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Three Simple Steps to Clip the Peak in the Texas (ERCOT) Electricity Market

U.S. Association for Energy Economics Working Paper; Social Science Research Network

Zarnikau, Jay

Electricity resource adequacy is the most urgent and controversial challenge facing the Electric Reliability Council of Texas (ERCOT) market. The policy discussions have neglected some very simple steps that could be taken to promote demand response and reduce peak demand. An allocation of some of the responsibility for non-spinning reserves based on the contribution of a load serving entity (LSE) to peak demand would encourage LSEs to undertake programs to reduce their contribution to the peak. An extension of the four coincident peak (4 CP) pricing used to charge large industrial energy consumers for transmission services to smaller commercial and residential loads would encourage smaller consumers to reduce their peak usage. Narrowing the definition of

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