An empirical analysis of supply offers in the ERCOT operating reserves markets

Mark D. Noll, W. Neal Mann and Todd Levin

Applied Energy, 2025, vol. 381, issue C, No S030626192402419X

Abstract: This paper seeks to improve theoretical and empirical understanding of supplier dynamics in wholesale markets for operating reserves, which have been understudied compared to energy markets. We begin by identifying several economic factors that unit owners may consider when submitting offers into operating reserves auctions in two-stage, co-optimized markets common across much of North America. Next, we analyze historical offer data from the Electric Reliability Council of Texas (ERCOT) market to assess whether actual reserve market behavior aligns with expectations based on economic theory, as well as with commonly used assumptions in electricity market modeling efforts. We find that the aggregate supply of operating reserves in ERCOT varies meaningfully over time, becoming more expensive during summer afternoons, which is consistent with theoretical expectations but contradicts the typical modeling assumption of temporally invariant reserve offers. Analysis of offers made by individual units uncovers additional insights, such as the existence of large offer pattern differences by unit owner and the tendency of battery storage units to submit very low offer prices. We conclude by discussing how our findings can be integrated into electricity market modeling assumptions to improve alignment with observed operating reserve offer inputs and pricing outcomes.

Keywords: Electricity market; Operating reserves; Ancillary services; Electricity auction; Supply offer; Production cost model (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1016/j.apenergy.2024.125035

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