We are excited to announce the launch of our first price forecast product, a 15-day LMP (locational marginal price) forecast for ERCOT’s day-ahead market. Since our inception, we’ve dedicated our expertise to providing grid market participants with highly precise forecasting solutions.
This move into price forecasting is the result of our deep understanding of market fundamentals and our proven capabilities in forecasting demand and net demand at both grid and zonal levels. Our new LMP forecast is a powerful tool that addresses the unique challenges of one of the most volatile markets – ERCOT.
Tackling ERCOT’s rapidly changing market
ERCOT’s wholesale electricity market is undergoing dramatic shifts, fundamentally altering the landscape for market participants. Two key factors driving these changes are:
- The rapid deployment of utility-scale solar PV and wind assets, which are adding renewable, lower marginal cost resources to the generation stack. These intermittent resources are reshaping net demand peaks later in the day and increasing forecast uncertainty due to the volatility of wind and irradiance.
- The unprecedented growth of energy storage assets. New ancillary programs and improved asset economics have led to a surge in installed battery capacity, further transforming the market.
Together, renewable energy deployment and energy storage are introducing new price behaviors, increased volatility, and greater uncertainty in ERCOT.
We can see the effects of these market changes in the following analysis of ERCOT North Hub’s Day-Ahead Settlement Point Prices:
- Wider Price Spreads and Increased Volatility
- Figure 1 depicts the daily standard deviation of hourly settled day-ahead prices from 2012 to August, 24 2024. Between 2012-2018, DA LMPs were relatively stable, with an average standard deviation of ~$10/MWh. However, in the past five years, volatility has surged, and 2023 proved to be the most volatile year yet, with multiple instances of prices hitting the offer cap. Larger price peaks and intra-day LMP spreads are now the new norm for ERCOT.
- Shifts in DA Peak Price Occurrence
- Figure 2 illustrates how the occurrence of peak price for the DA market shifted in ERCOT’s North Hub. Historically, the HE16-18 period saw a significant increase in net load as residential demand increased. However, with the growth in solar PV and its generation tapering off after HE18, net load peaks have shifted to HE19-21. Consequently, peak prices have followed, now concentrating in later hours of the day.
Navigating volatility: Risk and opportunity
With ERCOT’s market evolving so rapidly, volatility presents both risk and opportunity for market participants. To help our clients manage these changes, Amperon is leveraging machine learning techniques, energy and weather domain expertise, and fundamentals modeling to predict the dynamics of the DA LMP market.
We’ve already seen great results from our price forecasts. During price spikes in ERCOT in August, our day-ahead zonal price models accurately forecasted the peak price for each day. Soon, we will be launching our real-time price forecasts in ERCOT, followed by rolling it out to other markets.
Our new price forecast empowers utilities, public power entities, retailers, independent power producers (IPPs), and financial traders to confidently predict prices, identify opportunities, and optimize their load, financial positions, and generating assets. This will not only help companies manage financial risk and optimize renewable assets and batteries, but also ensure the grid remains stable and reliable during this transition to greener energy. Contact us to learn more.
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