Author Archives: Colin Meehan

Demand Response Means Big Money for Big Users

By | Bio | Published: August 22, 2012

After a full week of triple digit temperatures in central Texas, the forecast this weekend for highs in the mid-90’s seems like a blessing both for our thermostat and for the unending topic of this blog series: our electric grid.  Officials from the Public Utility Commission (PUC) and the Electric Reliability Council of Texas (ERCOT) have been worried about the strain on our electric grid all summer long, but they aren’t just worried about this summer.  The energy crunch is an issue that we know will be with us until we deal with it; we can’t rely on dancing cats to ease the crunch. We need real solutions to avoid real problems in the future. 

It doesn’t have to be that way though, and it doesn’t need to cost as much as some worry it will, but that’s assuming that the PUC and ERCOT are able to move quickly and decisively to encourage demand response.  In our blog post last week we focused on the benefits of demand response for residential customers and small businesses, and that’s probably where the greatest overall potential lies.  But the quickest return – and the most financially savvy electric customers – might lie in the commercial and industrial markets today.  Fortunately two great examples in other parts of the country show how we could be doing more for those markets in demand response as well.

 “Making the Most of Your Energy” in NYC

Large commercial buildings typically face a number of hurdles when trying to upgrade their energy systems – particularly those with multiple tenants.  In New York City, the Rockefeller Group Development Corporation saw these hurdles as an opportunity for a new approach to energy management.  By selling their demand reductions to the grid, in the manner we’ve proposed for ERCOT, they managed to reduce energy usage by 60,000 kWh per month and reduced peak demand by 1.4 MW.  McGraw Hill now receives a net income (after payments for the financed upgrade) of $500,000 annually.

Rules in ERCOT might allow for this kind of savings already in some small ancillary services markets, so long as their metering system complies with ERCOT protocols.  Those ERCOT demand response markets are capped and already oversubscribed; leaving developers who want to build smart buildings or upgrade older ones are looking to other markets for their business.

Meanwhile, in the heartland….

We mean Warrick County, Indiana specifically. Alcoa, one of the world’s leading aluminum producers has worked with their grid operator Midwest ISO (MISO) to develop a completely new approach to industrial demand response that has blown the doors off of the possibilities for Texas’ industrial sector.  The market for aluminum is ruthless, and Before Alcoa anything that gives Alcoa a leg up helps them preserve critical jobs and tax income in their communities around the country. 

With this new market, Alcoa has managed to maintain international competitiveness for their Warrick County plant and is looking to expand demand response to their aluminum smelters in other parts of the country.  In Texas, where Alcoa's Rockdale smelters are were not able already struggling to maintain international competitiveness and have been idled as a result, , new markets like the pilot project announced by ERCOT on Monday could mean the difference for other industries between staying profitable and shutting down operations.

Whether it’s in the city or the country, a big user or a small mom and pop store, demand response markets offer a new benefit to customers if the market rules allow customers to compete with other resources.  As we discussed earlier this week, the potential for these resources in Texas would help us meet 15 percent of our peak demand needs according to ERCOT’s Brattle Report.  That potential stretches across all types of customers, and must be part of the solution to the energy crunch in Texas if we want to keep rates down and maintain reliability.

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

The Texas Electric Market Isn’t Being Manipulated, It’s Just Built That Way (…And That’s Not A Good Thing)

By | Bio | Published: July 19, 2012

Last week, the Independent Market Monitor for the Electric Reliability Council of Texas (ERCOT) released a report showing that the violent prices fluctuations of June 25 and 26 were not the result of market manipulation, as asserted by earlier reports.  Most have greeted this as welcome news, but the finding could spell rocky years ahead with wild swings in electric prices from day to day, which makes it difficult for investors, generators and most importantly customers to plan ahead.  To understand why, let’s back up a second and talk about what these findings mean.

Wild Mood Swings

If the market isn’t being manipulated, it is at least feeling a little bipolar: one hot summer day with high demand prices are up slightly but everything was working fine. The next day however, a 2 percent uptick in demand combined with an unexpected loss of 1.6 percent sent prices soaring.  The peak price on June 25 hit $438/ megawatt hour (MWh), but on June 26 prices maxed out at $3,000/MWh, meanwhile average prices skyrocketed to 640 percent above the average for the 25th. 

In a well functioning market these price swings wouldn’t be so dramatic and unpredictable, and those swings point to fundamental problems with the electric markets in Texas.  In extreme situations prices and profits may increase enough to support new investment but those extremes are so unpredictable that no power company can plan well for them, much less finance new investments.  As Brattle Group says in their report to ERCOT, “reliance on scarcity prices is unlikely to achieve ERCOT’s current reliability objectives.”  The solution?  Reduce our reliability standards or implement reforms that will lead to reliable electricity over the long term without the need for emergency regulatory intervention.

The reason for these swings is pretty simple, and outlined in the Brattle Report: the ERCOT supply curve does not efficiently reflect current or upcoming scarcity conditions in the market.  The supply curve is dominated by low price resources like wind, efficient natural gas power plants, along with nuclear power and some cheaper coal, all of which come in at or under about $30/MWh.  But as the chart shows, when you start getting near the 100 percent peak demand level there’s a sharp “hockey stick” curve upwards in price.  This means that when we’re in that high demand territory, a single power plant going offline or an unexpected spike in demand can send electric prices from $30/MWh to $3,000/MWh without warning, like we saw in late June.  Other regions have a more gradual supply curve of price increases during scarcity conditions, providing a kind of ‘warning’ to the market that the Brattle Report suggests as part of its suite of recommended market reforms.  That gradual curve is important because it allows demand-side resources to help stabilize prices and at the same time it provides potential investors with the kind of predictable certainty that allows them to consider investing in Texas.

Solving the Problem

As we said above scarcity pricing by itself, especially when it’s so dependent on weather extremes, is not enough to keep the lights on in Texas.  To do so, regulators and stakeholders will need to roll up their sleeves, put politics aside and find a solution that works for all Texans.  As a many have pointed out, the Public Utility Commission (PUC) made the decision to raise the offer cap without even a cursory analysis of the impact on ratepayers, an oversight that hopefully won’t happen again. 

If and when ratepayer impacts are taken into account, demand-side resources will be seen as playing a key role not only in maintaining reliability, but also in reducing the impact to ratepayers.  According to the Brattle Report we can reduce our peak demand needs 15 percent with such demand-side resources, with residential customers and small businesses making up 72 percent of the reduction during the hottest days of the year, but only if serious changes are made to the market.  In PJM (another grid operator) , where demand-side resources are allowed to participate in energy and capacity markets, participants have received over $174 million for over 10,000 MW of customer provided demand-side resources, over $20 million of the payments went to residential customers. In Texas, as we consider implementing new policies that improve reliability and provide stable predictable market signals it will be critical to include demand response, and to tap into growing residential and small business markets.

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

Forecasting Calamity In Texas

By | Bio | Published: July 5, 2012

(Credit: www.newsinarlington.com)

We’ve already had a spring of record highs, and now a June that is breaking records for electric demand (in June and July), including a peak demand that has already surpassed the projected peak demand for this summer –which we usually don’t hit until August.  Also, in an important decision last week – albeit one that won’t really change much this summer except for wholesale electric prices – the Public Utility Commission (PUC) voted 2-0 to raise the cap on energy bids in the electric market.  Given all of this activity over the past few weeks, one of the most interesting things to see has been the shift of focus from this summer to the next few summers, specifically 2014 and 2015, without stopping to consider why that time frame was chosen as a focus.

It all comes down to one obscure forecast, one that has almost nothing to do with energy: the Moody’s non-farm employment forecast. The energy crunch on the horizon that has everyone worried is a direct result of projected growth in demand in 2014/2015, derived from Moody’s projection that employment will remain fairly level in the near term, followed by a drastic increase in Texas employment around 2014.  Economic forces, in particular low natural gas prices and the need to further reduce pollution, will force some older, inefficient power plants out of the market, but the overwhelming factor is the projected ramp-up in demand in two years.

An important question arises that hasn’t been fully explored: why 2014, could it be later, or even sooner?  Today’s report on Texas Economic Indicators from the Federal Reserve Bank of Dallas has good news: “Texas factory activity surged in June… posting its strongest reading in 15 months,” which is welcome news of continued economic expansion in Texas, but is our electric grid ready to handle this spike in demand?  Tomorrow, the Bureau of Labor and Statistics will release its monthly unemployment numbers, which will have additional relevance for Texas as we struggle to meet electric demand in the face of record temperatures and economically-driven population growth.

The truth is, as with most projections, ERCOT’s planning process involves a little bit of art combined with a lot of analysis, and with every new national and local report on employment indicators the near term risks to our electric grid may shift.  As such, it’s important to realize that the major decisions currently being made at ERCOT and the PUC are largely the result of a single forecast with a highly time-dependent factor.

We won’t know how accurate these forecasts are until after the fact, but the decisions being made in Texas right now will have substantial, long-lasting effects on electric rates and customers.  Those effects haven’t been fully examined by the PUC, as the Houston Chronicle pointed out last week.  Historically the PUC has hesitated to take on clean energy policies purportedly out of concern for their impact on consumer rates, so it’s unclear why that analysis hasn’t been undertaken for such major market changes. 

What is clear is that these changes don’t do much to address real long term issues like water shortages, rising costs associated with fossil fuels and the flexibility to adapt to future economic conditions.  The recent Brattle reports – one showing that demand response is needed to maintain future reliability and another showing that solar power will help reduce electric costs – point to key steps the PUC can take to help customers deal with rising costs the will result from other PUC decisions.

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

Latest Brattle Group Report Points To Solar Power To Lessen Energy Crunch In Texas

By | Bio | Published: June 21, 2012

Is there a way for Texas to keep the lights on in the face of our energy crunch and manage to save electric customers some money at the same time?  According to a new report from Brattle Group, solar power needs to be a big part of the answer if the Public Utilities Commission (PUC) plans to reduce the financial impact of their decisions on consumers.  Fresh on the heels of their report detailing changes that could be made by ERCOT to keep our electric grid reliable, comes a new report from The Brattle Group showing the important role solar power can play in solving our long-term energy problems.

The difference between the reports is really focused on whether short-term fixes to help build new fossil-fueled power plants are enough, or if Texas should be looking at long-term solutions for the whole market (not just power companies, but customers too).  The report couldn’t be more timely either: over the past few years, Texas has relied on the few forward thinking municipal utilities like San Antonio’s CPS, El Paso Electric and Austin Energy to attract solar companies to the state.  Until now, the approach has worked. Because of those three cities, as recently as last year, the Solar Foundation ranked Texas #7 for solar jobs in the country and #9 for solar installations but as solar markets continue to grow throughout the U.S., Texas may be left behind. 

The market is changing quickly.  With panel prices declining 47 percent over the last year, many other states have entered the solar market – which means Texas can no longer rely on a few utilities to keep the state on the solar industry’s radar.  In fact, according to the latest report from GTM Research, Texas has fallen from a ranking of #9 in the nation for new solar installations to #15.

As the Brattle Group’s new report shows, the importance of this shift relates not only to growing jobs in Texas, but also to the state’s ability to provide homeowners and businesses with reliable electricity. As we come off of the warmest spring on record in Texas, with triple digit temperatures making us all thankful for our air conditioners, reliable electricity will remain a critical issue. The new rules proposed by the PUC will help companies build new power plants, but these rules cannot focus solely on power companies.  As the Brattle Report shows, we can meet the energy crunch head-on with policies that help Texans invest in solar to meet our growing energy demand in a way that relies less on water to operate.

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

Let’s Improve Texas’ Energy Efficiency Programs Instead Of Adding More Red Tape

By | Bio | Published: June 14, 2012

Summer is upon us: in Austin on Monday the mercury hit 101 degrees, with the humidity it felt like 110; this can be compared to a historical average high of 92 degrees this time of year.  This weather report won’t surprise anyone that follows global warming trends: according to a report earlier this week, Texas is one of the 10 fastest warming states in the U.S. Since 1970, average temperatures have risen 2.3 degrees in the Lone Star state.  Rising temperatures mean rising demand and more stress on our already strained electric grid, so you would think the state would be focused on near term solutions for rising energy demand, specifically energy efficiency and conservation.

(Credit: www.poonamsagar.com)

The timing couldn’t be better either: last year, the state of Texas passed legislation to increase and strengthen energy efficiency programs and the Public Utility Commission (PUC) is currently developing a new rule around that legislation.  While this appears to be good news, some parts of the PUC’s proposed rule actually would hurt energy efficiency programs and decrease the effectiveness of current programs by adding unnecessary red tape and discouraging efficiency.  At the same time, the PUC has contracted with outside consultants to ask citizens to turn up their thermostats during the hottest days of the summer.  Such public appeals are commendable, but it doesn’t make sense to add red tape to proven programs that allow customers to reduce energy use without turning up their thermostats, while at the same time spending money on unproven programs that are difficult to verify.

At a PUC workshop last week, stakeholders voiced many of the concerns around proposed changes that would weaken energy efficiency programs.  Most stakeholders seemed to agree that the PUC proposal creates new problems without resolving existing ones, like better monitoring of existing programs to ensure they are working.  With temperatures rising and our electric grid already strained, we can’t afford those kinds of fixes. Given the broad stakeholder agreement, we hope the PUC will remember “if it ain’t broke, don’t fix it.”

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

New ERCOT Report On The Texas Energy Crunch: PUC Tweaks Are A Move In The Right Direction, But Not Enough To Keep The Lights On

By | Bio | Published: June 5, 2012

Last week The Brattle Group released their Electric Reliability Council of Texas (ERCOT)-commissioned report on what Texas can do to make sure we keep the lights on this summer, the next and for many future summers after.  As Jim Marston discussed in the Houston Chronicle last Friday, the Brattle Group is no stranger to resource issues in Texas: in 2009 they reported on demand response opportunities in Texas and other states in a report commission by the Federal Energy Regulatory Commission. 

Using that work and more recent analyses, the report shows the role that demand response can play in meeting Texas’ future energy needs.  Demand response is any change a customer makes in normal electric usage patterns in response to market signals; Brattle recommends developing programs that pay customers a market-based price for their actions, rather than simply asking them to reduce energy during peak hours. 

So what makes such a nerdy idea so important?  The Public Utility Commission (PUC) is considering raising offer caps in the wholesale market to better reflect the true cost of peak energy usage in an effort to create a more efficient market.  According to Brattle, this move will help, and may even be needed, but “reliance on scarcity prices is unlikely to achieve ERCOT’s current reliability objectives,” largely due to extreme weather events which are expected to become more frequent as a result of global warming.

Raising the offer caps isn’t just a purely abstract concept; it means real rate increases for Texans.  At the same time, Brattle found that Texas could meet 15% of our peak energy needs through demand response alone, but only if ERCOT gets serious about allowing residents and small businesses to participate in demand response programs that have historically been aimed at big industrial customers.  Demand response programs mean more money in ratepayers pockets, all while helping to stabilize the grid. 

Improvements in small programs with a limited scope like the “ERS” program are certainly helpful, but as Brattle points out repeatedly, those improvements won’t be enough to keep the lights on in the next few years.  Hopefully the PUC will direct as much effort into programs like demand response, which puts money back in customer’s pockets, as they have on increasing wholesale offer caps. 

Demand response is a big piece of the picture but it’s not the whole painting: energy efficiency programs and an expansion of peaking renewable resources like solar and coastal wind power will also play a large role, particularly as we consider a hotter, drier future in Texas with less water to cool power plants.   The Brattle report lays out some excellent recommendations, demand response among them, and – as the summer continues – we’ll be looking into Brattle’s work as well as other initiatives that Texas can take to find its way out of this energy crunch.

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

ANGA's New Texas Report Serves Up A Heaping Helping Of ‘Number Salad’

By | Bio | Published: April 26, 2012

The American Natural Gas Association (ANGA) released a paper in March titled “Texas Natural Gas: Fuel for Growth,” to a lot of press, and rightly so.  The paper correctly cites several benefits of using and producing natural gas in Texas: it is produced in-state, has water use and air-quality benefits when compared to coal and helps to fund state and local governments through taxes. 

Unfortunately, the paper also makes some claims that are difficult to take seriously; perhaps the first warning sign should be that while the paper was presented as an economic analysis, the authors have no economic credentials.  Dr. Michael J. Economides, a chemical and biomolecular professor at the University of Houston, and petroleum engineering consultant Philip E. Lewis spend little time worrying about the details in this report, serving up a heaping helping of “number salad.”

For instance, the $7.7 billion “loss” is calculated by projecting the potential use of gas in Texas, if it had followed the national trend, against the actual use.  But in looking at the data, it’s not clear that the Texas fuel mix ever tracked the national fuel mix.  Even more importantly, looking at the authors’ own slides, Texas uses 20% more natural gas in its fuel mix than the nation.  If anything, the national fuel mix is following the trend set long ago by Texas —adding more natural gas and wind, while decreasing coal output.

What might shock the authors is that natural gas consumption in the electric power sector has increased by around 5,000 one thousand cubic feet of gas (MCF) since 2006, 800 MCF in transportation and nearly 10,000 MCF in the industrial sector. 

There are so many misleading statistics and inaccuracies that we could practically write a report on the report, but instead I’ll just focus on one aspect that stands out in particular. 

When it comes to comparing natural gas to coal power, the authors are quick to cite the many local benefits of using natural gas energy produced in Texas: it’s cleaner than coal and creates local jobs and a local tax base.  Wind energy has largely produced the same benefits: local wind power has brought jobs and a growing tax base and population to rural Texas counties that “had seen consistent, significant population losses since 1950.”  On top of the economic development benefits, where natural gas beats coal in reducing pollution, wind energy beats both by reducing pollution basically to zero.  But when it comes to discussing any of these benefits from wind energy in the report, the silence is deafening. 

Natural gas is reshaping our energy landscape.  And, done right—with the proper, mandatory environmental safeguards in place and reduced methane leakage rates—compared to coal plants, natural gas power plants offer other distinct air quality benefits.  It emits less greenhouse gases than coal when combusted and avoids mercury and other dangerous air pollutants that come from coal.

However, the same – and more – can be said about wind energy and Texas’ potential clean energy resources, including solar and geothermal power, among others.  Rather than pitting our local clean energy resources against each other as this report does, we should seek to expand and diversify our clean energy mix, reaping health, environmental, economic and security benefits.

Posted in Natural Gas, Renewable Energy, Texas | Comments closed

Austin Energy's Electric Rates Are Lower Than The Texas Public Policy Foundation Would Have You Believe

By | Bio | Published: February 22, 2012

Austin Energy’s Residential Rates: 12% Below the Average Rate in ERCOT’s Competitive Markets – After Accounting for the Proposed 14.4% Rate Increase

Austin Energy has been in the news a lot lately, and most often for some controversy around the ongoing rate review process.  What often gets lost in these heated discussions is that fact that Austin's heritage of clean energy and innovative approaches to economic development are firmly rooted in our city's electric utility, and that the utility allows city leaders to keep taxes low.  At the same time, Austin Energy's leadership often puts it in the crosshairs of groups that are ideologically opposed to clean energy and city owned utilities, and whether supported by facts or not, the opportunity to criticize Austin Energy has proven too difficult to resist.

(Source: www.inhabitat.com)

The Texas Public Policy Foundation (TPPF) is often one of the ringleaders in the crusade against clean energy as well as city owned utilities, and they're not going to let facts get in the way of scoring an ideological point.  In knocking Austin Energy and promoting their agenda, TPPF cherry picks data and uses coded language like the idea that customers "can choose" rates lower than Austin Energy's if they are in the competitive regions of the Electric Reliability Council of Texas (ERCOT).  The truth is, for a customer in the competitive areas of ERCOT to maintain lower rates than Austin Energy they would have to change electric providers each month, and they’d have to be pretty lucky on top of it.

The problem is that the rates TPPF reference when they say customers can choose lower rates are usually introductory, variable or otherwise subject to increases not included in the rates that customers do choose.  What this means is that customers actually pay more than TPPF's selective math would suggest, but TPPF seems more concerned with scoring political points than what customers actually pay for their electricity.

Look at the data from a more logical point of view and you will see that competitive regions in ERCOT average higher residential rates than ERCOT's average rates.  In fact, ERCOT rates are kept low largely by municipal and co-operative utilities like Austin Energy, the customer owned utility model that TPPF criticizes in their latest missive.  The most recent data available for a real analysis of the rates Texans pay was released by the Energy Information Administration just a few months ago, including data through 2010.  As the chart below shows, Austin Energy's rates are well below the ERCOT average, and even farther below the average competitive market rate, despite TPPF's claims to the contrary.  

Source: Energy Information Adminstration (EIA)

Even if you account for Austin's proposed 14.4% residential rate increase through 2015, the the new rates are 12% below current competitive rates in ERCOT. This calculation doesn’t even take into account the fact that nominal retail energy prices in ERCOT are projected to go up by 11% by 2015 according to the Energy Information Administration.  Taking this projected rate increase into account  it's clear that Austin Energy's rates – even after the rate review is completed – will be below the competitive average.

As we talk about rates in our community and across Texas, it’s important to remain focused on factual analysis and avoid misleading assumptions driven more by ideology than a desire for real debate. Unfortunately, arguments like those put forward by TPPF don't contribute to an honest discourse; they mislead the public, distort reality, and threaten Austinite's low tax lifestyle.

Posted in Texas, Utilities | Comments closed

Demand Response: A Key Component In Texas’ Electricity Market. Why Isn't The State Taking Advantage Of It?

By | Bio | Published: January 12, 2012

On Monday, the Texas Senate Business and Commerce Committee took up the critical issue of the impact of extreme drought conditions on electric generation capacity and state officials’ plans to respond to those risks.   A number of important issues and policy solutions were raised, from on-bill financing of energy efficiency to renewable energy to send the right ‘market signals’ to incentivize the construction of new power plants.  Public Utility Commission (PUC) Chair Donna Nelson singled out, in particular, the state’s energy efficiency and renewable energy goals.  These policies have helped reduce pollution, saved customers money and have the added benefit of reducing our dependence on water for electricity production.

Another important part of the solution discussed was raised by a number of panelists: demand response (aka load management).  The ability of end-use customers to reduce their use of electricity in response to power grid needs or economic signals has helped the Electric Reliability Council of Texas (ERCOT) avoid rolling blackouts and, in other regions of the country, it has helped markets avoid the need for new capacity.  As ERCOT CEO Trip Doggett and PUC Chair Nelson pointed out in their testimony, demand response is a market competitive resource that uses no water and, as such, it may prove to be a valuable resource in view of the state's record drought. 

The Texas Capacity Crunch – Obstacles and Opportunities
The historic drought of 2010-2011 has put Texas' conventional power plants at risk, threatening a return of the rolling blackouts caused by extreme winter conditions just a year ago.  State Climatologist, Perry appointee John Nielsen-Gammon says, “Statistically we are more likely to see a third year of drought.” 

At the same time, ERCOT faces a challenging capacity crunch caused largely by “low natural gas prices, an influx of low marginal cost wind power, increased wholesale market efficiencies, low wholesale power prices, tight credit markets” and other issues according to TXU Energy.  With limited ability to invest new capital given the current market conditions, and over 11,000 MW of power dependent on water sources at historically low levels, Texas needs to tap into resources that can be deployed rapidly and require less capital and much less water.

Demand Response – Low Cost, Zero Water Resource
Fortunately Texas has ample resources to meet these needs with demand response.  If allowed to participate fully in Texas’ energy markets as it does in other regions, demand response can benefit customers and increase grid reliability.  Unfortunately Texas continues to lag behind other states and regions, which have seen market-competitive demand response grow rapidly as market barriers have been removed. 

    • The definition of “demand response” is “end-use customers reducing their use of electricity in response to power grid needs or economic signals from a competitive wholesale market.”
    • The potential for cost competitive demand response is tremendous – according to the Federal Energy Regulatory Commission (FERC) Texas could add as much as 19 GW in capacity by 2019 if we open up our electric market to allow customers to compete alongside generators.

Texas currently is among the lowest states in terms of load management, despite having the highest potential by far according to FERC and the Brattle Group. 

Source: FERC

Why Does Texas Lag the Nation in Demand Response?

  • In 2011, demand response amounted to 9% of the PJM’s (a grid operator in the Mid-Atlantic/Midwest) system peak demand, greatly benefitting customers and improving reliability. 
  • At ERCOT, despite great potential, demand response only amounted to just over 2% of peak demand, limited by unnecessary market barriers. 
  • Texas leads the nation in smart meter deployment, intended by the legislature to “facilitate demand response initiatives.”  Why is ERCOT so far behind?

Market Barriers Prevent Customers from Competing in ERCOT

  • ERCOT’s legacy demand response program is capped at 1150 MW and is effectively limited to large industrials within ancillary services markets.
  • ERCOT’s Emergency Reliability Service is the only program in the market that allows any customer to participate if they qualify.  The program is limited in scope (it can only be called on twice per year) and to date has been unable to reach the original goal of 500 MW.  Despite these limitations, the program helped avoid rolling blackouts last summer.

Source: NERC

Regulators are Focused on Building New Power Plants

  • Instead of looking to all possible solutions, regulators seem focused only on how to get new power plants built.
  • Other grid operators have successfully created programs for smaller commercial and residential customers to compete through aggregation.  In Texas, residential and small commercial customers have been put on the back burner.
  • Despite the PUC’s reluctance to act on other clean energy opportunities, such as the 500 MW non-wind RPS or increasing the energy efficiency standards, it is clear that these programs have been successful in creating clean, “water-proof” power.
  • In the midst of a capacity crunch caused by extreme drought and market structure problems, demand response provides an opportunity to address both by enabling cheaper, water-free capacity by simply opening markets to customers.

Posted in Energy Efficiency, Renewable Energy, Smart Grid, Texas | Tagged , | Comments closed

ERCOT Reliability: “It’s Complicated”

By | Bio | Published: December 20, 2011

This commentary was originally posted on the EDF Texas Clean Air Matters Blog.

It seems like only yesterday that ERCOT was issuing dire warnings of rolling blackouts as a direct result of regulations required by the court system to ensure cleaner, healthy air for Texans and our neighboring states.  Well, maybe not yesterday, but at least as recently as this month.  Buried deep within the report was ERCOT’s tacit acknowledgement that they have allowed companies to idle more than 1,000 MW of power plants because those plants are not economic in today’s hyper-competitive market.

Source: Texas Tribune

Of course, no announcement made as much news as Luminant’s claim that they were shutting down two of their Monticello lignite power plant units in response to EPA regulations.  Those claims have been pretty well debunked over the last few months as people began to realize that market economics and poor planning were responsible for Luminant’s decision.  As we discussed in September, it was as convenient for Luminant to blame the EPA as it was reflexive of Texas politicians and regulators to threaten rolling blackouts as a result of Luminant’s decision.  ERCOT’s decision to let other power plants shut down for economic reasons calls those claims into serious question, and their recent decision (password required) that idling the Monticello units at the heart of this debate  does not threaten system reliability will hopefully end this cycle of unfounded recrimination and backtracking.

As ERCOT has made clear, the real threats to system reliability are of our own making: market failures have lead to a lack of proper signals to encourage the building of new power capacity; and this year’s record breaking drought, made more extreme by climate change, has threatened to shut down more than 11,000 MW of power plants.  What all of this means is that ERCOT’s reliability issues are far more complicated than a political slogan, and getting rid of sensible regulations that protect our children, elderly and general population from real health risks will do nothing to solve our problems. 

Instead of focusing on the easy political score, our leaders should be looking for real solutions that don’t pose risks to human health or to our water supply.  The solutions are out there: dry-cooled power plants, energy efficiency programs like demand response, as well as wind, solar and other non-water consuming renewable energy. 

The most recent decision by ERCOT that idling Luminant’s power plants poses no threat to grid reliability should end the cycle of unfounded accusations for political gain.  It should focus our state leadership on solutions that will work instead of distractions that only delay solving the problem.  It should also serve as a signal to those who are all too ready to accept unfounded claims for the sake of a good story or a convenient target. When it comes to ERCOT and reliability, the issues are complicated, but the solutions are out there and it will take real focus and effort to prevent Texas from experiencing the same rolling blackouts we had last winter.  It’s winter again (even if it’s just barely starting to feel like it), and next summer looks to be another scorcher. We don’t have a lot of time, so let’s get to work.

Posted in Smart Grid, Texas, Texas Energy Crunch | Tagged | Comments closed