Energy market uncertainty boiling up in Texas

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

Given the difficulties in forecasting of futures spot market prices and market behaviour, is wide disagreement on the rules proposed levels 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 during that ERCOT would still "several thousand megawatts [demand response] under a $9,000 cap price need."

Although constructing discussions of big market a challenge could changes could discourage investment due to uncertainty, overlooking ERCOT the construct of the market itself. The construct of "just energy" pays only resources for the energy and costs services that they provide, not installed capacity, makes it difficult for investors to calculate the bankability of such assets, rarely called according to Midwest ISO discussion paper on the adequacy of the resource for the Midwest ISO energy market.

Earlier comments filed, who with the PUCT the multi-state energy company Exelon suggested, "there is no perfect adjustment to the energy market [because it] is inherently short term and volatile and creation of 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 at the Gulf Coast power Association she noticed "a competitive market allows determining the capacity as efficiently as possible... and allows time for the winner of the auction capacity online to bring their resources." 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 attributable to shareholders makes the spot prices explode. But the uncertainty of this occurrence favours a more risk-averse--and therefore more protracted--investment strategy that may include the development of small, scalable, load following solar generation. As evidenced by the lack of speaker dangerous fumes in ERCOT market uncertainty is antithesis to the long-term, capital intensive projects.

Especially should follow the unintended market the PUCT of new rules will not be ignored. To improve the intention may be speaker net margins, though, the rules could actually encourage more demand-side circumcision instead at the end. Which means that flexibility is key. Who can most effectively to predict or react fastest to the new rules are those ensure itself a beautiful Texas size payday.

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

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