Dive Summary:

• The Electricity Reliability Council of Texas (ERCOT) is trying to fix a problem: when electricity demand spikes on summer days, the price of electricity does not spike along with it. As a result, no one is incentivized to participate in demand response.
• To address this problem, ERCOT and the Texas Public Utility Commission are considering an operating reserve demand curve (ORDC) that would steadily raise prices with increasing demand. This subtle tweak has the potential to radically boost demand response participation.
• ​William Hogan, research director of the Harvard Electricity Policy Group and author of a white paper analyzing the impact of ORDC on ERCOT, said that improving scarcity prices is "an important but subtle point. If they get it approximately right, this will stimulate demand response participation and provide a very strong economic signal to then develop and mature.” 

From the article:

“As reserves are used up, there’s more risk on the system,” said John Dumas, director of wholesale market operations at ERCOT. “You need to value that risk and have that reflected in the energy price.”