In 2018, the Electric Reliability Council of Texas (ERCOT) experienced a significant increase in congestion and energy prices. Compared to the previous seven years of Nodal implementation, there is at least two times the amount of total hourly averaged Real-Time (RT) shadow prices year-to-date. The market is also experiencing a very large upswing in Day Ahead Market (DAM) congestion where it approaches three times the amount of all prior years. Several factors contribute to this volatility, including increased generation in western Texas, removal of coal power plants, and overall increased demand through Texas where several peak records were already broken this year. In the midst of so much ERCOT activity, overall congestion continues to increase. The amount of unique pieces of congested transmission equipment is almost double past precedent. This environment creates a unique and exciting market for both the DAM Point-to-Point trades and CRR Option/Obligation bids opening doors to either capitalize on or hedge against these volatile times.
Genscape’s Nodal Market Insights product (NMI) offers insight into what is really going on in ERCOT. By design, the NMI product predicts what will happen tomorrow by understanding what happened yesterday. To get to this conclusion, analysts and traders can use the NMI platform to run models for the future and compare them to past models run for a historic day, a unique analysis methodology proprietary to Genscape. Analysts use this information to run a daily default congestion forecast and subsequent bid calculation to determine the best constraints for our clients to target every morning. This process offers an easy view of Genscape’s morning take on the DAM market. Clients can leverage this data to find new possible opportunities in the market or confirm positions created by their internal processes.
NMI inputs key data points such as the most recent transmission congestion events and their contingency, the most recent network topology, pulled from the weekly ERCOT published Common Interface Model (CIM) file, and the most up-to-date network transmission outages to derive morning congestion forecasts, executed prior to the DAM for the next day. Clients have a choice between two load/demand outputs; the latest ERCOT published load zone demand forecast or a proprietary Genscape demand forecast (both of which include individual Non-Opt-In Entity (NOIE) zone values).
NMI is a multi-layered tool that also supports other types of analysis for other Genscape products. Analysts use NMI as a reference tool internally, and feed other data, such as generation dispatch forecasts (how many megawatts each generator will run at each hour), into NMI to produce more accurate results. There are two generation dispatch options available; a “Like day” analysis of generation for similar demand, wind, time of use, and season to provide an approximate generation value or Genscape PowerIQ™ Security Constrained Economic Dispatch (SCED) generation dispatch for a target date as well as a study of the closest possible “like day.”
Congestion Forecast Results show the highest accuracy percentage of any other forecasting tool to-date. In a sample period from June 29 through August 3, the NMI engine predicted RT congestion events and shadow price value for 74 percent of actual ERCOT congestion. These results contain both targeted constraint bids as well as the study of all possible Load Zone and Hubs in ERCOT for aggregated congestion view. Especially unique about the NMI engine is that there is no human intervention when compiling which bids are considered good or not, just a general high-level selection.
As part of Genscape’s NMI model accuracy auditing process, the forecast shift factors and recommended trades are compared to the actual market results published by ERCOT. A recent audit day, July 22, predicted the NMI shift factor within 2 percent of the ERCOT shift factor 99.67 percent of the time. For the RT market, the product predicted the NMI shift factor within 2 percent of the ERCOT shift factor 81.59 percent of the time. For the same audit day, NMI also made critical, quantifiable predictions about congestion events, or in some cases, non-events. In assessing congestion potential, NMI answered the following key questions:
- Will there be RT congestion from July 20 that will continue to congest on July 22?
- NMI correctly determined that 9 distinct constraints would continue to congest across 72 hours at a total shadow price value of $33,795
- When will RT congestion cease to exist on July 22 that existed on July 20?
- NMI accurately forecasted that 7 distinct constraints would cease to congest across 18 hours at a total shadow price value of $1,630
- Are there any NEW RT congestion events on July 22 that the market didn't see on July 20?
- NMI created opportunities by finding 5 distinct constraints across 18 hours at a total $1,265 shadow price value
- Were there any false positive DAM constraints for July 22 that actually did not post in RT for the same date?
- NMI calculated that 32 distinct constraints across 121 hours at a total $1,355 DAM shadow price value would not congest in the RT market
Genscape’s NMI platform, currently available in the ERCOT and Pennsylvania, New Jersey, Maryland (PJM) markets, is a step ahead, providing a lens into the future, after checking the rear-view first. Results are unmatched and speak for themselves, allowing for a new level of predictability unlike any other tool used for congestion trading in the past. This capability will launch in the Midcontinent Independent System Operator (MISO) and Southwest Power Pool (SPP) markets by the end of 2018. For more info, contact Genscape for a demo.