ERCOT forecast and new analysis show the Texas grid moving away from fossil fuels

A duo of recent announcements underscore the clear direction the Texas grid is headed: toward more renewable energy, storage, energy efficiency and sophisticated demand-side management resources and away from coal.

That means less climate and local air pollution, of course. But it also means more local jobs, less volatile energy costs, a more stable and reliable grid and yet another opportunity for Texas to reap the economic benefits that come with being an energy pioneer.

Texas will meet electricity demand with a record amount of clean energy this summer

This week, Texas’ grid operator, The Electric Reliability Council of Texas, issued its Seasonal Assessment of Resource Adequacy for June – September 2020 and updated its Capacity, Demand and Reserves Report. It projects that even though Texas is likely to experience record electricity peak demand this summer, even higher than last year’s record peak, the grid will be able to provide sufficient generation across the state. ERCOT’s reserve margin (the amount of energy ERCOT can tap above what it expects to need) was revised upward to 12.6%. For those of us who rely on the grid to stay cool during brutal Texas summers, that’s good news indeed.

However, the more interesting news is how Texas is meeting this record demand with new, clean resources. ERCOT’s report notes that in just the last several months, seven wind, solar and storage projects totaling 979 megawatts came online. Those projects will contribute 276 MW to meet this summer’s peak. Without this additional capacity (as well as the clean energy that has been installed since last summer) Texas would be stuck with a reserve margin of just 7.5%, according to EDF’s analysis — and staring down another nail-biting summer.

Utility scale solar is a great match for peak summer demand, which typically coincides with solar’s most productive hours in the day. ERCOT is projecting that market forces in the competitive market will accelerate its growth over the next few years and increase the reserve margin to almost 20% in 2021 and remain in this range through 2024.

That’s bad news for coal-fired generation which is uneconomic except during the summer when hot temperatures drive residential air conditioners to consume more than 50% of the electricity that is generated and cause wholesale power prices to spike dramatically. Increased deployment of storage and reductions in electricity demand through efficiency, demand response and rooftop solar, coupled with modern energy management technology, would increase competition in ERCOT, reduce costs and ensure grid reliability and resilience.

The ERCOT report also highlights the quick relief that rooftop solar can provide to ERCOT’s summer peak demand. Among various market penetration scenarios ERCOT considered, rooftop solar could contribute up to 4,000 MW of generation by 2025 and up to 4,800 MW by 2029. Not only will that be pollution-free energy, but it will also reduce the amount of electricity ERCOT needs to serve those customers — a win-win for the environment and for the folks that work to keep the lights on across the state.

Managing demand to meet Texas’ needs and reduce emissions

ERCOT’s assessments are focused primarily on whether there will be enough generation (supply) to meet the state’s forecast peak electricity demand. However, a new report from EDF inventoried the potential of leveraging technology and policy that manage the demand side of the electricity equation.

Written by grid reliability expert Alison Silverstein, the report is the first to clearly outline the relationship between supply and demand for resource adequacy in Texas and explains how demand-side resources can fit within our existing competitive electricity market.

Technology we possess today — like distributed energy resources, energy efficiency, and sophisticated demand management software and services that can near-instantly reduce customer demand, can impact the grid in much the same way as new power plants by reducing overall pressure on the grid, with the added benefit of mitigating climate and local air pollution.

Texas has more demand response and energy efficiency capability than any other state. An independent analysis completed by the Federal Energy Regulatory Commission concluded Texas could cost-effectively increase demand response levels to about 20,000 MW. A recent study by the Department of Energy concluded Texas could cost-effectively achieve 12.3% energy efficiency by 2025 and 18.8% by 2035. And, almost 11,000 MW of storage are in ERCOT’s development queue.

All of this potential is available to Texas now, and the report outlines the steps Texas legislators and regulators can take to tap it. For example, energy efficiency measures, standards, programs and requirements should be strengthened, and local governments should be allowed to set higher or more aggressive standards for their region. The state should require that any facilities planning energy additions with the support of state funds first maximize the potential of energy efficiency measures. The state should create new funding mechanisms to support local and governmental investments in demand-side management programs and technology, and should eliminate the legislative and regulatory barriers that make it harder or less attractive to deploy demand-side resources. These are the quickest, simplest and most affordable ways to spark demand-side options.

Even in uncertain times, Texas’ energy future looks cleaner

The economy today is tenuous enough that it’s impossible to make firm predictions — especially energy predictions. But given the volatility of the oil and gas sector, the continued decline of coal, the recent performance of renewable energy and the potential of demand-side management, massive investments in fossil fuel generators are looking much less attractive than they did only a few years ago.

Twenty years ago, Texas sparked a clean energy boom that led to billions of dollars of investment and millions of new jobs. Our leaders have an opportunity to replicate that success with demand-side management. The future of Texas electricity looks cleaner and smarter. And the future would get here a lot faster with a little help.