Texas is seeing record June heat, reminiscent of the scorching summer of 2011, and record electricity demand is being forecast. After the disaster in February 2021, many Texans are wondering how long the grid will be able to handle the state’s growing electricity demand.
They’re right to wonder, and while the Texas grid should pass its test this week and the rest of this summer, the long-term picture will continue to deteriorate until the Public Utility Commission of Texas (PUC) requires wind and solar generators to pay for the reliability costs they are imposing on the grid.
The heat waves this week and a few weeks ago illustrate exactly why the Texas grid is becoming less reliable. The first factor in play is growing demand. While the Electric Reliability Council of Texas (ERCOT) has been consistently over forecasting peak demand this year, it is safe to say that the August 2019 record of 74,820 megawatts will be broken tomorrow as temperatures top 100 degrees throughout the state.
The second factor is wind generation that does not line up with demand. At the same time demand peaks tomorrow, wind generation is forecast to drop to 6,000 megawatts, less than 20% of its installed capacity and much less than the 9,363 megawatts ERCOT expects from wind during peak summer periods.
Thankfully, our natural gas, coal, and nuclear fleets will be operating well above 90% of their installed capacity because most power plant operators were able to complete their annual maintenance on time. And the 11,000 megawatts of solar generation built over the past few years, while not useful during winter storms or at night, will be helpful during peak afternoon hours both this week and throughout the summer. Therefore, the Texas grid should be able to handle the heat tomorrow without calling on emergency resources or conservation.
Demand could soar even higher on Monday, but tomorrow will be a much stiffer test for the grid. Why? Because the wind is expected to blow a lot on Monday, producing more than 70% of its installed capacity.
This situation is a repeat of what happened a few weeks ago, when wind generation dropped from over 20,000 megawatts to less than 5,000 megawatts, leading ERCOT to cautiously call for conservation. The mainstream media was fixated on 2,900 megawatts of gas power plants that suddenly went offline while ignoring the five times larger drop in wind generation.
What was also not reported anywhere was that ERCOT put out the conservation appeal on the day of lowest demand that entire week. The drop in wind output, not high demand or a few power plants that unexpectedly failed, was by far the largest driving factor in the stress on the grid that week.
These events highlight the fundamental problem facing the ERCOT grid and electric grids across the country. When we are replacing gas and coal generators—which can consistently operate with greater than 90% availability during peak demand periods—with a resource like wind, which can vary from less than 10% to more than 80% availability, it is no wonder our grid is becoming more fragile. We can predict wind output fairly well a week in advance, but we don’t know how much electricity wind will produce on the hottest days a month or two from now, or during the coldest days next winter.
This variance in wind and solar output is also leading to more and more variance in prices. Wholesale electricity prices, which may reach their $5000/MWh maximum tomorrow afternoon, were negative for several hours Sunday night because of high wind output outpacing demand. They might be negative again next week when the wind picks back up.
Given these massive and unpredictable swings in prices, it’s no wonder that Texas, which sits on an ocean of natural gas, is not building gas-fired power plants to stabilize its grid. Power plant developers cannot predict their revenue from year to year, much less 20 years into the future, and ensure that they can get a return on their investment.
In contrast, wind and solar generators are being built because they benefit from massive federal subsidies and often have guaranteed offtake contracts with large commercial and industrial users or municipal power utilities, all of whom want to claim they are 100% powered by renewable energy. Of course, those claims omit the fact that we are all paying for backup power to support the grid when the wind and sun aren’t available.
And therein lies the problem that the Public Utility Commission of Texas (PUC) must solve. Who pays for the extra backup power to support the explosive growth of wind and solar on the Texas grid? Right now, no one is paying for it, and the reliability of the grid is degrading as a result.
The PUC is embarking on a redesign of the ERCOT market in an attempt to ensure that the grid has adequate resources to meet growing demand. However, the current proposals are fatally flawed because they impose no discipline on the growth of wind and solar generation, instead placing the cost of ensuring reliability entirely on ratepayers.
Unfortunately, any plan that put reliability costs solely on Texas ratepayers will end up chasing wind and solar subsidies with subsidies for reliable backup power, just as California and Germany are doing. Texas electric rates are already skyrocketing, and in a couple years, our electric bills will start to look like California’s instead of the low-cost electricity we are accustomed to.
The ERCOT market has invested over $60 billion of private capital in new wind and solar generation, on top of billions in federal subsidies. It’s not hard to imagine our electric system being more affordable and reliable if $30 billion of that $60 billion was invested in more reliable generation and resiliency. The PUC is saying we need more investment, but what we need is smarter investment.
The most cost-effective way to fix this investment problem is to require wind and solar generators to purchase backup power or energy storage and to bring their variability more in line with that of gas and coal generators. This requirement will impose appropriate discipline on the growth of wind and solar by ensuring that new wind and solar generation is not increasing the variability of our supply of electricity.
The Life:Powered team was calling for this reform long before February 2021. The Texas Senate and Governor Abbott called for it almost a year ago, but the PUC is currently not even studying it. It is time for the PUC to stop avoiding the problem and finally get it right. The future of the Texas grid depends on it.