Resource adequacy in the "Energy-Only" ERCOT market

This paper describes the history of resource adequacy mechanisms in the Electric Reliability Council of Texas (ERCOT) market and the reasons behind ERCOT stakeholders' decision to continue and refine its "Energy-Only" resource adequacy mechanism. ERCOT's market power mitigation methods have been designed to be consistent with an Energy-Only market. It is important that any mitigation method applied in ISO- or RTO-run day-ahead and real-time energy market not suppress scarcity prices. Also, if there are any system-wide energy offer caps in these markets, those caps must be high enough to encourage long-term bilateral contracting to hedge against exposure to potentially high spot energy prices. ERCOT stakeholders viewed any mandated Capacity Market as a regulatory intervention and a subsidy that is likely to lead to greater reliance on regulatory processes to ensure resource adequacy. Finally, the paper describes the market design elements including greater transparency into market behavior, supply and demand forecasts, and higher system-wide offer cap that have been adopted in ERCOT to ensure the success of its Energy-Only market.