ERCOT Study: Why?

I am perplexed. Texas news headlines are hyping the phrases “big electric bill” and “tax could raise bills,” misleading ratepayers everywhere and leaving out a big chunk of the whole story.

ERCOT released its “analysis” of the impacts of CO2 legislation on Texas this week and I’m not really sure what it’s an analysis of, except maybe some bizarre world in which the only option available for reducing carbon emissions in Texas in the next five years is switching entirely from coal-fired electricity to natural gas-fired electricity.

The whole story? In its much-publicized study, ERCOT failed to incorporate carbon offsets, energy efficiency or the impact of renewable energy beyond what is already planned, in the current bill before congress.

In fact, in the first paragraph of the paper, ERCOT acknowledges that it has not attempted to determine the equilibrium price of allowances, which is one of the fundamental benefits of using free-market economics to drive innovation and decision making in reducing greenhouse gasses. 

To put it simply, what ERCOT is saying is: “There are a host of inexpensive ways to reduce greenhouse gas emissions under the Waxman-Markey bill. We have not analyzed any of those.”  Given the statement Commissioner Smitherman, who requested the report, gave the Dallas Morning News, I can understand why ERCOT may have focused on such a narrow portion of the legislation. “I’m more concerned about climate change legislation than I am about climate change,” he said.

This tells me two things. First, the report did not look at the real full impact of the legislation, which the EPA says in its report would cost the average household about $98 per year. Second, Commissioner Smitherman hasn’t been listening to all of the scientists and economists who talk about the costs of inaction and stress that the agricultural sector in Texas alone stands to lose $3.6 to $6.5 Billion if we do nothing to address climate change.

And that’s just the beginning. While the ERCOT report fails to figure in the least expensive solutions to reducing our GHG emissions, it does go on to say that people will use less energy and the impact of that – along with all the extra wind generation the good people of Texas had the foresight to build transmission for – will save us a total of 60 percent of ERCOT’s projected “costs” of the Waxman-Markey bill. 

None of this of course looks into the combined impact of Senator Watson’s SB 541 and Senator Fraser’s SB 545, which will develop solar in that same expanded transmission zone, and other renewable energy around Texas.  I can tell you that it would have a similar or greater impact on reducing our GHG emissions.  In total, this could lead to a reduction of 90 percent of ERCOT’s projected costs if Texas takes back its lead in renewable energy. Of course, I haven’t even mentioned all of the studies showing that energy efficiency (a net money saver for customers) and agricultural offsets could meet all of our emissions goals through 2030, saving even more money than renewable energy and supporting our agricultural jobs.

What all of this tells me is that ERCOT has looked at the most expensive way for Texas to meet it’s carbon reduction goals, even though vastly cheaper options exist that will create an entirely new clean energy economy instead of giving all of our money to the oil and gas industry.  The only question I have left for ERCOT is why?  Why leave out the cheapest solutions in “analyzing” an inherently market-based policy that will focus only on the cheapest solutions?