Capacity Forecast Model

Mark Ruane Credit Work GroupERCOT PublicOctober 15, 2014

Capacity Forecast Model Next Steps

ERCOT Public

• In July ERCOT presented the results from an internally-developed model to forecast reserve capacity over a four-day horizon.

• The model appears promising in providing a forward-looking basis for assessing the risk of high prices

• However, the model utilizes outage information, which limits its use on a mandatory basis

Capacity Forecast Model Next Steps

ERCOT Public

• Potential approach• Rolling six day forecast of potential reserve shortfall hours; two

day advisory forecast (D5-D6), published daily• 2-Level forecast threshold at 3000MW and 2500MW excess

capacity• RTLE adjusted daily on a rolling basis for updated D1 – D4

forecasts with capacity shortfalls• Reserve shortfall periods reflected in RTLE as an increased

percentile parameter in the price estimate for a shortfall hour• Periodic review of parameters to allow ongoing “tuning” of

model

Capacity Forecast Model Next Steps

ERCOT Public

Daily forecast posts

Forecast tenorForecast tenor

D1D1 D2D2 D3D3 D4D4D0D0 D5D5 D6D6

AdvisoryAdjust TPE as applicableAdjust TPE as applicable

Rolling six-day excess capacity forecast.

TPE would be adjusted by applying a higher lookback percentile than currently used in NPRR638 calculations. TPE would not be adjusted until the day following the forecast.

ERCOT Public

Capacity Forecast Model Threshold

The negative correlation between prices and reserves is greatest at reserve levels < ~3000 MW.

y = 1520.5x0.2181

R² = 0.9954

y = 19195x-0.943

R² = 0.8163

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

-93%

-92%

-92%

-90%

-88%

-87%

-86%

-86%

-85%

-85%

-84%

-84%

-83%

-82%

-82%

-81%

-81%

-81%

-80%

-80%

-80%

$/MWhMW RPC

Reserves and Hub Bus Prices

Hourly Average Reserves Average Hourly HubBus Price

Power (Hourly Average Reserves) Power (Average Hourly HubBus Price)

AdvisoryAdvisory

WatchWatch

EEA1EEA1

Cumulative CorrelationCumulative Correlation

ERCOT Public

Capacity Forecast Model Threshold

Potential approach to increase collateralized price level from P84 to P90 at 3000MW, and from P90 to P95 at 2500MW Physical Responsible Capacity (PRC).

y = 1520.5x0.2181

R² = 0.9954

y = 19195x-0.943

R² = 0.8163

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

-93%

-92%

-92%

-90%

-88%

-87%

-86%

-86%

-85%

-85%

-84%

-84%

-83%

-82%

-82%

-81%

-81%

-81%

-80%

-80%

-80%

$/MWhMW RPC

Reserves and Hub Bus Prices

Hourly Average Reserves Average Hourly HubBus Price

Power (Hourly Average Reserves) Power (Average Hourly HubBus Price)

AdvisoryAdvisory

WatchWatch

EEA1EEA1

~P90

~P95

Cumulative CorrelationCumulative Correlation

Questions

ERCOT Public

Capacity Forecast Model Next Steps