term, capital intensive projects.

In particular should follow the unintended market the PUCT of new rules are not ignored. To improve the intention might be Peaker net margins, although the rules could encourage actually circumcision instead more demand at the end. Which means that flexibility is key. Who will be the most effective way to predict or react fastest to the new rules are those ensure themselves a beautiful Texas size payday.

This article was published originally at the NREL renewable energy finance and was republished with permission.

View the original article here

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