ERCOT CONE for 2026
Prepared for Electric Reliability Council of Texas, Inc. (ERCOT)
The Electric Reliability Council of Texas, Inc. (ERCOT) retained consultants at The Brattle Group (Brattle) and Sargent & Lundy (S&L) to develop an updated estimate of the Cost of New Entry (CONE) for use in setting the Peaker Net Margin (PNM) threshold affecting energy price caps, evaluating the cost of proposed reliability standards, analyzing the Market Equilibrium Reserve Margin (MERM) and Economically Optimal Reserve Margin (EORM), and potentially setting demand curves for a Performance Credit Mechanism (PCM).
CONE represents the expected levelized first-year net revenues a representative resource would need to earn for a merchant developer to be willing to build in the ERCOT market. For ERCOT, CONE has been estimated in three steps by (1) identifying an appropriate reference resource and alternative reference resource that can economically enter the ERCOT market; (2) conducting a detailed bottom-up analysis of each one’s capital costs and ongoing fixed operation and maintenance (FOM) costs; then (3) for each, calculating a first-year revenue estimate needed for entry, given likely trajectories of future total revenues over the economic life of the plant, discounted at an appropriate ATWACC.
This report presents our resulting estimates of CONE in ERCOT for a June 2026 Commercial Operations Date (COD), a discussion of uncertainties, and a recommended method for updating the CONE values annually.
