Shortage hours

Shortage hours are the top 5% of hours by scarcity signal over the trailing 36 months. A 12-month window gets the shortage hours that fall inside it, so a mild year has fewer than 5% of its hours.

WattCarbon uses shortage hours to value a resource by what it does when the grid is tightest. Shortage relief, for example, is the drop in a home’s grid draw during its grid’s shortage hours.

Which grid

Shortage hours belong to a balancing authority: the grid operator that balances supply and demand in an area, such as PJM, MISO or ERCOT. Each EIA balancing authority has its own shortage hours.

The scarcity signal

Each hour of the 36 months gets one scarcity score:

• Price. Where the grid operator runs a day-ahead market with enough history, the score is the regional day-ahead price. The price is used only when at least 24 months of the 36 are priced, and each season is fully priced in at least two years, so one season does not outweigh another.
• Price, with the scarcity fuel. Where the grid operator publishes which fuel set the price, an hour in which the region’s scarcity fuel (such as oil) set the price scores at the window’s highest price. This applies only when that fuel set the price in at most 10% of priced hours.
• Index. Otherwise the score is the mean of three percentile ranks: demand, the share of demand met by peaking plants, and how far imports fall below their usual level for that hour and month. At least two of the three must be available.

The top 5% of hours by this score, ties included, are the shortage hours.

Why 36 months, then a 12-month window

A shortage is rare, so one year is too few hours to judge which hours are truly tight. The 36 months set the bar. A window of 12 months, such as a calendar year or the year that ends at a chosen month, then takes the shortage hours that fall inside it:

• A tight year has more than 5% of its hours as shortage hours.
• A mild year has fewer.
• A year with no shortage hours has no shortage relief to value.

This keeps years comparable. A resource is valued against the same bar in every window.

Data

• Hourly demand, generation by fuel, and imports: EIA Form 930.
• Hourly output of peaking plants (gas combustion turbines and oil units): EPA’s Clean Air Markets Program Data.
• The fuel that set the price, where published: each grid operator or its market monitor.
• Day-ahead prices: each grid operator.