Category Archives: ERCOT

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

By | Bio | Published: January 14, 2013

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.

Also posted in Demand Response, Texas Energy Crunch | 2 Responses

Wind Update: The PTC And A Christmas Day Record

By | Published: January 9, 2013

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.

Also posted in Texas Energy Crunch, Wind | Leave a comment