Texas keeps adding load, adding generation, and adding complexity. But attracting the next wave of investment often comes down to a crucial question:

How does ERCOT use market forces – especially signals that determine where energy prices are set – to boost reliability on the grid?

In this episode, Josh Rhodes sits down with Andrew Reimers to pull back the curtain on the machinery most people never see, including operating reserves, scarcity pricing, and what changed when ERCOT launched real-time co-optimization in December.

The quiet lever: reserves, scarcity, and incentives

Andrew breaks down the pricing story to a simple idea: when electricity on the grid gets tight, the value of the next increment of reliability rises fast, which should signal to investors that they can make money by building more generation in Texas. ERCOT tries to reflect that through scarcity pricing and its operating reserve demand curve.

The hard part is running the grid in a way that ensures affordable, reliable electricity, and that doesn’t smother the very price signal that’s supposed to attract new capacity to the market.

“Carrying this large volume of operating reserves… you can suppress the prices… disincentivizing investments in new generation.”

That tension – lowering the risk of outages today vs. maintaining investable signals for tomorrow – drives the entire market design debate in Texas.

Reliability policy is also investment policy.

What changed on Dec. 5, and why it matters

In this episode, Josh and Andrew discuss ERCOT’s move to real-time co-optimization late last year and what it means for the ways reserves are procured and obligations show up in real time. That can change outcomes, even if the physical grid looks the same.

The conversation covers:

* Why pricing can look wrong even when the grid is fine.

* How rule changes can create unexpected incentives.

* Why these mechanics matter more as demand rises and the resource mix shifts.

Batteries, forecasting, and the value of looking ahead

Josh and Andrew also show how this all connects to batteries.

Andrew frames batteries as a question of timing and trade-offs, not just megawatts.

“Batteries… it’s opportunity cost. If I discharge now, I can’t necessarily discharge in the future.”

If ERCOT’s market structure encourages operators to look ahead even an hour or two, the state will end up valuing flexibility more intelligently – and customers will avoid the excess cost of simply buying more reserves to cover forecasting errors.

Final Thoughts

This episode shows that the Texas grid is not just about steel in the ground. It’s also a unique, and largely successful, experiment in how free-market policy – with smart guardrails – can translate individual investment into reliability for all.

If you want to understand why ERCOT decisions spark so much argument, and why market design tweaks can have outsized consequences, this conversation is a great map.

If this prompted questions for you, drop one in the comments. And if you know someone who cares about ERCOT prices but hates reading market docs, send them this episode.

Energy Capital Podcast is produced by ClarityForge Studios.

Timestamps:

* 00:05 – Episode Setup, Why This Matters

* 01:09 – Andrew Reimers, Role of the IMM

* 05:03 – Operating Reserves and Market Design

* 09:55 – Real-Time Co-Optimization Explained

* 14:30 – ERCOT vs Other Markets

* 16:42 – Post-Uri Conservatism and Price Signals

* 19:12 – Scarcity Pricing and Investment Incentives

* 23:50 – DRRS, RUC, and Reliability Tradeoffs

* 28:26 – NPRR 1309 vs 1310 Debate

* 31:02 – Load Forecasting and “Officer Letter Load”

* 36:55 – Solar, Wind, and Shifting Peak Dynamics

* 40:45 – Batteries and Multi-Interval Markets

* 49:15 – Out-of-Market Actions and Hidden Impacts

* 53:59 – Final Takeaways and Wrap-Up

Resources:

Guest & Company

* Andrew Reimers (LinkedIn)

* Potomac Economics (Website - LinkedIn)

* Potomac Economics - ERCOT IMM overview

* Joshua Rhodes (LinkedIn)

* Webber Energy Group (LinkedIn)

* IdeaSmiths (Website - LinkedIn)

Company & Industry News

* ERCOT NPRR 1310, IMM comments (Feb 3, 2026)

* S&P Global, ERCOT ancillary services rule changes and IMM perspective (Aug 6, 2025)

* RTO Insider, ERCOT and IMM ancillary services study (Jul 1, 2024)

* Potomac Economics, 2024 State of the Market Report for ERCOT (PDF)

Books & Articles Discussed

* Ancillary Service Study, Initial IMM Results (Aug 28, 2024)

Transcript

Josh Rhodes (00:05.174)

Right now, Texas is planning for rapid load growth while still catching up on transmission and interconnection constraints. The challenge is not whether demand is coming, but how fast the system can realistically respond. Welcome to the Energy Capital Podcast, where we cover the decisions, data, and debates shaping the Texas grid and the energy future. I’m your host, Joshua Rhodes. Today’s guest is Andrew Reimers. He’s deputy director of ERCOT at Potomac Economics, the independent market monitor. Andrew is an expert on grid planning,

Josh Rhodes (00:35.234)

load growth, and how infrastructure decisions actually get made in Texas. In this episode, we walk through what planners know, what they are assuming, and where uncertainty is doing real work in the system. We discuss load forecast, transmission bottlenecks, and the trade-offs between moving quickly and maintaining reliability. You’ll walk away with a decision-useful lens for understanding how Texas is navigating growth right now, and where the biggest pressure points are likely to emerge next. Let’s get into it.

Josh Rhodes (01:09.25)

Andrew Imers, welcome to the Energy Capital Podcast.

Andrew Reimers (01:11.566)

Happy to be here. Thanks for the introduction. You and I have, I think, known each other for like 13 years now.

Josh Rhodes (01:17.154)

Yeah, I it has been a while. I was wondering at a high level if you could just describe what Potomac Economics does relative to Earth.

Andrew Reimers (01:24.098)

Yeah. So, you you have ERCOT who is the independent system operator. So they are sort of a quasi government institution. They’re really a nonprofit institution with a charter through the state of Texas to manage the flow of electricity on the transmission network, and then also run various wholesale electricity markets. And, you know, there are several different flavors of that. The most important one for the conversation we’re going to have today is the real time market.

Andrew Reimers (01:53.752)

So that’s really where the physical scheduling of generation happens and everything ultimately is transacted according to the prices that come out of the real time market. That’s ERCOT where Potomac Economics comes in. This whole concept of an independent market monitor, if you kind of take it back historically, all of these power grids and deregulated electricity markets used to be like vertically integrated.

Andrew Reimers (02:18.58)

utility markets where you’d have retail customers that were in a monopoly all the way up to the firms that own the generation and stuff. and that model still exists in certain parts of America. Yeah, the Southeast parts of the Midwest are still kind of like this. The Rockies are like this, although that’s kind of an evolving situation. Yeah. Most of the rest of the US is what we call deregulated. That means that you have

Josh Rhodes (02:30.328)

like the Southeast.

Andrew Reimers (02:44.204)

divested the transmission system from the generation system. And there is no longer necessarily as strict of a monopoly on the retail side. And be that as it may, you still had a lot of legacy firms that had a lot of concentration in the market. So like in Texas, the big firms might be Luminant slash Vistra that historically could be traced back to Dallas Power and Light. And maybe you have NRG Reliant.

Andrew Reimers (0...