Dive Brief:

• The Brattle Group estimates that the economically optimal reserve margin in the Electric Reliability Council of Texas (ERCOT) is 10.2%, well below the area's 14.1% reserve margin.
• The report was written for the Texas Public Utility Commission, which is considering changing ERCOT's energy market to encourage new power plants construction.
• Brattle said its study shows that ERCOT's current energy-only market design exposes customers and suppliers to higher price volatility and reliability risk than under higher reserve margins. “Mandating higher reserve margins would mitigate risks at a slightly higher cost,” the consulting firm said.

Dive Insight:

The Brattle Group's report has something for both sides of the capacity market debate in Texas.

"ERCOT's current market is not likely to lead to poor outcomes from an economic perspective," one of the report's authors said. "However, mandating higher reserve margins could reduce certain price and reliability risks, at a modest incremental cost."

Texas Public Policy Foundation argues that the report shows Texas doesn't need a capacity market.