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Transition and Integration of the ERCOT Market with the Competitive Renewable Energy Zones Project

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  • Xiaodong Du and Ofir D. Rubin

Abstract

In this study, we seek to explore the impact of a state level transmission expansion project, the Competitive Renewable Energy Zones (CREZ), whose goal is to integrate a massive amount of wind energy, on the wholesale market prices in the Electric Reliability Council of Texas (ERCOT). We find strong evidence for price convergence across ERCOT with accordance to the timing of the expansion of major sections of the CREZ. A variety of empirical analyses shows a gradual transition to a well-integrated market. We also find that regional-specific shocks became more important in terms of driving price change in other regions. Specifically, the impacts of Houston (demand) and the West (wind supply) on each other and the North and South regions have increased significantly. Our study contributes to the literature by connecting the expansion of physical transmission lines with electricity market integration.

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  • Xiaodong Du and Ofir D. Rubin, 2018. "Transition and Integration of the ERCOT Market with the Competitive Renewable Energy Zones Project," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    • Handle: RePEc:aen:journl:ej39-4-rubin
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    1. Severin Borenstein & James. Bushnell & Steven Stoft, 2000. "The Competitive Effects of Transmission Capacity in A Deregulated Electricity Industry," RAND Journal of Economics, The RAND Corporation, vol. 31(2), pages 294-325, Summer.
    2. Andersen, Torben G & Bollerslev, Tim, 1998. "Answering the Skeptics: Yes, Standard Volatility Models Do Provide Accurate Forecasts," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 885-905, November.
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    Cited by:

    1. Cao, K.H. & Qi, H.S. & Tsai, C.H. & Woo, C.K. & Zarnikau, J., 2021. "Energy trading efficiency in the US Midcontinent electricity markets," Applied Energy, Elsevier, vol. 302(C).
    2. Simshauser, Paul & Newbery, David, 2024. "Non-firm vs priority access: On the long run average and marginal costs of renewables in Australia," Energy Economics, Elsevier, vol. 136(C).
    3. McDonald, Paul, 2024. "Interrelationships of renewable energy zones in Queensland: localised effects on capacity value and congestion," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 818-833.
    4. Heesun Jang, 2020. "Market Impacts of a Transmission Investment: Evidence from the ERCOT Competitive Renewable Energy Zones Project," Energies, MDPI, vol. 13(12), pages 1-16, June.
    5. Simshauser, P. & Gohde, N., 2024. "3-Party Covenant Financing of 'Semi-Regulated' Pumped Hydro Assets," Cambridge Working Papers in Economics 2425, Faculty of Economics, University of Cambridge.
    6. McDonald, Paul, 2023. "Locational and market value of Renewable Energy Zones in Queensland," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 198-213.

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