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

The implementation of ERCOT's Real-Time Co-optimization Plus Batteries (RTC+B) market reform in late 2025 marks a seismic shift in Texas' energy landscape. By integrating energy storage as a unified asset with real-time state-of-charge (SoC) modeling, the reform redefines how batteries participate in wholesale markets, reshaping valuation models and investment strategies. For investors, this transition demands a recalibration of assumptions about revenue streams, risk profiles, and the long-term profitability of battery projects.

Key Provisions of RTC+B: A New Market Architecture

ERCOT's RTC+B reform replaces the outdated Operating Reserve Demand Curve (ORDC) with Ancillary Service Demand Curves (ASDCs), co-optimizing energy and ancillary services in real time. This allows batteries to be modeled as single devices with SoC constraints, enabling dynamic dispatch decisions that align with grid needs according to Enverus. For example, a battery can now charge during low locational marginal pricing (LMP) hours and discharge during peak demand, maximizing arbitrage opportunities. The reform also introduces the Constraint Competitiveness Test (CCT), which evaluates battery portfolios based on both injection and withdrawal capabilities, adding layers of complexity to bidding strategies according to ESS News.

According to a report by Resurety, this co-optimization is projected to reduce total system costs by 2.7% to 5.5% through improved resource utilization, while also enhancing grid reliability by enabling faster responses to renewable intermittency according to Resurety. However, the same report notes that reduced market volatility-driven by increased storage penetration-may erode the premium prices previously commanded by batteries, particularly for ancillary services according to Resurety.

The Valuation Conundrum: From Ancillary Services to Energy Arbitrage

Prior to RTC+B, battery revenues in ERCOT were heavily reliant on ancillary services. Data from Tyba.ai reveals that in H1 2025, 42% of battery fleet revenue came from ancillary services, with the remainder split between real-time and day-ahead energy markets according to Tyba.ai. However, post-RTC+B, ancillary service revenues have plummeted nearly 90% since 2023, averaging $17/kWh in 2025 compared to $149/kWh in 2023. This collapse is attributed to market saturation and the reform's emphasis on co-optimization, which reduces scarcity-based pricing for reserves.

The shift has forced operators to pivot toward energy arbitrage as a primary revenue stream. As stated by Ascend Analytics, the new market design allows batteries to shift energy from low-LMP to high-LMP hours, enhancing their economic value according to Ascend Analytics. However, this strategy requires advanced forecasting tools and real-time optimization platforms to navigate the fast-paced dispatch cycles under RTC+B according to Yes Energy. Legacy systems or static bidding strategies risk under-optimization, as highlighted by GridBeyond's analysis.

Investment Strategy Shifts: Hybrid Models and Long-Duration Storage

The RTC+B reform has also spurred a reevaluation of project structures. Hybrid models-combining storage with solar or wind assets-are gaining traction, as they allow operators to diversify revenue streams and mitigate the risks of single-market exposure according to Resurety. For instance, Modo Energy's research underscores the growing investment case for four-hour batteries, which align better with the arbitrage opportunities created by the reform according to Modo Energy.

Moreover, the reform's emphasis on SoC constraints has introduced operational complexities. As noted by Ascend Analytics, batteries must now maintain sufficient charge to fulfill all committed services simultaneously, limiting their ability to stack multiple ancillary services according to RenewAfi. This has pushed developers to prioritize longer-duration storage systems, which can better navigate the new dispatch rules while capitalizing on energy arbitrage.

Case Studies: Lessons from the Field

The impact of RTC+B is already evident in investment trends. For example, the ERCOT Interconnection Queue has seen a surge in long-duration storage projects, reflecting developers' confidence in the reform's ability to unlock value according to Modo Energy. Meanwhile, companies like Enverus and Resurety have developed updated valuation models that incorporate real-time co-optimization, dynamic bidding rules, and the CCT's portfolio assessments according to Enverus.

However, challenges persist. A case study by PV Magazine highlights how the 90% decline in ancillary service revenues has forced operators to adopt more sophisticated strategies, such as leveraging hybrid projects and optimizing day-ahead/real-time spreads according to PV Magazine. These adaptations underscore the need for agile financial models that account for the reform's evolving dynamics.

Conclusion: Navigating the New Normal

ERCOT's RTC+B reform is a double-edged sword for energy storage investors. While it promises cost savings and grid resilience, it also demands a fundamental rethink of valuation frameworks and operational strategies. The key to success lies in embracing advanced analytics, hybrid project structures, and a focus on energy arbitrage. As the market matures, those who adapt to the new rules of the game-rather than clinging to outdated assumptions-will be best positioned to capitalize on the opportunities ahead.