ERCOT's RTC+B Market Reform and Its Impact on Energy Storage Assets

The Electric Reliability Council of Texas (ERCOT) has embarked on a transformative overhaul of its electricity market with the implementation of the Real-Time Co-Optimization Plus Batteries (RTC+B) program on December 5, 2025. This reform, the most significant since the inception of the Real-Time Nodal market in 2010, redefines the economics and value proposition of battery storage assets in Texas. By integrating energy storage into a co-optimized real-time market and refining ancillary service (AS) procurement, ERCOT aims to enhance grid flexibility, reduce operational inefficiencies, and unlock new revenue streams for storage operators. However, the reform also introduces challenges, including market saturation and evolving revenue dynamics, which investors must carefully navigate.

A Structural Shift in Market Design

The RTC+B framework replaces the traditional Operating Reserve Demand Curve (ORDC) with Ancillary Service Demand Curves (ASDCs), enabling product-specific pricing signals for different types of reserves. This change allows batteries to be modeled as a single device with a state of charge (SoC), rather than as separate generation or load components, thereby streamlining their participation in energy and AS markets. By co-optimizing energy and AS in real time, the reform reduces manual interventions and transmission congestion, with ERCOT projecting annual wholesale market savings of $2.5–$6.4 billion. For battery operators, this means greater flexibility to arbitrage low and high locational marginal price (LMP) hours and respond dynamically to system conditions.

Enhanced Revenue Opportunities and Operational Efficiency

The RTC+B model creates new avenues for battery storage to monetize its capabilities. For instance, in a "Swap the Reg" scenario, batteries shifted energy from low-LMP to high-LMP hours, achieving a 2.7% reduction in total system costs. Similarly, during a "Solar Cliff" event-where solar generation drops unexpectedly-batteries were dispatched earlier to prevent regulation up shortfalls, avoiding price spikes and enhancing system reliability. These case studies underscore how the co-optimization of energy and AS can improve asset utilization and reduce curtailment of renewable energy, particularly during mid-day "soak and shift" periods.

Moreover, the introduction of ASDCs allows batteries to submit offers for ancillary services directly in the real-time market, enhancing liquidity and potentially reducing price volatility. This shift is expected to increase the liquidity of AS markets, where batteries historically derived 42% of their revenue in the first half of 2025. While ancillary service revenues have declined sharply-averaging $17/kWh in 2025 compared to $149/kWh in 2023-due to market saturation (over 11 GW of installed battery capacity), real-time energy markets remain a critical revenue source, especially for operators at volatile nodes.

Challenges and Long-Term Considerations

Despite these opportunities, the RTC+B reform introduces risks. Increased market efficiency may reduce price volatility, which historically drove high-value reserve calls and ancillary service payments. For example, the top 20 battery assets in ERCOT averaged $4.63/kW-month in H1 2025, while the median asset earned only $2.13/kW-month, highlighting wide performance disparities. Additionally, the need for precise forecasting and settlement systems to manage real-time dispatch complexity could raise operational costs for smaller operators.

Market saturation is another concern. With over 11 GW of battery capacity installed by mid-2025, competition for AS contracts has intensified, driving down revenues. However, the RTC+B framework's emphasis on real-time co-optimization may mitigate this by enabling operators to capture value from both energy and AS markets simultaneously.

Strategic Implications for Investors

For investors, the RTC+B reform represents a generational upgrade that aligns battery storage with the evolving needs of a decarbonizing grid. The projected $2.5–$6.4 billion in annual savings and the ability to arbitrage volatile LMPs position batteries as critical assets for grid resilience and renewable integration. However, success will depend on operators' ability to adapt to the new market design, leveraging advanced forecasting tools and optimizing dispatch strategies to maximize revenue from both energy and ancillary services.

In conclusion, ERCOT's RTC+B program redefines the economics of battery storage by enhancing flexibility, reducing costs, and creating new revenue streams. While challenges such as market saturation and reduced volatility persist, the long-term outlook for energy storage remains robust, particularly for operators who can navigate the complexities of the reformed market.