Summary: "Blackouts are likely this summer in the United States." In Texas, “in this new reality, our risk goes up as the sun goes down. Data shows for the first time that peak demand this summer will exceed the amount we can generate from on-demand dispatchable power." "The credits would increase electricity customer bills an estimated 2% and direct the funds to companies that operate on-demand power sources, with a goal of incentivizing them to build more power plants or keep existing plants in service longer." / A collection of current information and articles concerning electricity and Electric Reliability Council of Texas (ERCOT); WPC will update this blog with current news.
Latest Update: Monday, 22 May, 2023 Friday, 12 May, 2023, Friday, 03 February, 2023, reposted 17Jan2023
Tags:#Electricity
Electricity, Energy, ERCOT
A collection of current article, information, agencies, organizations and commissions that affect our electricity. Willow Park Civics will update and repost this blog with current news. See red arrow ➜ for basic resource articles.
"Blackouts are likely this summer in the United States, according to the North American Electric Reliability Corp." [3]
In Texas “in this new reality, our risk goes up as the sun goes down. Data shows for the first time that peak demand this summer will exceed the amount we can generate from on-demand dispatchable power. There is no longer enough dispatchable generation to meet the demand of the ERCOT system. So, we will be relying on renewables to keep the lights on.” [1] "Lawmakers [in the TX 88th Legislative Session] are evaluating a new economic tool that [the Public Utility Commission] approved, called performance credits. The credits would increase electricity customer bills an estimated 2% and direct the funds to companies that operate on-demand power sources, with a goal of incentivizing them to build more power plants or keep existing plants in service longer." [2]
• 3 Power Blackouts Will Be Part Of This Summer In The U.S. OilPrice,com 11 May 2023
Energy Commissioner Warns of ‘Major Threats’ to Power Grid, The Epoch Times, 19 May 2023, Excerpts. With a hotter than usual summer projected, federal agencies are warning utilities of an "elevated risk" of power outages across two-thirds of North America between June and September.
Hope is a powerful energy, but it won’t keep the air conditioner on when summer temperatures soar and demand for electricity skyrockets, causing an overburdened electrical grid to grind to a stop.
Yet that seems to be the Biden administration’s plan in addressing warnings that nine North American regional electrical grids face an “elevated risk” of power outages this summer, Federal Energy Regulatory Commission (FERC) Commissioner Mark Christie maintains.
“I take it as, ‘We hope we can through the summer. We think we have a chance if the weather is normal,’” he said during a May 18 FERC meeting. “We hope we get all good news this summer.”
• 2 Texas utility commission chair raises threat of summer power outages and pushes for more gas-powered electricity, The Texas Tribune, 03 May 2023, Excerpts.
Public Utility Commission Chair Peter Lake on Wednesday warned that Texas’ main power grid is at risk for outages this summer if wind turbines don’t produce enough electricity when it’s needed. He yet again made the case that more on-demand power sources, such as natural-gas-fueled power plants or batteries, need to be built to make the grid more reliable.
Lake’s statements, made in light of a new assessment of possible risks facing the grid this summer, echoed arguments he has made throughout the legislative session.
Lawmakers are evaluating a new economic tool that Lake’s agency approved, called performance credits. The credits would increase electricity customer bills an estimated 2% and direct the funds to companies that operate on-demand power sources, with a goal of incentivizing them to build more power plants or keep existing plants in service longer.
The Electric Reliability Council of Texas found that the grid might not be able to meet a very high demand for power at the end of the typical work day if it coincides with extremely low wind and an extreme number of unexpected outages at other plants. ERCOT also found that low winds and very high demand after sunset could also cause power shortages.
• 1 Texas Electricity Demand to Outpace Dispatchable Supply for First Time Ever, ERCOT Officials Announce, The Texan, 04 May 2023, Excerpts.
Public Utility Commission (PUC) Chairman Peter Lake and Electric Reliability Council of Texas (ERCOT) CEO Pablo Vegas sent a clear message to the Texas Legislature on Wednesday: tweak the electricity market so that natural gas generation can be supplemented, or continue to face problems in the summer heat.
“Operationally, the ERCOT grid is ready for this summer,” Lake said, unveiling the 2023 Seasonal Assessment of Resource Adequacy (SARA) report. “The reliability reforms that were put in place have been tested and continue to work. We’ve made the grid we’ve got as strong as possible using every tool available.”
However, Lake tinged the grid’s readiness with an omen.
“Data shows for the first time that peak demand this summer will exceed the amount we can generate from on-demand dispatchable power,” Lake warned. “There is no longer enough dispatchable generation to meet the demand of the ERCOT system. So, we will be relying on renewables to keep the lights on.”
The State of Texas is adding about 300,000 people per year, which means a larger and larger demand for electricity on the state’s largest power grid.
“In this new reality, our risk goes up as the sun goes down,” Lake added.
• Texas May See Rolling Blackouts This Summer, Texas Scorecard, 09 May 2023
• New economic incentive plan clears hurdle in Texas House, The Texas Tribune, 04 May 2023, Excerpts. Eligible projects would include a manufacturing project, or a project that would require an investment in a Texas school district of more than $1 billion. They also include projects that add more on-demand electricity to the power grid, such as a natural-gas-fueled generator or batteries, a project to produce hydrogen fuel or a seawater desalination project.
• Decisions on ERCOT Market Reforms Loom With Legislative Ball in House’s Court, The Texan, 26 April 2023
• Dispatchable Power Floor, Reliability Fees Among Senate’s Priority ERCOT Reform Slate, The Texan 09 March 2023
• Lawmaker Hopes to Protect Texas Electric Grid From EMP Attack, Texas Scorecard, 29 March 2023
• Willow Park Civics Blog > This week's weather and the electrical grid, 30 January 2023
• As Texas hit with freezing temps, natural gas drives Texas energy grid, The Center Square, 02 February 2023, Excerpts. As Texas continues to grapple with winter conditions and about 1% of Texans lost power due to icy conditions, statewide, the power, heat, lights and water are on, largely fueled by the Texas natural gas industry.
According to ERCOT, the state’s regulatory agency that manages the power grid, natural gas is keeping the power on in Texas. It’s Fuel Mix report, which breaks down energy generation by resource type, shows the majority of energy produced comes from natural gas. At midnight Feb. 1, for example, solar and hydro accounted for 0% of energy generated. Wind generated 7%, coal and lignate accounted for 19%; nuclear, 9%. The majority of electricity generated came from natural gas: 66%.
• Abbott Leaves Door Open for Other ERCOT Market Plans, The Texan, 03 February 2023, Excerpts.
During an emergency press conference on extreme weather conditions hitting the state this week, Gov. Greg Abbott indicated potential agreement with Lt. Gov. Dan Patrick on a certain portion of power grid reform.
Abbott, who has reiterated that “everything that needed to be done, was done” last session to fix the grid’s physical vulnerabilities, has been less vocal about the pending reform of the Electric Reliability Council of Texas (ERCOT) market redesign.
Last month, Abbott backed the proposed Performance Credit Mechanism (PCM) option in front of the Public Utility Commission and advised the agency to get on with its implementation. At the Tuesday press conference this week, Abbott again touted the PCM but then said that other options may be on the table as well.
“We’re not going to end this session without passing strategies to ensure we have enough power for the people of this state for the next 40 years,” he said. Patrick has made similar references to creating more dispatchable generation on the ERCOT grid, even suggesting that it could require subsidizing the construction of new power plants.
Abbott has made previous comments about fixing the current state of the ERCOT market. In July 2021, he called for dispatchable development and sticking renewables generators with reliability costs.
• State regulators approve controversial Texas electricity market reform, The Texas Tribune, 19 January 2023, Excerpts. The Public Utility Commission voted Thursday to make a substantial change to the state’s electricity market in a controversial effort to get the whole system to be more reliable. The agency said it will let the Legislature review its plan before moving forward with putting it in place.
The idea, known as the “performance credit mechanism,” is a first-of-its-kind proposal. It’s meant to help produce enough power when extreme heat or cold drives up demand and electricity production drops for various reasons — such as a lack of sun or wind to produce renewable energy or equipment breakdowns at gas- or coal-fired power plants.
• Gov. Abbott Backs Proposed ERCOT Market Redesign, Suggests Not Waiting for Legislature’s Input, The Texan, 11 January 2023.
• ELA Expects 'Higher Wholesale Electricity Prices This Winter In Every Region Of The Country' As Americans Will Spend An Average Of 50.6% More For Electricity This Winter, Washington DC Business Daily, 13 December, 2022, Excerpts
The U.S. Energy Information Administration (EIA) released data for its short-term energy outlook last week, bringing grim news to Americans as colder months approach. Limited natural gas production combined with a higher demand for natural gas creates no choice but for prices to rise.
The data reveals significantly higher wholesale electricity prices expected this winter in all supply regions analyzed — an average 50.6% increase compared to last year.
This comes as retail electricity prices are also expected to be higher this winter. The EIA forecasts residential electricity prices to average 14.5 cents per kilowatt-hour in the core winter months from December through February, which is 6% higher than last winter.
• Texas needs to build new dispatchable energy resources for when the grid is stressed in extreme weather/higher energy use', Lone Star Standard, 23 December 2022, Excerpts. Texas State Senator Charles Schwertner (R) said that a recent proposal by the Texas Public Utility Commission (PUC) fails to meet legislative directives. "TX needs to build new dispatchable energy resources for when the grid is stressed in extreme weather/higher energy use," Schwertner wrote. "Unfortunately, PUC's current market design proposal falls short of this fundamental goal. Let’s work together this session to get it right for Texans."
• Data from ERCOT shows the state of our grid is still precarious at best, Lone Star Standard, 28 December 2022, Excerpts. The Texas State Senate Business and Commerce (B&C) Committee recently sent a letter to the Texas Public Utility Commission saying that the PUC did not include any evaluation of the dispatchable ancillary or reliability service product as the Legislature had previously requested in a report it had released.
State Rep. Jared Patterson (R-Frisco) wrote an opinion article regarding grid reliability for The Cannon, which was published on Dec. 5.
"Data from the Electric Reliability Council of Texas (ERCOT) shows the state of our grid is still precarious at best," Patterson wrote in The Cannon. "The ERCOT grid broke records multiple times this summer as demand for electricity soared higher than ever. But demand isn’t the problem; our ability to meet it is. And if Texas continues trusting wind to do that, power outages will become more and more common.
"Energy producers have moved away from reliable fossil fuels and toward unreliable renewables, because it’s nearly impossible to compete with taxpayer-funded subsidies tipping the scales so heavily," Patterson continued. "Had those subsidies not distorted the market, Texas could have kept much-needed coal and gas plants from closing and kept our grid strong for a tiny fraction of the price. The Texas Legislature must resist the siren song of renewable energy subsidies and shift its focus to affordable, reliable sources like natural gas, clean coal and nuclear — the only generators we can count on to perform when we actually need them."
• Texas needs to build new dispatchable energy resources for when the grid is stressed in extreme weather/higher energy use, Lone Star Standard, 23 December 2022, Excerpts. "TX needs to build new dispatchable energy resources for when the grid is stressed in extreme weather/higher energy use," Schwertner wrote. "Unfortunately, PUC's current market design proposal falls short of this fundamental goal. Let’s work together this session to get it right for Texans."
• After underestimating power demand, Texas electric grid operator gets federal permission to exceed air quality limits, The Texas Tribune, 24 December 2022, Excerpts. The U.S. Department of Energy has cleared the way for Texas power plants to pollute more than is usually allowed, such as by burning dirtier fuel oil instead of natural gas, to keep the electricity on through Christmas morning.
The Electric Reliability Council of Texas, which operates the state’s main power grid, asked for permission to exceed normal federal air quality restrictions after underestimating the demand for power during this week’s subfreezing temperatures. Such a request is not unusual during emergencies, experts said.
• State of Texas Joins Contest Over ERCOT Governmental Immunity, Backs Grid Operator’s Exemption Claim, The Texan, 22 December 2022, Excerpt. The Office of the Attorney General has joined the fray over a lingering legal fracas challenging the Electric Reliability Council of Texas’ (ERCOT) governmental immunity from lawsuits. / On behalf of the Public Utility Commission (PUC) — the state agency tasked with overseeing ERCOT — Attorney General Ken Paxton’s office sided against an appeals court ruling from February that decided ERCOT may be sued by private entities. A trial court sided with ERCOT before the appeals court reversed the ruling, which has now been appealed to the Texas Supreme Court.
• TAM representative Katie Coleman on Texas grid reliability: 'It essentially just assumed we were going to retire coal and gas and that creates a problem that we have to solve’, Austin Journal, 14 December 2022, Excerpts. During a recent Texas Senate Business and Commerce Committee hearing on a Public Utility Commission (PUC) energy grid report, Katie Coleman spoke on behalf of the Texas Association of Manufacturers (TAM) and said how this report is attempting to solve grid reliability issues while basing them off of false energy retirement assumptions that will only end up creating more problems down the road.
• Kolkhorst on Texas power grid: 'We're paying a lot of money for uncertainty, Austin Journal, 12 December 2022, Excerpts. At a hearing on a Public Utility Commission (PUC) energy grid report, Texas State Sen. Lois Kolkhorst (R-TX18) noted how the evidence specifically shows that the coal and natural gas sectors are shrinking, potentially putting the Texas grid in harm's way.
"We're paying a lot of money for uncertainty," the senator said. "I don't think our constituents are going to be real happy about that. It's just going to cost them more. The part that reduced the most which is coal and natural gas. Nuclear grew not at all and wind grew some."
• Texas lawmakers ask state agency to delay power market redesign until after 2023 legislative session, The Texas Tribune, 05 December 2022, Excerpts: In a Monday committee hearing, lawmakers questioned whether a Public Utility Commission proposal to redesign Texas’ electricity market would lead to the building of more natural-gas-fired power plants. Regulators say it would. / In a letter last week and in a committee meeting Monday, Texas lawmakers from both the House and Senate have asked the Public Utility Commission, which regulates the state’s electricity market, to hold off on its planned electricity market redesign until the Legislature can evaluate it. / The PUC’s favored proposal would leave the basics of the market unchanged — a supply-and-demand model that relies on price and gives the biggest financial benefits to generators that can produce the cheapest power. But it would add financial rewards for power plants that can quickly produce electricity when the grid is at its most stressed, such as during very hot or very cold days.
• Seasonal Assessment of Resource Adequacy for the ERCOT Region (SARA) Winter 2022/23, ERCOT, 29 November 2022
➜ Texas Nears ERCOT Market Redesign After Third Party Delivers Recommendation, The Texan, 17 November 2022, Excerpts
The State of Texas is one step closer to restructuring its electricity market redesign, in response to thepower grid collapse of February 2021.
As part of the fallout from the collapse, the Legislature directed the Public Utilities Commission (PUC) to re-evaluate the way electricity is bought and sold on Texas’ largest power grid. An initial Phase II blueprint was released 11 months ago, and since then the agency and industry have been enveloped in discussions and considerations on a path forward.
PUC contracted with E3 Energy Solutions to evaluate the Electric Reliability Council of Texas’ (ERCOT) electricity market and potential paths of reform. E3 released its analysis and recommendation last week.
The whole endeavor has two main purposes: to adjust the status quo to cope with the massive influx of renewable generation, a dynamic that didn’t exist when the state set up the current energy-only system, and to find a way to incentivize development of more dispatchable — thermal — generation.
Both purposes are aimed at one objective: increased reliability.
Texas’ current structure is an “energy-only” market, in that the electricity is supplied in real-time and not negotiated up front — which means the price fluctuates depending on the demand for and supply of electricity on the market at a given time. This structure uses price signals to incentivize generators to come online and go offline depending on the severity of need.
But since the influx of renewable generation in Texas goaded by tax credits — primarily from the federal government, but also local ones — a windmill-sized wrench has been thrown into the delicate equation. Wind and solar cost less to break even on selling electricity due to the disproportional tax breaks and lack of fuel costs, which makes it an attractive investment.
Due to their intermittency, the growing proportion of the grid portfolio, and pricing advantage, the influx of renewable generation has brought with it a decline in natural gas and coal development. During times of peak demand — the time of highest grid stress, which comes during the afternoons and early evenings of hot summer days — wind production varies substantially, sometimes falling off almost entirely.
[See article for graph.]
Solar performs far better and more consistently than its renewable counterpart during those periods. Its weakness, unsurprisingly, is when the sun goes down — which often, but not always, coincides with wind’s best performance period overnight.
[See article for graph.]
Through 2026, E3 projects a 230 percent increase of installed solar capacity in the works, along with a 15 percent increase of installed wind capacity; that would put both sources around 40,000 megawatts of installed capacity each.
The projected trend for natural gas and thermal development varies entirely on the path chosen by state officials. Natural gas generation currently accounts for 56 percent of the installed capacity available this past summer.
Meanwhile, thermal generators see little to no incentive for new development so long as that economic imbalance dynamic exists.
The thing everyone agrees on — renewables, thermal, bureaucrats, politicians, etc. — is that nobody is entirely happy with the status quo, which is using a patchwork of costly half-measures to bridge the gap between now and the time at which the redesign is implemented.
According to ERCOT’s Independent Market Monitor, the operational changes applied in the wake of the blackouts cost $1.3 billion through May 2021.
Generally, those precautions — the additional caution applied to the grid that is costing so much more — have continued.
And they’ve accomplished their purpose, getting the state through a cold snap in February and a prolonged scorching summer this year. But those adjustments are not self-sustaining, hence the redesign.
Under the current state of the energy-only market, E3 estimates that in 2026, customers would see $22.3 billion in costs per year as 11,260 MW of natural gas and coal capacity would exit the system — plants retiring from use without replacements. Under that scenario, the consultant also projects 1.25 days per year in which load-shedding, rotating or forced blackouts, might be necessary.
That’s the baseline of E3’s analysis.
The firm then analyzed six other paths forward for the redesign and recommended the PUC adopt a “Forward Reliability Market” (FRM) approach.
The FRM would create a system in which “reliability credits” — monetary awards divvied out to generators by ERCOT — are distributed to generators based on their performance during times of high stress on the grid.
This does not mirror one of the items Gov. Greg Abbott tasked the PUC with pursuing in July 2021: sticking renewable generators with costs incurred by the state or other generators when the intermittent sources fail to show up. It appears instead to try and accomplish a similar goal through another route — rewarding those who do produce monetarily.
E3 estimates the cost of this measure to ratepayers to be $460 million with a 0.1-day-per-year loss of load potential, which is in line with industry standards, according to the report. It also estimates a 5,630 MW growth in natural gas capacity under that scenario.
The other option E3 favored close to the FRM is a Load Serving Entity Reliability Obligation. This plan is similar in structure, but its reliability credits would instead be traded between generators rather than divvied out by the central authority.
The idea is similar to the internationally discussed “Cap and Trade” system in which a cap on emissions is set and then emitters, whether power plants or other miscellaneous businesses, can trade emissions credits between one another.
That system comes with roughly the same cost, load-loss, and capacity growth estimates as the FRM scenario.
A complication within the report is that while E3 stops its analysis after 2026, ERCOT projects capacity developments through 2033. Pair that with the fact that many Retail Electric Providers — more accurately, their ratepayers — are paying off billions of dollars in debt associated with the costs from the blackouts through securitization loans for decades to come.
• State agency proposes changes to power market aimed at averting mass blackouts, The Texas Tribune, 10 November 2022, Excerpts
The proposal is aimed at making sure power providers and electricity generators have enough power on hand in case of increased demand. But it’s not clear how it would hold up in unexpected weather, an expert said.
After several months of hammering out how to make the Texas power market more reliable in the wake of the deadly 2021 winter storm, state officials have landed on what they say is a solution.
Under a new proposal unveiled Thursday, power providers would be required to buy “performance credits” from power generators — which are intended to guarantee that both have enough electricity to meet increased demand when power demand is high enough to stress the electrical grid. If providers don’t buy the credits or generators don’t meet their end of the bargain, both could face financial penalties.
If the idea is implemented, “this will be the first time … that the companies that sell power to households — who you send your check to when you pay your bill each month — this will be the first time they’re actually responsible for ensuring they can deliver that power,” said Peter Lake, chair of the Texas Public Utility Commission, the board that regulates the state’s power grid operators.
A consultant hired by the Public Utility Commission, which oversees the largely deregulated Texas power market, to analyze different proposals for overhauling the power market did not factor in how extreme weather events such as the 2021 winter storm would stress the grid operating under the credit system — writing in the report that “such analysis is beyond the scope of this study.”
Silverstein pointed to this year’s unseasonal heat wave in May, which forced six power plants offline.
The consultant’s analysis said using performance credits would cost an estimated $460 million more per year. But Lake said competition among generators would theoretically drive down prices of the credits. By avoiding massive energy price spikes like those seen during the 2021 winter storm, Lake said power customers “shouldn’t, according to this analysis, experience any significant impact on their bill.”
• Public Utility Commission Releases Reliability Reform Study on Texas Electric Market Design, Shelby County Today, 11 November 2022, Excerpts
The Public Utility Commission of Texas (PUCT) today released an independent study commissioned to analyze and recommend design updates to the Texas wholesale electricity market that will strengthen current and long-term reliability reforms to the state’s electric grid. The study was done in alignment with the economic and operational reliability principles outlined in the PUCT’s Blueprint for Wholesale Market Design, which was unanimously adopted by Commissioners in December 2021.
“This study confirms that we can achieve even more dramatic improvements in reliability with minimal cost impact to consumers,” said PUCT Chairman Peter Lake. “By combining the best elements of each design model into the Performance Credit Mechanism (PCM), we create a system that ensures enough electricity when we need it most while incentivizing construction of new plants to deliver reliable power to Texas homes and businesses.”
Agencies, Organizations and Commissions
• The Electric Reliability Council of Texas (ERCOT) manages the flow of electric power to more than 26 million Texas customers -- representing about 90 percent of the state’s electric load.
• Public Utility Commission of Texas > Review Of Wholesale Electric Market Design, 10 November 2022 and Electricity Market Design
The Public Utility Commission of Texas was charged by the 87th Texas Legislature and Gov. Greg Abbott in Senate Bill 3 with designing the Texas wholesale electricity market to ensure reliability of the state’s electric grid at a reasonable cost to rate payers.
In December 2021, PUCT Commissioners unanimously adopted key principles, summarized here, to guide electricity market design that would: • Ensure adequate supply of electricity at all times, especially during periods of high demand. • Incentivize construction of on-demand electricity generation resources. • Keeps costs low through a competitive retail electric market.
In June 2022 the PUCT engaged Energy+Environmental Economics (E3) to study options for market design aligned with the principles and market design proposals adopted by the PUCT in its blueprint for reliability reforms. / The E3 study, PUCT staff memo and request for public comment / The blueprint adopted by the PUCT for reliability reforms and market design
Public Comment: Texans are encouraged to share comments and feedback on the E3 study and recommendations. Comments and feedback should be provided within the parameters of the PUCT’s blueprint for market design, E3’s report and PUCT’s staff memo, all linked above. The PUCT is adding five days to the normal 30-day public comment period to accommodate for the Thanksgiving holiday. Comments are due by noon, Thursday, December 15, 2022...
➜ Comptroller of Texas > Economy > Fiscal Notes > Texas’ Energy Profile, September 2022, A Review of the State's Current Traditional and Renewable Energy Capabilities / Continued growth in population and industry means increased demand for energy to power appliances, machinery and other equipment necessary for daily life, as well as for the manufacturing of products that require fossil fuels to produce. Rising demand raises a myriad of questions: How do we generate enough energy to meet our needs? How do we get that energy where it needs to go? Are the sources of energy generating electricity when the demand peaks? What is the mix of generation needed today and in the decades ahead?
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