Energy Exchange

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

By / Published: January 28, 2013

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.

Also posted in Natural Gas, Renewable Energy, Texas / Read 5 Responses

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

By / Published: January 14, 2013

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.

Also posted in Energy Efficiency, Texas / Tagged ERCOT, NERC | Comments are closed

Weathering The Storm Next Time: Gov. Cuomo’s NYS 2100 Panel Offers Smart Plan To Keep The Lights On, Emissions Down

By Andy Darrell / Published: January 10, 2013

Extreme weather and aging infrastructure came together with a vengeance in Sandy, showing the fragility of the basic systems that sustain this vibrant city and region. Like so many others, my family lost power, heat and water during Superstorm Sandy, and I watched out my window as a giant flash marked the moment that waters crested a 12-foot retaining wall at the 14^th Street ConEd plant.

New Yorkers are all too familiar with the devastation that followed, and the disruption that spread far beyond the water’s reach. As the immediate crises are resolved, our attention is now on the complex challenge of long-term resilience.

One big step: The NYS 2100 Commission, a panel of experts assembled by New York Gov. Andrew Cuomo back in November, just two weeks after the storm. EDF President Fred Krupp served on the commission, and our energy team prepared extensive recommendations on how to make our energy system more robust, resilient and adaptable. In yesterday’s State of the State address, he talked about the results.

As it turns out, some important solutions were right under our noses.

For example, amid the darkness and devastation, there were dozens of homes, businesses, even whole communities that kept their lights on and the water because they were designed to isolate breakdowns, heal quicker, and work with natural systems rather than against them.

Success stories were located across our region:

Lights stayed on for sixty thousand residents of Co-op City in the Bronx thanks to a combined heat and power plant that can operate independent of the grid. Ditto the office tower at One Penn Plaza, an apartment building at 11 Fifth Avenue, and large parts of the campuses at Princeton and NYU.
In Bayonne, NJ, the Midtown Community School used a combination of solar panels and a generator to offer a safe, warm place to stay for over 50 residents during the storm.
On Long Island, the Villani family kept their lights on thanks to a 4.8 kw solar array that happens to have a battery bank. “We had friends and neighbors coming over to charge phones and batteries,” Stephanie Villani said.
In lower Manhattan, the community group Solar one used solar panels to offer residents of Stuyvesant Town, the sprawling 35-building apartment complex, a place to charge their phones and computers.

Exceptions like these should be the rule next time. Unfortunately, today’s utility grid is set up to discourage more of these success stories – which are also cleaner and more efficient.

Source: Reuters

In fact, many buildings outfitted with fresh new solar arrays stayed dark thanks to cumbersome, outdated rules and regulations. Ironically, the solar panels were not making electricity when the grid was down, precisely because they were permanently connected to the grid and had to be shut down, rather than simply unhook when the larger system failed. So instead of sunshine, they were running on diesel power – if they were running at all.

Building a smarter grid, and encouraging clean, efficient ‘microgrids’ that provide islands of heat and light means fewer outages and faster recovery. A smarter grid would also have the intelligence needed to pinpoint outages, cordon off damage, and reroute power.

Clearing out the legal cobwebs and requiring utilities to unlock their grids more easily would make their systems stronger and more resilient in a crisis, and open the door for more efficient, renewable energy solutions. It would also open up opportunities for new ways to finance the upgrades needed to take full advantage of efficiency and renewables in today’s buildings.

(You can read EDF’s blueprint for a smarter, more robust grid here.)

Climate change means that higher sea levels and more extreme storms are the new normal. Unfortunately, some of this is already locked in. But we still have an opportunity to prevent the worst, most costly consequences by working together to reduce heat-trapping pollution. Superstorm Sandy reminded us of the need to prepare for a more challenging future. We need to make sure the steps not only protect against the impacts we can’t avoid, but also help prevent those we can.

Yes, we will have to fortify our buildings and infrastructure, change building codes and keep generators on hand in the face of extreme weather. But a lot of the steps we can take to keep the lights on during a crisis are also steps we can take to cut the pollution that is linked to climate change and extreme weather in the first place.

As we invest federal emergency dollars to rebuild, as we get ready for the next time – let’s make sure we’re taking every step that solves for both safety and less pollution at the same time. Efficiency, a smart grid, transparent information, renewables. Unlocking multiple benefits like these can help us rebuild better, faster and stronger. And lead the way for the world’s great cities, many of which are on the coast and in harm’s way just like New York.

My kids and I were lucky to weather the storm with just inconvenience. But as I think about how might live in a future New York City, I’d like to be sure that we’re doing everything we can now to run this town on safe, clean energy. The Cuomo commission report takes a big step in that direction: let’s join the Governor and the members of this commission in making its recommendations a reality. This is an opportunity that business, political and community leaders must not miss.

Also posted in Energy Efficiency, Grid Modernization, New York, Renewable Energy / Tagged Grid Resiliency, Superstorm Sandy | Read 1 Response

Shut Down The Texas Government (Power)!

By Marita Mirzatuny / Published: September 7, 2012

Source: Jon Rogers

These days it seems “shutting down” the government is a popular rallying cry in Texas. So, why not do it…er…or at least shut down the electricity when it’s not being used!?

As many of us enjoy the shortened work week due to the Labor Day holiday on Monday, I thought it would be a good time to look into what kind of demand response (DR) government buildings can participate in during holiday and seasonal closings.

We have discussed the benefits of both residential and commercial DR and governments can represent large or small entities depending on their size. The Texas Facilities Commission (TFC), responsible for “planning, providing and managing facilities for more than one hundred state agencies in over 290 cities throughout Texas,” has a current inventory totaling “24 million square feet of leased and state-owned properties.” Of that, offices make up about 6 million square feet across eight different cities.

These state agencies annually “consume over $200 million in electricity, which is procured and billed on thousands of separate accounts through various providers. In an effort to reduce these expenditures, the Office of Energy Management (OEM) is looking at ways to aggregate the State’s electrical load into fewer accounts, perhaps into just one. This strategic initiative could take advantage of negotiation opportunities, economies of scale, consolidation of facility loads and load scheduling resulting in the TFC saving thousands of dollars a year on electricity alone.”

Furthermore, the “OEM is taking a more expansive look at its resources, including purchasing, producing and distributing, and actual consumption. For example, it recently proposed aggregating the States electrical load to benefit from economies of scale, wholesale rates, reduced peak demand charges, and to acquire a more sophisticated rate structure and is currently studying the possibility of incorporating combined heat and power in its production.”

The TFC is also working with the General Land Office (GLO) to aggregate smaller state agency accounts to provide volume discounts for these accounts. Currently, smaller state agencies procure gas supplies from the local gas companies or in amounts from the GLO that do not render the economies of scale capable with the aggregate consumption with the TFC. By aggregating these smaller amounts, the TFC gets a better deal for the buildings under the TFC’s control and the other agencies. Read More »

Also posted in Texas / Comments are closed

Demand Response Means Big Money for Big Users

By / 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.

Also posted in General, Texas / Comments are closed

13:15

By Marita Mirzatuny / Published: August 13, 2012

Source: “ERCOT Investment Incentives and Resource Adequacy.” Brattle Group. June 1, 2012.

In January, we discussed the benefits of demand response (DR) and how Texas is not taking full advantage of it. Not only is DR a low cost, zero water source for providing capacity through conservation, but it can also actually directly benefit consumers financially. Furthermore, since residential and small customers account for “more than 70 percent of peak load” it is paramount that we tap into this resource.

The 13 Percent Reserve Margin

Fast forward to this summer, where a few factors have encouraged the situation as Texas’ energy crunch comes to light. In May, the 13.75 percent reserve margin became the center of discussion about how to proceed. Set in 2010 by the Electric Reliability Council of Texas (ERCOT) board, the 13.75 percent target planning reserve margin is to ensure enough power is available for contingencies such as extreme weather and unplanned power plant outages. However, a newly revised Capacity, Demand and Reserves (CDR) report shows that in 2014 we may be only at 9.8 percent and by 2015 this could drop to 6.9 percent, numbers that are very far away from the original goal. A failure to meet this reserve creates instability, not only for the ERCOT market as a whole, but that uncertainty ripples through the state for all businesses and households.

In June, the peak energy forecast for this summer was surpassed. ERCOT had predicted a 66,195 megawatt (MW) peak demand for the whole summer, but we surpassed that with 66,583 MW in June, well before the string of 100+ degree days we have seen recently.

The 15 Percent Potential From Demand Response

In June the Brattle Report came out reiterating FERC’s studies, which demonstrated that the potential for achievable participation in DR is 15 percent of capacity in Texas. This means that “dynamic pricing and load control technologies are deployed on an opt-out basis, with roughly 75 percent of customers participating.”

So if Texas met this DR goal of 15 percent it would be enough to cover our reserve margin of 13.75 percent and then some. Without new power plants. Without any new generation capacity at all. While in actuality we would rely on other demand side resources as well – such as distributed generation and storage – it is very important to point out the link between the 13/15 ratio, and how much potential demand response provides us.

Even better is that unlike other mechanisms that do not benefit consumers financially such as the price cap increase, DR and other demand side resources can provide large gains for consumers. Not only do they encourage reductions in energy consumption and thus energy bills, but because there is an added value in providing that “negawatt” capacity back into the system, customers are compensated. As we noted in an earlier blog, in the PJM market, $20 million of the payments went to residential customers!”

While there are still only a few of these initiatives around the country, the momentum is alive. Last year, FERC Rule 745 was established that “requires wholesale energy market operators to pay DR participants the market price for energy when those resources are able to balance supply and demand as an alternative to additional generation, and when DR dispatch is cost-effective.” This lays the foundation for how consumers will be compensated. FERC Chairman Jon Wellinghoff put it well, “[this] final rule is about bringing benefits to consumers. The approach to compensating demand response resources as we require here will help to provide more resource options for efficient and reliable system operation, encourage new entry and innovation in energy markets, and spur the deployment of new technologies. All of this contributes to just and reasonable rates.”

On June 26, ERCOT moved in the right direction by approving a DR pilot project that “will allow eligible participants a half hour to respond to ERCOT requests to reduce their electric use. The program is open to electric users — either as individual customers or as part of an aggregated group of consumers — who can reduce demand on the ERCOT grid by at least 100 kilowatts, which is the amount 20 homes use during peak demand.”

This follows a rule change adopted by the PUC in May that “authorizes ERCOT to conduct pilot projects to ‘evaluate resources, technologies, services, and processes that demonstrate the potential to advance the operational and market functions of the ERCOT system.’ This is the first pilot project approved under the new rule.” EDF commented on these rule changes and we are pleased to see ERCOT moving forward with these pilots. While many more deployments need to begin, we are headed down the right path and finally waking up the innovations needed in the energy market.

Also posted in Texas / Read 1 Response