Following the disastrous Winter Storm Uri in February, Texas lawmakers and energy experts set out to fix the power grid system and ensure reliability.
One of the key provisions pushed by the Electric Reliability Council of Texas and others was to require intermittent generators to pay for the ancillary services needed to keep the lights on. ERCOT’s newly announced plan provides for paying for these ancillary services, but the payment comes from the consumer rather than the lacking generators.
Institute for Energy Research CEO and founder Robert Bradley said the system has become overly reliant on energy that is unreliable. Bradley said serious trouble is not just possible, but likely.
“Texas has a wounded grid because of the high level of renewable penetration,” he said. “Wind and solar are dilute, intermittent sources that are parasitic to the ‘reliables’ of gas-fired, coal-fired and nuclear generation.”
Bradley said there is a solution to this self-inflicted malady.
“The state under the Public Utility Commission of Texas/ERCOT rules needs to stop new renewable projects from entering the grid unless they renounce all federal and state subsidies so that they are truly ‘economic,’” he said. “They are not. Just requiring full transmission pricing on the CREZ line will be a start. Secondly, existing wind and solar capacity needs to be retired as it wears out or becomes inactive otherwise.”
Studies show that renewable energy provides Texans with less than one-third of their power needs. Also, federal and state subsidies have long supported more traditional forms of energy.
In a recent statement, the Public Utility Commission of Texas announced it would respond to recent Texas power shortages by directing ERCOT to “significantly increase the amount of power on standby for the afternoon hours when summer demand is at its highest.”
This would be accomplished by purchasing extra “reserve power” from prompt and reliable generators. These reserves are commonly called “ancillary services.”
In addition, ERCOT plans to force power plants to produce power at cost, a process known as a Reliability Unit Commitment.
“In keeping with the PUC’s direction, our new standard process is to pull the trigger much earlier to help avoid potentially tight grid conditions,” said ERCOT interim president and CEO Brad Jones. “For Texans and Texas businesses, this simply means that the electricity is there when they need it.”
Energy Alliance policy director Bill Peacock, an opponent of renewable energy sources, has written about what he considers the unreliable nature of intermittent generators. During the winter storm that plagued Texans with lengthy power outages, Peacock noted “the more wind and solar you get onto the grid, the more problems you're going to have with reliability.”
He described how the storm not only contributed to increased demand, but it also created weather conditions that made renewable energy generators unable to operate at even their already diminished expected levels.
Texas Railroad Commissioner Wayne Christian warns against being impressed by Texas' 30 gigawatt capacity of renewables. He told Austin News that those 30 GW have "always been an illusion.”
Christian recounted how renewable generation dropped dramatically even before Uri hit Texas due to its “inherent unreliability.”
State Sen. Kelly Hancock's (R-North Richland Hills) statement of intent on Senate Bill1278 describes how unreliable generators paying for ancillary services are key in ensuring grid reliability. He noted that, unlike thermal generators, renewable sources of electricity are intermittent by nature and cannot be relied upon by ERCOT to meet a given demand in all circumstances.
“Intermittent generation, mainly wind and solar resources, cannot be ‘dispatched’ by the Electric Reliability Council of Texas (ERCOT). This can make it look like we have a lot of installed generation capacity, but much of it cannot be relied upon because it is only there if the sun shines or the wind blows,” Hancock wrote in an explanation of the bill. “ERCOT cannot tell these intermittent generators to provide power at any specific level, including during peak demand periods [Texas sets a new peak demand nearly every year because of population and economic growth].”
Currently, there are no consequences for intermittent generators when they do not produce their expected level of energy. SB 1278 requires these generators to pay for the costs they impose on the market instead of passing these expenses along to the consumer. ERCOT’s plan to pay for ancillary services would pass the expense onto Texans. SB 1278 died in committee during the regular legislative session.
According to the Houston Daily, Texas Gov. Greg Abbott directed the PUC to support infrastructure for natural gas, coal, and nuclear power. Furthermore, Abbott also ordered that reliability costs should be allocated to producers of energy that cannot guarantee reliability, like wind and solar.
Bradley said Uri, which caused a crisis that left millions shivering in the dark in February, killing scores of Texans and leaving billions in bills behind, and concerns about record heat in August, mean action is needed — and as soon as possible.
“The problem of blackouts makes the situation urgent,” he said.
Bradley is one of the leading experts on the history and regulation of energy market. He has testified before the U.S. Congress and the California Energy Commission, lectured at numerous colleges, universities, and think tanks around the country and had reviews and commentaries have been published in the New York Times, Wall Street Journal, and other national publications.
In addition to his work at the Institute for Energy Research, he is the energy and climate change fellow at the Institute of Economic Affairs in London, and an adjunct scholar at both the Cato Institute and the Competitive Enterprise Institute. He is a member of the academic review committee at the Institute for Humane Studies at George Mason University.
Bradley is the author of seven books, most recently “Edison to Enron: Energy Markets and Political Strategies.”
He received a B.A. in economics from Rollins College, where he also won the S. Truman Olin Award in economics. He received an M.A. in economics from the University of Houston and a Ph.D. in political economy from International College.
