Ascend Analytics Market Outlook for Storage Operators

In ERCOT, a substantial winter storm is poised to form over Texas later this week, including the potential for significant ice and rain throughout the state. ERCOT is taking the winter storm very seriously and will likely posture the load forecast to clear the day-ahead (DA) market high. However, the potential for freezing rain and cold to take out generation (and load) remains a wildcard and could induce high real-time (RT) prices as well. Operators should prioritize bringing SoC into the peaks by charging (partially) in day-ahead energy and utilizing SmartBidder’s target SoC framework to posture SoC. See the ERCOT section below for more insights.  

In CAISO, arbitrage spreads for batteries are improving as more solar production is adding congestion back into the mix and pushing charging prices down. That means reg prices will begin climbing and opportunities will improve for aggressive operators.  

ERCOT This Week: A Wintry Test for the Grid

The scene is set for a potentially significant winter storm to impact Texas and the southern portion of the United States this weekend. Here are some important operational and strategy factors to pay attention to over the next several days as the forecast evolves.

Weather and Grid Operational Considerations:

• ERCOT biasing the wind forecast low. As shown in the plot above for the 24^th, ERCOT is already biasing the p50 wind forecast to be substantially lower than the p20 forecast (the dashed green line is above the thick green line). It is not possible for p50 to actually be below p20. ERCOT is likely taking a conservative approach in anticipation of some wind generation not being available due to ice accumulation and we suspect they are manually adjusting the p50 number down. If the wind production is fully available, expect much lower real-time prices compared to day-ahead prices on Saturday the 24^th.  

• ERCOT biasing the load forecast to be higher in day-ahead. Another conservative move ERCOT often makes is to bias the load forecast higher to clear more generation into the day-ahead market. The winter storms of 2024 and 2025 are prime examples of clearing the day-ahead morning peaks high out of an abundance of caution.  

• Freezing rain and ice impact on load and generation. The main wildcard compared to more recent storms in Texas is that substantial ice accumulation is expected with this storm. That has the potential to remove large sections of load (lowering RT prices) and large sections of generation (raising RT prices).

• Timing. The Monday morning peak on the 26th is clocking the highest forecasted net load right now. However, the most severe ice and snow impacts will likely occur on Saturday and Sunday. While this timing will likely fluctuate, consider more day-ahead caution on Saturday (when impact uncertainty is higher) and more aggression by Monday when storm severity is clearer.  

Optimization Strategy Considerations:

There are a number of strategy adjustments that can and should be made in anticipation of the storm depending on your risk tolerance. Speak to your analyst this week to make sure that you are comfortable with SmartBidder’s approach in the day-ahead and real-time markets.

ERCOT Last Week: Signs of Volatility

While not shown in the chart above, the most interesting price action in ERCOT over the past week occurred on the morning of the 20^th as real-time prices in Hub North and Hub Houston rose above $800/MWh at the top of HE9. This may likely serve as a wake-up call for many operators to treat the real-time energy (and RT Ancillary Services) markets more seriously ahead of the impending winter storm. The corresponding pops to ~$250/MWh in RT RRS and RT reg-up indicate that a lot of the structural AS DART premium that existed at the beginning of RTC+B has been traded out of the market. Additionally, the higher prices in RT RRS and RT reg-up (which have lower SoC requirements) compared to RT non-spin and RT ECRS underscore the importance of offering all the RT AS products opportunistically to clear into the most lucrative product.

CAISO This Week: Everything's Bigger in Texas This Week

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While ERCOT operators adjust for potential extreme scarcity pricing, operators in CAISO should not deviate much from the old-reliable energy-arbitrage strategy of the past few weeks. Solar generation is forecasted to eclipse 10GW beginning on the 23^rd and should lead to cheap midday charging and worthwhile TB-X spreads through the end of the week. When solar is forecasted lower on the 21^st and 22^nd, operators can use reg-down to supplement charging and boost revenues in a flatter price environment.

CAISO Last Week: Consistency Delivered

As forecasted in last week’s outlook, CAISO delivered a week of reliable, solar-driven cycling, with consistent midday charging opportunities and predictable net load ramps into the evening hours. Although cloud cover late in the week slightly muted the depth of charging prices, the overall daily cycling pattern remained intact, keeping energy arbitrage the clear focus. Regulation down provided a valuable way to supplement charging while earning ancillary revenue, and its role became increasingly important later in the week as midday charging prices rose. Real-time prices rose above day-ahead in a few peaks, but charging prices were equal or better in day-ahead most days.

The information provided in this newsletter is for educational and informational purposes only and should not be considered trading advice. Trading in energy markets carries inherent risks and short and medium-term forecasts are always subject to change and revision.

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