Author Archives: Colin Meehan

Don’t Be Fooled By Recent Lows: The Texas Energy Crunch Is Still A Big Issue

This past month, we experienced refreshing, cool and somewhat wet weather in Texas.  However, those working on energy issues know all too well that this weather change doesn't mean we have escaped the worst of the “energy crunch.”  As the farmers say: “If you don’t like the weather in Texas, wait ten minutes and it will change.”  Despite cooler temperatures, an unplanned power plant outage during a warm day late last month forced the Electric Reliability Council of Texas (ERCOT) to issue an advisory, demonstrating just how quickly things can change.

At the same time, recent ERCOT reports indicate that reserves will be tight this summer due to an anticipated record level of high energy demand and stunted growth in new electricity resources – thus making conservation notices likely and rolling outages probable.  All of this points to the important role conservation programs, like demand response, can play for ERCOT.  Some ERCOT staff and stakeholders have recognized the importance of demand response, which allow customers to voluntarily reduce electricity use in response to a signal from utilities.  Others have called explicitly for programs that pay customers for reducing energy the same way generators are paid for producing energy, an approach EDF has advocated for several years.

ERCOT and a few retail electric providers already have conservation programs, albeit limited, in pilot phases that compensate customers for their participation.  But in comparison to other regions, Texas lags far behind other states – despite having the highest potential for conservation and clean energy resources in the U.S.  That’s why the three remaining weeks of the legislative session are so important: two critical pieces of legislation that would open up demand response in Texas to meet our electricity reliability goals and drive further market competition are under review.

Senate Bill (SB) 1351 from Senate Business & Commerce Chairman John Carona would require ERCOT to allow customers to participate in all competitive energy markets; the bill passed the Senate earlier this week and is now on its way to the House of Representatives.  SB 1351 is an excellent piece of legislation to propel demand response in Texas, but alone it is not enough to ensure Texas can keep the lights on during the hottest summer days.  A separate bill from Senator Kirk Watson, Senate Bill (SB) 1280, would accomplish just that by requiring ERCOT to secure enough demand response to meet its reliability needs if existing resources fall short; the bill passed unanimously out of the Senate Business & Commerce committee.

These bills will make all the difference this summer and for many summers to come.  The Texas Legislature has the opportunity to ensure that ERCOT and the Public Utility Commission (PUC) have all the necessary tools to avoid rolling blackouts over the next several years as we wait for new energy resources to come online. Read More »

Posted in Demand Response, Texas, Texas Energy Crunch | 2 Responses

Renewables BuyBack Bill Pays Good Money For Clean Energy

Picture this: You live in Texas, the state with the most solar energy potential in the U.S.  Knowing this, you decide to install solar panels on your home’s rooftop because, in Texas, you can lease – rather than buy – the entire solar energy system.  The option to lease allows you to take advantage of a low monthly payment that will be offset by the savings on your energy bill, rather than face high upfront investment costs.

Now, while you are at work during the day, your panels are actually putting excess, unused energy back onto the grid, when electricity is most expensive.  And, that surplus of energy isn’t just wasted; it is used by your electric company to serve other customers.  In most states, electric companies buy this power back at a retail rate.  But, in Texas it’s not quite that simple.  In order to see any form of pay back, you have to be a lucky customer of one of only three retailers – TXU Energy, Reliant Energy and Green Mountain Energy – that offer “renewable buyback” rates in Texas.  If you happen to buy electricity from one of the other 50 retailers serving residential providers across the state, though, you could always switch over to a renewable buyback program.  But there is no guarantee that you will be paid a fair market value for the 25+ years your solar energy system is expected to last.

Making a long-term investment to protect against highly-fluctuating, unpredictable electric rates is a difficult decision, and making that decision without knowing whether you are guaranteed fair compensation is nearly impossible.  This is one of the key reasons why Texas lags behind the nation in solar adoption.  Fortunately, there is a solution in the works.  Senate Bill 1239 from state Senator Jose Rodriguez seeks to guarantee homeowners, schools and religious facilities at least a minimum buyback rate based on wholesale market energy prices, which were about 50 percent lower than retail rates in 2011, on average.  The bill has a similar impact for rural electric co-operative, municipal and independently-owned utility customers, ensuring that any homeowner, school or religious entity that installs a properly-sized solar energy system will be compensated comparable to the way a fossil fuel power plant is compensated in the wholesale market. Read More »

Posted in Renewable Energy, Solar, Texas, Texas Energy Crunch | Tagged | Comments closed

Don’t Turn The Lights Off On Demand Response

Source- FERC: National Assessment of Demand Response Potential

If Texas Legislators want to make sure the lights stay on this summer, they have a great opportunity to do so tomorrow, April 9, 2013, while saving electric customers money.  There are two critical bills being considered at the legislature in Texas that would expand the use of demand response, a tool that allows customers to voluntarily reduce peak, or high, electricity use and receive a payment for doing so in response to a signal from their energy provider.  We need to take advantage of tools like demand response to alleviate the pressures facing the Texas electric grid, what EDF refers to as the ‘Texas Energy Crunch,’ which include a shrinking water supply, growing population and rising summer temperatures.

Demand response has been identified by numerous experts as a key component to a reliable electric grid in Texas, and Tuesday’s Senate Business & Commerce Committee hearing at 8 am represents a great opportunity for the legislature to help meet future energy needs while providing direct benefits to customers and reducing water usage.

Demand response is critical to keeping the Texas electric grid humming.  According to a comprehensive report on the Electric Reliability Council of Texas (ERCOT) reliability from the Brattle Group, “the energy-only market will not dependably support ERCOT’s current reliability target until sufficient demand response penetration is achieved.”  Demand response can be deployed in a matter of months, while it usually takes two to five years to build a natural gas power plant, even after all the permitting and financing is completed.  At the same time, demand response provides financial incentives; in the mid-Atlantic region, where demand response plays a critical role in the electric market, customers were paid a total of $330 million last year.  At the same time, according to the grid operator for the region, PJM, demand response actually lowers overall energy system costs by bringing more competitive resources into the market.  During the summer of 2012, PJM estimates this effect saved all customers around $650 million.

Read More »

Posted in Demand Response, Texas, Texas Energy Crunch | Comments closed

The Texas Energy Crunch Report: Looking Back And Looking Forward

We have been blogging about the ‘Texas Energy Crunch’ for over a year now, and the issue has attracted attention from the media, the Texas Legislature and even international groups.  During all of that time, the Texas Public Utilities Commission (PUC), Electric Reliability Council of Texas (ERCOT) and stakeholders have continued to try to develop new markets and programs that will help ensure the state of Texas can keep the lights on this summer and into the future.  This seems like as good a time as any to step back and take stock of how far we have come and how far we have left to go.  To that end, EDF released this report: “The State of the Energy Crunch in Texas.”

The Energy Crunch is not a fleeting issue that will go away in the near future. It’s critical that we take action now to preserve our electric grid, the engine of the Texas economy, over the long-term as we face a shrinking water supply, a growing population and rising summer temperatures.  The ongoing drought puts Texas' power plants at risk, threatening a return of the rolling blackouts caused by extreme winter conditions we experienced in 2011. State Climatologist and Governor Rick Perry appointee, John Nielsen-Gammon states, “Statistically, we are more likely to see a third year of drought.”  In recent testimony, Nielsen-Gammon reaffirmed that if the drought continued through this year, this drought is likely to be the second worst episode of drought in Texas’ history.

The solutions are out there in the form of customer, or demand-side resources, like energy saving demand response (DR) initiatives (which allow customers to voluntarily reduce peak electricity use and received a payment for doing so in response to a signal from their utilities), energy efficiency programs and increasing renewable energy sources like solar and wind power, all of which consume almost no water and can be built faster than gas and coal plants. This report provides an overview of these issues and concludes with legislative recommendations that will help meet future energy needs while providing direct benefits to customers and reducing water usage.

As economic growth continues to surge in Texas, state leadership must ensure a stable and secure supply of electrical power to businesses large and small, homeowners, hospitals and schools, among others. This challenge is critical in the face of a worsening drought, population growth and the failure by the PUC to take meaningful action after almost two years of deliberation. In the final months of the 83rd Legislative Session, lawmakers have an opportunity to directly address the Energy Crunch through several pieces of legislation that would help reduce customer energy bills, lower water consumption and increase business opportunities in Texas, while also reducing peak electric demand throughout the state.

Several of these opportunities have been identified by the PUC, but a lack of clear direction from Commissioners has left businesses hesitant to engage directly in the Texas market without a good understanding of the long-term outlook.  By providing the PUC with strong guidance on issues like demand response, innovative clean energy financing mechanisms and fair payment for locally generated electricity, the Legislature can help reduce the threat of extremely costly rolling blackouts across the state.

We cannot solve this problem with the same thinking that got us here. Technology has changed our lives and the energy industry over the past few years alone, creating new opportunities for innovation. Now the state needs to be smarter about the way energy is used, and it starts with using technology to better manage our electric grid. This includes taking advantage of market-based solutions such as demand response (DR), energy efficiency programs and the continued growth of renewable energy into a smart grid.

In our report, EDF details legislation that is currently being considered by several Texas House and Senate Committees to help meet future energy needs while providing direct benefits to customers and reducing water usage.  The list includes bills that allow all customer classes to participate in electric markets, provide innovative clean energy financing mechanisms and offer fair compensation for customers who provide power back to the electric grid by generating excess electricity from renewables or conserving energy using demand response initiatives.  The Energy Crunch hasn’t ended by a long shot.  Forecasts continue to show that we won’t have the level of reserves needed this summer to ensure reliability –particularly if the summer looks anything like 2011.  Similarly, EDF will continue to engage in the issue both on our Texas Energy Crunch website and through the discussions going on at ERCOT, the PUC and the Texas Legislature.

Stayed tuned as we continue to develop innovative, market-based environmental and economic approaches that seek to keep the lights on and benefit customers.

Posted in Demand Response, Energy Efficiency, Renewable Energy, Texas, Texas Energy Crunch | Comments closed

El Paso Electric Inks Solar Deal That Is Cheaper Than Coal

On the heels of our blog post last week, showing how competitive wind and solar power have become in recent years, is news of possibly the cheapest solar deal yet in the U.S. (that we know of publicly, at least).  Even more interesting is the fact that the deal was made between Texas-based El Paso Electric and First Solar, an Arizona-based solar manufacturer.  While it’s a little sad that a Texas-based company has to go to New Mexico to build solar, it’s at least heartening that they could partner with a U.S. company to get the project done.  First Solar has been one of the leading solar manufacturers for several years, and last year their suite of projects made them the #2 solar panel supplier in the world (up from #4.) 

Marty Howell, the City of El Paso’s Director of Economic Development and Sustainability, said that “El Paso Electric’s recent solar contract with First Solar is another example of our great partnership with El Paso Electric and how El Pasoans are working together to make our community more sustainable.”

This new 50 megawatt (MW) project in New Mexico comes in at 5.79¢/kilowatt hour (kWh), which is almost half the cost of a new “advanced” coal power plant (12-14¢/kWh), according to the Energy Information Administration.  It is helpful to note that the deal did benefit from subsidies, as detailed in an article by Renewable Energy World, including the Investment Tax Credit (ITC) – which provides renewable energy projects with a tax credit equal to roughly 30 percent of a project’s costs.  If we were to remove that credit and the benefit of local incentives, the project would come in right around the cost of a new advanced coal plant, even if the coal plant lacks carbon capture and storage technology.

Time will tell whether this deal is an exception or the new rule, but growing signs of price parity for solar power, and the continued growth of competitive wind energy, consistently point to a critical shift in our energy infrastructure.  With continued declines expected in both wind and solar prices, this First Solar project seems more likely to become the norm than not.  The only question is whether utilities and regulators are ready for such rapid growth in wind and solar power. 

In New Mexico, they certainly seem to be ready.  However, in many other states, including El Paso Electric’s home state of Texas, that’s still an open question.

Posted in Carbon Capture and Sequestration, Renewable Energy, Solar, Wind | Tagged , , , | Comments closed

New ERCOT Report Shows That Texas Wind And Solar Are Highly Competitive With Natural Gas

An interesting fact seemed to go unnoticed in all the press around the Electric Reliability Council of Texas’s (ERCOT) Long Term System Assessment, a biennial report submitted to the Texas Legislature on "the need for increased transmission and generation capacity throughout the state of Texas." ERCOT found that if you use updated wind and solar power characteristics like cost and actual output to reflect real world conditions, rather than the previously used 2006 assumed characteristics, wind and solar are more competitive than natural gas over the next 20 years.  This might seem a bit strange since we've been told for years by renewable energy skeptics that wind and solar power can't compete with low natural gas prices. Let me back up a second and explain what's going on here, and what it means for both the energy crunch and Texas' ongoing drought.

Every two years since 2005, ERCOT has used a series of complex energy system models to model and estimate future conditions on the Texas electric grid.  This serves a critical function for legislators, utilities and regulators and others who need to prepare for changes as our electric use continues to expand and evolve.  As with any model of this kind, the assumptions are critical: everything from the price of natural gas, to the cost to build power plants and transmission lines. Facing an acute energy crunch and given that solar and wind costs have come down a great deal since the first study in 2006, ERCOT dug a little deeper into their historical assumptions and developed a version of the model that used current, real-world cost and performance data for wind and solar power.

What they found was astounding: without these real-world data points, ERCOT found that 20,000 MW of natural gas will be built over the next 20 years, along with a little bit of demand response and nothing else.  Once they updated their assumptions to reflect a real-world scenario (which they call “BAU with Updated Wind Shapes”) ERCOT found that about 17,000 MWs of wind units, along with 10,000 MW of solar power, will be built in future years.

In addition to demonstrating the economic viability of renewable energy, these results show two drastically different futures: one in which we rely overwhelmingly on natural gas for our electricity, and one in which we have a diverse portfolio of comparable amounts of renewable energy (which does not use water) and natural gas.  All of this is crucial to keep in mind as the Legislature, the Public Utility Commission and ERCOT evaluate proposals to address resource adequacy concerns and the impacts of a continuing drought on our state’s energy supply.

Finally, one ERCOT statement in particular stands out from this analysis, in direct contradiction to renewable energy opponents who say that renewable energy is too expensive: “the added renewable generation in this sensitivity results in lower market prices in many hours [of the year].”  This means that when real-world assumptions are used for our various sources of power, wind and solar are highly competitive with natural gas. In turn, that competition from renewables results in lower power prices and lower water use for Texas.

As state leaders look for ways to encourage new capacity in the midst of a drought, it’s important to realize that renewable energy is now competitive over the long term with conventional resources.  The fact that renewable energy resources can reduce our water dependency while hedging against higher long-term prices means that however state leaders decide to address the energy crunch, renewables need to be part of the plan.

Posted in Demand Response, Natural Gas, Renewable Energy, Solar, Texas, Texas Energy Crunch, Wind | Tagged , , | Comments closed

NERC Demands Action From ERCOT To Keep The Lights On In Texas

This commentary was originally posted on EDF's Texas Clean Air Matters blog.

Last week was a busy one in Texas, with the beginning of the 83rd Legislative session attention was focused on incoming lawmakers, both seasoned and freshmen, and the opportunity that only happens every two years to address serious issues in Texas including water scarcity, education, tax issues, and of course energy issues.

So it's understandable that no one seems to have noticed a strongly worded letter to the Electric Reliability Council of Texas (ERCOT) from the North American Electric Reliability Corporation (NERC) last Monday demanding more action to ensure electric reliability in Texas, and asking ERCOT to report back to NERC by April 30 on additional actions taken. NERC isn't some federal boogey man either; it's a corporation founded by the electric industry to create commonly accepted standards for electric reliability across North America, usually through voluntary compliance. President Bush's Energy Policy Act of 2005 gave the corporation "the authority to create and enforce compliance with Reliability Standards," which is where this letter comes into play.

In their 2012 report, NERC highlighted ERCOT as the only region in North America that was not maintaining adequate electric reserves to meet demand, and with this letter they made it very clear that the actions taken to date have not done enough to mitigate that risk. In the letter, NERC President Gerry Cauley notes that the PUC and ERCOT are continuing to address energy reliability issues, but finds that "solutions have not yet sufficiently materialized to address NERC’s reserve margin concern."

Cauley goes on to say that "it is still unclear to us how ERCOT intends to mitigate issues that may arise on the current trajectory and when new resources may be available to meet growing demand." So according to the corporation whose membership consists mostly of utilities, grid operators, large and small customers, and electric regulators, the actions that the PUC and ERCOT have taken at this point are not enough to ensure we'll have reliable electric supply, risking blackouts as soon as this summer.

As lawmakers settle into Austin for the next few months they'll certainly be paying close attention to this issue, though many have indicated they would prefer that ERCOT and the PUC develop the solutions to this problem. Cauley's letter serves as notice that the PUC and ERCOT need to be more aggressive if they want to ensure a reliable supply of power in Texas. Certainly both agencies are putting serious time and effort into keeping the lights on in Texas, including effort so expand existing demand response programs, but NERC clearly thinks they need to be doing more.

All of this reminds me of the Texas drought: a year ago it was a huge looming crises, but a break in the weather took everyone’s mind off of the drying rivers and lakes, even though they never really recovered. Lately the drought has been back in the news as Texans realize that we're basically in the same place that we were in 2011.

No one could accuse ERCOT or the PUC of sitting idly by or pretending this risk isn't real. However, they have yet to send a strong enough signal to the market to spur investors in demand response or any other resources to develop new projects. About the only thing that has been done is the extension of the federal production tax credit for wind energy, which has wind developers racing to build new projects in Texas. The concern is that the solutions they've begun work on to date may not get us to where we need to be by this summer.

This letter is a reminder that the energy crunch hasn't gone away, things are not likely to change in the near term if serious action isn't taken soon. That is a risk we can't afford to take given a looming drought, a growing economy and a stagnant electric market. NERC has asked ERCOT to report to them on their progress by April 30, near the end of our biennial legislative session, and one in which the critical PUC/ERCOT sunset legislation is expected to pass, maybe legislators should consider a similar request.

Posted in clean energy, Demand Response, Energy Efficiency, Texas, Texas Energy Crunch | Tagged , | Comments closed

Pecan Street Inc. Researchers’ Report Receives Outstanding Paper Award

Source: Pecan Street Inc.

With 1.8 gigawatts (GW) of solar power installed in 2011 and an expected 2.8 GW in 2012, it is safe to say that solar energy has solidified its role as an important part of our nation’s energy portfolio. Affordability, competitive financing and reduced greenhouse gases are just a few of the reasons why the number of solar installations has skyrocketed in the past several years.

Now, new research from Dr. Alexis Kwasinski, Dr. Fabian Uriarte, and Amir Toliyat, engineers from the University of Texas at Austin, sheds some light on how rapidly growing solar installations can work with the current electric grid. For their groundbreaking findings in "Effects of high penetration levels of residential photovoltaic generation," they were recently awarded an Outstanding Paper Award at the International Conference on Renewable Energy Research and Applications (ICRERA) in November for their in-depth research and innovative solutions.

Jump started by a $10.4 million grant from the Department of Energy, Pecan Street Inc. is a “community-wide collaboration to fully reinvent the energy delivery system”  based in Austin, Texas.  This living ‘smart grid laboratory’ provided a perfect data collection site for the researchers. Pecan Street’s leadership focuses on developing new technologies that reinvent the way we create and use energy, so that residents drive electric vehicles, invest in cutting-edge technology and, of course, use solar panels.

The massive amount of data gathered from Pecan Street’s efforts provided researchers the opportunity to analyze solar energy’s effect on the three key characteristics of “power quality” (voltage level, voltage unbalance and power factor).  The researchers found that energy inflections (voltage levels and voltage unbalance) did not create any major concerns with the power grid, despite unfounded claims to the contrary by some solar critics.

Digging further into the data, the researchers unexpectedly found that power factor could become a real issue if solar installers don’t use modern equipment that provides for power factor support.  While the issue could become very real at higher levels of solar penetration, the solution is simple, cheap and currently available; it simply means installers should begin using newer models of solar panel “inverters,” which convert solar power into electricity that can be fed into your grid and home.

Inverters simply convert raw DC power to AC power (i.e. the type of electricity we need to use everyday household items). Maximizing the amount of electricity that is converted into usable power makes solar energy more competitive, ensuring that it will remain an important and growing part of our nation’s energy mix.

It’s exciting to see that these researchers are receiving accolades for their groundbreaking work, and international acclaim is always an excellent motivator for this kind of work, but it’s nice to be appreciated where you hang your hat too.  Fortunately that doesn’t seem to be a problem, since earlier this year Austinites voted in the Best of Austin 2012 award by the Austin Chronicle for Best Way to Turn Some Green Even Greener.  Their choice: Pecan Street Inc.

Posted in Smart Grid, Texas | Tagged | Comments closed

Texas Electricity Generation Plan Focuses On Fossil Fuels Instead of Diverse Infrastructure That Includes Renewables & Efficiency

Last week, the Public Utilities Commission of Texas (PUC) voted to approve a staged increase of wholesale offer price caps in the Texas electric market for the Electric Reliability Commission of Texas (ERCOT) in order to prop up lackluster investment interest in new power plants. This change fits well with established theories of competitive markets, but it does little to resolve current issues beyond sending a signal to investors that the PUC intends to act further to incentivize investment in new generation.

That same day, the commissioners “swatted aside” a petition to revisit the state’s goal for non-wind renewable energy without allowing any public discussion.  Given our need for new drought-proof energy and the fact that solar costs have fallen 80 percent in the last three years, this seems like an issue the PUC would be eager to take up.  In fact, when PUC Chairman Donna Nelson was pressed during a state senate hearing this spring to identify state policies that had successfully added electric drought-proof resources, she focused on both the state’s Renewable Portfolio Standard (RPS) and energy efficiency goals.

The PUC has now voted twice to raise wholesale offer price caps for electric generation, even though it voted recently to make it more difficult for the state’s energy efficiency programs to succeed by lowering their price caps.  Last week, while voting to increase price caps again, Chairman Nelson noted that the work to ensure new electric generation did not end with that vote.   I hope that’s the case because I want to make sure we can keep the lights (and air conditioning!) on too.  Since the PUC denied the petition to create a rulemaking to expand the RPS, it seems that their work on expanding electric generation is limited to non-renewable, fossil fuel power plants and not much else.  This is unfortunate given the fact that renewable energy is expected to be the world’s second largest source of power by 2015, according to the recently released World Energy Outlook.

Over the last century, Texas has dominated the international energy scene. However, as the playing field changes, we need to make sure that Texas doesn’t fall behind as a state and an international energy leader.  Recent PUC decisions may increase that risk, but their final decisions on a new market structure will likely be the ultimate decider.

Texas and its citizens deserve a competitive and diverse energy infrastructure that allows for a wide variety of characteristics in energy resources such as storage, customer-side energy resources, renewable energy, and cleaner-burning modern natural gas-fired power plants. Anything less will risk not only our state’s near term electric grid reliability, but also our long-term economic viability as well.

Posted in Energy Efficiency, Renewable Energy, Solar, Texas, Texas Energy Crunch | Comments closed

Chasing Red Herring On The Wind

The saying goes that hunters used smoked red herrings to train their dogs, trying to throw them off the scent of the hunt with something that has a much stronger and tempting smell but ultimately wasn’t the real target.  This is quite similar to recent discussions about resource adequacy – now that it’s become clear that the EPA isn’t the reason for power plants shutting down, some seem more focused on finding another scapegoat rather than addressing the real problems in the market.

There was a time, not too long ago, when the low marginal costs of technologies like wind and solar power were seen as a good thing.  In 2009 the Public Utility Commission (PUC) said “renewable generation has reduced wholesale and retail energy prices during some periods and has been instrumental in moderating price increases during periods in which the cost of natural gas was increasing.”  Back then, this was seen as a good thing because there was a need for a moderating influence on high natural gas prices at the time.

Times have changed though, and lately PUC commissioners have taken to blaming wind energy for their current troubles, even when their own paid experts tell them otherwise.  In a Senate Natural Resources hearing last week, PUC Chairman Nelson stated that “the market distortions caused by renewable energy incentives are one of the primary causes, I believe, of our current resource adequacy issues.”

The problem with this claim is that it isn’t supported by the facts, and most industry experts agree that the real problem (if you want to call low energy prices a problem) is a combination of a market structure in need of reform and consistently low natural gas prices.  In the Brattle Group’s report on resource adequacy issues in ERCOT they make a pretty strong case that gas, not wind, is responsible for setting the bulk of market prices.  Perhaps the best way to look at it is this chart showing how electric rates lined up with gas prices over the last decade. Read More »

Posted in Renewable Energy, Texas, Texas Energy Crunch, Wind | Comments closed