The Shift to Nodal Market

The main role of the Energy Reliability Council of Texas (ERCOT) is to coordinate electric power transfers among members and ensure electricity transmission reliability. Over the years, this role has expanded to include overseeing transactions related to the restructuring of the electric industry, such as when the wholesale electricity generation market was deregulated in 1995. Thus, starting in 1996, ERCOT was restructured and began operating as an Independent System Operator (ISO).

"In September 2003, as part of Project 26376, the Public Utility Commission of Texas (PUCT) ordered ERCOT to develop a nodal wholesale market design.  The nodal market design introduces more precise assignment of congestion costs, resource-specific security-constrained economic dispatch, an energy and ancillary service capacity co-optimized day-ahead market, and increase transparency of energy prices from Locational Marginal Pricing (LMP) technology, thereby enhancing reliability and increasing market efficiency."

What are the differences between a zonal-based market and a nodal market?

"The zonal-based market determines the price of electricity (paid to the generators) every 15 minutes, this price is also known as the market-clearing price because it the price that balances the supply and demand of electricity. In the zonal market the grid is organized into congestion management zones. These zones are meant to increase the reliability of the system because often the generation of electricity takes place far from the point of consumption, which can cause congestion of the transmission lines (i.e., they cannot carried all the power being generated) and reduce the reliability of the system."[1]

"Unlike the current zonal market, the nodal market calculates transmission costs from the point of generation from several thousand delivery points or nodes across Texas. Nodal pricing should help provide a more detailed and accurate picture of transmission and generation, which will enable the market to better reveal areas of more expensive electricity (e.g., congestion) and thereby reduce costs and encourage more efficient transmission solutions or dispatch (i.e., using the least expensive generator)."[2]

The shift from zonal-based market to a nodal market was designed to help consumers save on their electricity bills.  However, this goal has yet to be substantially achieved.