Selected tags: ERCOT

UPDATE: Demand Response Helped Texas Avoid Rolling Blackouts in the Face of Polar Vortex

Source: KXXV

Source: KXXV

Good news for clean energy in Texas!

The Electric Reliability Council of Texas (ERCOT), Texas’ power grid operator, presented a report to its Board of Directors this week confirming what we already knew: demand response is a worthwhile investment that strengthens Texas' power grid.

Demand response is an innovative tool used by utilities to reward people who use less electricity during times of peak, or high, energy demand. In effect, demand response relies on people, not power plants, to meet the demand for energy. And on January 6th when the Polar Vortex hit Texas, it did just that. Read More »

Posted in Clean Energy, Demand Response, Smart Grid, Texas | Also tagged | Comments closed

Demand Response Helps Texas Avoid Rolling Blackouts in the Face of Polar Vortex

MaritaHeadshot

This commentary originally appeared on our Texas Clean Air Matters blog

As we begin a new year, the outlook for 2014 looks bright.  But as the Polar Vortex has descended upon the U.S. over the last few days, we have been reminded of the past, specifically the winter of 2011 when Texas’ electricity grid stuttered under the extreme cold.

Monday, as a record-breaking cold snap whisked over the U.S., the Electric Reliability Council of Texas (ERCOT), the state’s grid operator, warned of possible blackouts, just as they did in 2011.  We were lucky this time, but in February of 2011 we were not, and blackouts occurred throughout the state.

ERCOT’s warning meant that the grid's power reserves “dropped below a comfortable threshold,” and the "system was just one step away from rolling blackouts” as the need for energy outpaced supply.  As these blackout threats loomed, two power plants succumbed to the cold and went down.  The loss in capacity amounted to about 3700 megawatts (MW), with 1800 MW lost due to the cold.  According to Dan Woodfin, ERCOT’s Director of System Operations, “if we had lost another unit it would have put us into an Energy Emergency Alert Three” – the stage that prompts rolling blackouts.  This is unnecessary and unacceptable. Read More »

Posted in Demand Response, Renewable Energy, Texas | Also tagged , , , , | 2 Responses, comments now closed

Debate Over a Changing Texas Energy Market Heats Up at Senate Natural Resources Committee Hearing

Marita MirzatunyOver the past two years, Texas’s changing energy landscape has been a focus of EDF’s work.  In our Texas’ Energy Crunch report from March 2013, we highlighted that Texas has a peak capacity constraint – meaning that the power grid becomes strained when, for example, everyone is using their air conditioning units on hot summer afternoons.  This challenge, coupled with increased climate change and drought, signal the need to prepare by adopting a smarter grid and cleaner resources.

The Public Utilities Commission of Texas (PUCT) and the Electric Reliability Council of Texas (ERCOT) have been engaged in this conversation and various proposals have been laid on the table to determine what Texas’ energy future will look like.  EDF maintains the position that, whatever reforms are made, customer-facing, demand-side resources – defined here as demand response (DR), renewable energy, energy efficiency and energy storage – must play a key role to ensuring reliability, affordability, customer choice and environmental improvements.

Energy-Only Status Quo or Capacity Market or…?

Texas’ current energy-only market structure pays power plants only for the energy they produce.  This is beneficial in that generators are not overcompensated, but the downside is that energy companies aren’t incentivized to build in Texas and energy management providers (DR companies) are not viewed as equal players.  Energy prices are low due to an upsurge in cheap, abundant natural gas and wind – and without a guarantee for a high return on investment, companies will not take the risk of constructing costly new power plants. Read More »

Posted in Demand Response, Energy Efficiency, General, Renewable Energy, Smart Grid, Texas | Also tagged , , , , , , | Comments closed

What Does It Mean For Energy Efficiency To Be A Resource In Texas?

We’ve discussed the potentially grave impacts of the Texas Energy Crunch in a number of our previous blog posts. Time and time again, we repeat that the cheapest, cleanest and most reliable energy resource is the energy we save through energy efficiency. But our energy efficiency programs in Texas are still modest compared to other states. Beyond politics, there is another key issue limiting our state’s energy savings: Texas does not treat energy efficiency as a ‘resource.’

Traditionally, energy efficiency is left ‘invisible’ to utilities and grid planners—so they lose count of its many benefits. Treating energy efficiency as a resource, instead, puts it on a level playing field with other energy resources, such as power plants. This allows utilities to realize the unique benefits energy efficiency has over other energy sources.

Energy efficiency can reduce harmful greenhouse gases, save people money and create jobs – and it is extremely competitive with other energy resources. When the energy saved through efficiency is weighed against new energy resources, efficiency upgrades to buildings and homes generally weigh in at just one-third of the cost of building a new fossil-fuel power plant. On top of that, energy efficiency upgrades can eliminate the need to install or replace other expensive electric grid equipment. This cost-savings is one of the many benefits generally overlooked by utilities and electric grid planners.

Part of what prevents electric grid planners from counting efficiency as a resource in Texas is the way that the energy market is structured. When Texas deregulated its energy market in 1999, the aim was to increase options for customers and lower prices. Efficiency programs were not included in the new market structure. Instead, they were left for transmission and distribution utilities (TDUs), the “wires” companies that deliver electricity from power plants to customers, to manage. With efficiency left out of the restructured energy market, the Public Utility Commission of Texas (PUC) and other state leaders tend to view efficiency programs as subsidies that exist outside of the market. Read More »

Posted in Demand Response, Energy Efficiency, Smart Grid, Texas, Utility Business Models | Also tagged , , , , , | 3 Responses, comments now 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 Demand Response, Energy Efficiency, Texas | Also tagged | Comments closed

Wind Update: The PTC And A Christmas Day Record

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

Source: Houston Chronicle

Good news came out of the fiscal cliff ordeal last week when Congress voted to extend the Production Tax Credit (PTC) for renewables, which had expired on January 1. While the 2.2 cent-per-kilowatt-hour credit has only been extended through 2013, it provides some certainty to an industry that was holding its breath. As we’ve discussed previously, while the tax breaks for the oil and gas industry are written into the permanent tax code, the credits for wind and other renewables are not. Created under the Energy Policy Act of 1992, the PTC income tax credit is allowed for the production of electricity from utility-scale wind turbines, geothermal, solar, hydropower, biomass and marine and hydrokinetic renewable energy plants.

While this extension through the year does not appear to provide a great deal of long-term certainty, my colleague Colin Meehan points out that “an important distinction with this extension is that prior to 2013, the tax credits were awarded to facilities operational by the end of 2012. The extension now applies to facilities for which construction begins by the end of 2013. As a result, this is more like a two-year extension.” Cameron Fredkin, director of project development at Cross Texas, further emphasizes the point by highlighting that “the key provision in the extension is the requirement to begin construction in 2013 versus previous one-year extensions that required wind developers to complete construction and begin operations in 2013. Wind developers in the Panhandle region in the interconnection study process would have had difficulty achieving commercial operations in 2013.”

According to the American Wind Energy Association, “America's 75,000 workers in wind energy are celebrating over the continuation of policies expected to save up to 37,000 jobs and create far more over time, and to revive business at nearly 500 manufacturing facilities across the country. Half the American jobs in wind energy – 37,000 out of 75,000 – and hundreds of U.S. factories in the supply chain would have been at stake had the PTC been allowed to expire, according to a study by Navigant Consulting.”

As I wrote back in November, many of those projects and jobs that were on the line while Congress delayed are here in Texas. In Amarillo, Walt Hornaday, president of Ceilo Wind Energy, said the tax credit helped “dust off projects [they] had put on the shelf.” Hornaday says he is “impressed wind was in the bill with big-ticket items like Medicaid and the Farm Bill. It used to be wind wouldn’t have a chance to be included. I thought we’d be left out in the cold.” According to The Hill, “The wind industry has floated a phase-out plan for the credit as a way to cement some stability and avoid annual battles to extend the credit. Securing the extension now sets the table for those discussions.”

Andy Geissbuehler, head of Alstom’s North American wind business, a manufacturer of wind turbine equipment, believes that “the extension of the Production Tax Credit for wind power is a positive development for our company, our customers, and the many workers across the country employed directly and indirectly by the wind power industry. As an equipment supplier, we stand ready to provide the equipment that can be manufactured in our Amarillo facility to project developers across North America. We remain optimistic about the long-term market for wind power market in North America, especially now that the U.S. Production Tax Credit has been extended another year.”

One possible casualty of Congress’ stalling is the $5 million, 80,000-square-foot facility left behind by Zarges Aluminum Systems. The German company planned to produce wind tower components, such as ladders and platforms. A spokesman at the time blamed the recession and uncertainty regarding the tax credits as well as low natural gas prices for putting pressure on its customers and the company itself.

This extension comes at a time when wind set a new record in 2012 by installing 44 percent of all new electrical generating capacity in America, according to the Energy Information Administration, leading the electric sector compared with 30 percent for natural gas, and lesser amounts for coal and other sources. Here in Texas, wind set another record, providing 8,638 megawatts (MW) of power on Christmas Day, with 6,600 MW coming from West Texas wind farms and 1,600 MW coming from the Texas coast. This adds up to nearly 26 percent of the system load, which is 117 MW higher than the previous record set in November 2012.

As Kent Saathoff, vice president of grid operations and system planning at the Electric Reliability Grid of Texas (ERCOT), points out, "Unlike traditional power plants, wind power output can vary dramatically over the course of a single day, and even more so over time. With new tools and experience, our operators have learned how to harness every megawatt of power they can when the wind is blowing at high levels like this."

Those new tools and experience are exactly why the PTC is an important component of this emerging energy sector’s ability to grow and innovate, especially as ERCOT reviews an additional 20,000 MW of wind power capacity. This is in addition to the more than 10,000 MW it already has installed, which is the highest amount in the nation.

Posted in Renewable Energy, Texas | Tagged | 2 Responses, comments now closed

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

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 | Also tagged | 1 Response, comments now closed