ORIGINAL REPORTING: Reliability Anxiety In Texas
ERCOT's reliability anxiety: Energy groups square off on what's to blame; Attack on renewables incentives as the cause of reliability issues offers a "study 'em all!" compromise
Herman K. Trabish, April 30, 2019 (Utility Dive)
Editor’s note: The bills reported on here were help back by Texas renewables advocates, the fight is far from over and everyone involved expects more of the same in the next legislative session.
With natural gas and Variable wind now nearly two-thirds of the Texas energy mix, Texans are beginning to worry about whether the Electric Reliability Council of Texas (ERCOT) can keep the power flowing. And they are looking for someone to blame. ERCOT, the state's grid operator, navigated last summer's record demand spikes with an 11% reserve generation margin, well below the Public Utility Commission of Texas (PUCT) 13.75% target, as the existing fossil fuel generation that has traditionally served reliability is priced out of the market by low cost natural gas and renewables.
With the reserve margin falling, anxiety about meeting peak demand is rising for Texas policymakers who will hear from voters if the air conditioning goes off during this summer's demand surges. This reliability anxiety has sparked a debate about which of the state's various energy incentives are causing the grid's potential shortcomings.
When demand spikes, prices rise and reserves fall as more generation is brought online, threatening the reliable delivery of electricity. In response, ERCOT increases the market price to stimulate supply. To better understand the dynamics of these temporary market distortions, some lawmakers have introduced bills calling for a study of the impact of renewables incentives. But renewable energy advocates say the more useful study would be of the impacts of all energy incentives because U.S. Department of Energy research has shown it is natural gas and not renewables that is causing the Texas reliability anxiety.
The most highly debated bills, among a range of legislative efforts, are those calling for a study on the impacts of federal tax credits for wind and solar because high wind penetrations can determine when peak demand requires ERCOT to exercise market mechanisms to increase the power supply, Texas Association of Manufacturers (TAM) Attorney Katie Coleman told the state Senate Committee on Business and Commerce April 2. TAM, which includes manufacturers who use natural gas, supports a study of how wind's rapid growth, driven by federal and state "subsidies," has led to "increased price volatility" and "market distortions." Senate Bill (SB) 2232 would order that study.
These studies would likely lead to recommendations by the PUCT and ERCOT about changes to incentives or market rules to better address reliability. Renewables advocates do not completely object to these bills, but say the proposed studies would not go far enough. "All energy incentives deserve study and a review of their impacts," Advanced Power Alliance President Jeffrey Clark told the committee, adding that Texas has not studied the full spectrum of energy incentives since 2008, "when the state comptroller's study showed that 96% of the state and federal incentives went to fossil fuels."
ERCOT and the PUCT are already working on solutions to the state's supply challenges. The Operating Reserve Demand Curve (ORDC), ERCOT's mechanism to protect reliability, responds to falling reserves with an "adder" to the market price. With this year's summer reserves forecast at an all-time low, the commission ordered ERCOT to "adjust" the ORDC formula to boost short-term supply, PUCT External Affairs Director Andrew Barlow emailed Utility Dive… click here for more
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