What goes into real-time, wholesale prices?
While it’s easy enough to check the wholesale price on the Griddy app, how that price is decided by the market isn’t as simple. So please join us on a quick journey as we explain how the wholesale, real-time price is calculated.
There are two different types of real-time prices: LMPs and RTSPPs. (So many letters, oh my!)
LMPs are Locational Marginal Prices and are generally set by ERCOT every five minutes at hundreds of different points throughout the state of Texas. This is the price that shows up on your Griddy dial on the Wholesale Price screen and changes every five minutes. It is calculated based on how much it costs to actually generate the electricity going onto the grid plus the cost to move it from the generation source to its ultimate destination.
However, since smart meters only provide usage data in 15-minute intervals, ERCOT also provides an RTSPP or Real-Time Settlement Point Price every 15 minutes. This is normally just the average of the three five-minute prices in that 15-minute interval.
Sometimes when there is extremely high demand on the grid, ERCOT also includes additional charges called ORDC adders (oh no, more letters!) which stand for Operational Reserve Demand Curve. These adders are zero or near-zero more than 99% of the time, but when the grid is operating near capacity, those adders can increase quickly. When this happens, the price is more than just how much it costs to generate and move electricity. There is an additional cost tacked on based on how much additional capacity the grid has to generate more electricity - the less available capacity there is, the higher the price.
If you are confused, don’t worry; you are not alone. Whether it is the LMP, RTSPP or ORDC, these are prices set and adjusted by ERCOT and passed through to you without markup by your good friends at Griddy.