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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 / 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.

Also posted in Demand Response, Energy Efficiency, Texas, Utility Business Models / Read 1 Response

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

By / 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.

Also posted in Natural Gas, Texas / Read 1 Response

Guest Blog: The Devil In The Design – Energy And Climate Policy Design Matters More Than You Might Think

By EDF Blogs / Published: April 23, 2012

By: Guest Blogger Joe Indvik, ICF International

Policy design matters. But all too often, this notion is ignored by political pundits and belittled by policymakers in favor of flashy claims about the morality of a policy type. Like the latest sports car, a policy is usually touted as either a gem or a dud based on its superficial image, with only marginal public interest in looking at what’s actually under the hood. On the contrary, data-driven analysis of the inner workings of policy design will be the key to smart solutions on the road ahead for climate and energy policy the U.S.

The Waxman-Markey cap-and-trade bill of 2009 is a prime example. Claims about this former centerpiece of the American climate policy debate ran the gamut of dramatic generalization. They ranged from accusations of a job-killing socialist scheme that “would hurt families, business and farmers—basically anyone who drives a car and flips a light switch” to claims from hopeful environmentalists that any cap would be better than nothing. Discussion on the actual design of the bill was all but absent from the limelight. Energy policy discourse is often dominated by these combative back-and-forths, which focus on oversimplified notions of whether a policy would be good for the country while glossing over the practical nuances that make all the difference. Read More »

Also posted in Climate / Tagged FIT, Renewables, RPS, Solar, Solar Energy, Solar PV, Wind, Wind Energy | Read 4 Responses

A Triple Bottom Line for the Central Valley: Environment, Economy, Equity

By Jorge Madrid / Published: February 21, 2012

This week the Air Resources Board (ARB) held a public workshop in Fresno, California, to gather public input on ways to invest proceeds from California’s cap-and-trade auction. ARB heard from a wide variety of individuals and organizations with bright ideas on how to spend this money on projects that can lower greenhouse gases (GHG) and maximize the benefit to disadvantaged communities who are the most vulnerable to climate change and pollution impacts.

I represented EDF at the workshop, and an extended version of my public comments follows:

Also posted in California, Cap and Trade, Clean Energy, Energy Efficiency, General, State / Comments are closed

Clean Energy And The 2013 Budget Proposal

By Marita Mirzatuny / Published: February 15, 2012

Source: EcoWatch

In his State of the Union Address last month, President Obama made energy issues a focal point. Taking a clear stance, he said that it was time to “end the taxpayer giveaways to an industry that’s rarely been more profitable, and double-down on a clean energy industry that’s never been more promising.” With this statement, President Obama is addressing the reality that government support for new energy sources is the lowest it has been in any point in U.S. history, according to a report by DBL investors. “During the early years of what would become the U.S. oil and gas industries, federal subsidies for producers averaged half a percent of the federal budget. By contrast, the current support for renewables is barely a fifth that size, just one tenth of one percent of federal spending.”

Going further in addressing climate change the President said, “I know that there are those who disagree with the overwhelming scientific evidence on climate change. But here’s the thing. Even if you doubt the evidence, providing incentives for energy efficiency and clean energy are the right thing to do for our future, because the nation that leads the clean-energy economy will be the nation that leads the global economy, and America must be that nation.”

On Monday he unveiled his budget proposal for FY 2013. So, how does it hold up to the goals of his speech with regards to a clean energy future?

The Good News:

– The world’s largest energy consumer, the Department of Defense (DOD), would receive approximately $1 billion for energy conservation efforts. This would further the DOD’s increasing commitment to renewable energy which now makes up 8.5 percent of its energy production and procurement.

– With a 3.2 percent increase from the year before, the budget proposes $27.2 billion for the Department of Energy. Of that:

Research and development for energy efficiency, advanced vehicles and biofuels would get $2.3 billion
Renewable energy sources will get a $522 million increase and an additional $174 million for a revamped industrial technology-advanced manufacturing program.
$12 million would be directed towards multi-year research investments in safer natural gas infrastructure in order to reduce risks associated with hydraulic fracturing in shale formations.
Furthermore, pipeline safety would receive a 70 percent, $64 million, increase.
This 3.2 percent increase comes just as a report vindicates the DOE loan program, confirming that the “overall loan portfolio as a whole is expected to perform well and holds less than the amount of risk envisioned by Congress when they designed and funded the program.” Energy Secretary Steven Chu states that, “we have always known that there were inherent risks in backing innovative technologies at full commercial scale, and it is very likely that there will be other companies in the portfolio that won’t succeed. But the vast majority of companies are expected to pay the loans back in full, on time and with about $8 billion in interest — while supporting a total of 60,000 American jobs and helping us compete for a rapidly growing global industry.”

The Bad News:

– Seeming to cave to current attacks, the fiscal 2013 budget proposes stifling cuts to the Environmental Protection Agency (EPA):

Reducing current agency funding levels by $105 million, the EPA is slated to receive $8.3 billion. This would make for the first time since 1994 that the agency’s budget was cut for three consecutive years.

– Counterproductive cuts to USDA’s Natural Resources Conservation Service:

Proposed cuts for Farm Bill conservation programs would be about $600 million.
Already Congress has cut conservation funding by $2.8 billion over the last five years, representing 81 percent of the nearly $3.5 billion in Farm Bill spending cuts over that time period(FY 2008-2012).

Despite some disappointment, overall we at EDF are pleased that the President chose to not only speak to the importance of a clean energy future but that his budget reflects this as well.

Elgie Holstein, our senior director for strategic planning here at EDF and a former associate director of the Office of Management and Budget for Natural Resources, Energy and Science, sums it up well, “despite some flaws, the president’s budget is a big net plus for the environment, and we urge Congress to embrace the positive aspects of it.” That latter part will be the true challenge.

Vice president of EDF’s Energy Program, Jim Marston continues: “The fact is: clean energy and responsible environmental policy make good economic policy as well because they create jobs, while cutting energy and medical bills for American families. Look at it this way: environmental conservation is cheaper than environmental cleanup, just like preventive medicine is cheaper than emergency room treatment. We applaud the President’s support of job-creating, clean energy programs.”

The President understands that getting our energy future on the right path is an essential foundation that our country needs to be competitive, provide jobs and protect our health and environment.

Also posted in Climate, Energy Efficiency, Natural Gas, Washington, DC / Read 2 Responses

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

By / 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.

Also posted in Energy Efficiency, Grid Modernization, Texas / Tagged ERCOT | Read 1 Response