Texas Pushes To Boost Peak Power Demand; Grid Experts Warn Law Will Backfire
The Texas state government is pushing legislation to boost electricity supplies during peak demand summer periods, but grid experts are warning would be counterproductive and trigger more unreliability.
The state’s Senate passed a package of bills last month designed to address growing concerns that the state’s power sector doesn’t have an adequate amount of dispatchable fossil fuel energy generation that would provide electricity during emergency peak periods. [emphasis, links added]
GOP Lt. Gov. Dan Patrick, who presides over the Senate, said the package “levels the playing field” between intermittent renewables and dispatchable generation.
However, experts said one of the bills, SB 2012, includes so-called guardrails that could ultimately sink efforts to incentive energy companies to develop new dispatchable power facilities.
The bill caps the state Public Utility Commission’s (PUC) proposed performance credit mechanism (PCM) — a novel system that would reward generators that provide reliable energy during high-demand times — at $500 million annually.
“Senate Bill 2012 is designed to end PCM,” Brad Jones, the former president and CEO of the Electric Reliability Council of Texas (ERCOT), told Fox News Digital in an interview. “It’s called a guardrail bill, but it’s nothing similar to a guardrail. That’s just because it sounds good to say ‘guardrail.‘ It’s actually designed to kneecap the PCM proposal.”
Jones argued that, while estimates place the average cost of the PCM program at about $460 million per year, there would be years when costs far exceed $500 million depending on weather conditions, meaning it would be hard to consistently keep costs below the cap every year.
Overall, Texas has a roughly $40 billion power market with annual load growth of about 2%.
“Texas will face reliability concerns in the very near future, probably about 3 to 4 years away — the alarm has already been sounded that we’ve already crossed that threshold,” he continued.
“I think there’s a line in the sand. We stepped across it. If we continue to proceed in that way, we will face real reliability concerns in the future. That’s what they’re trying to avoid.”
A trade group coalition of Texas Competitive Power Advocates — which represents power generators, wholesale power marketers, and retail providers — and the Alliance for Retail Markets stated in a policy brief in March that SB 2012 provisions are “anti-market in nature and would undercut the PCM.”
The debate over SB 2012 comes months after the PUC voted unanimously in January to adopt a PCM system without a cap, arguing it would strengthen the reliability, accountability, and affordability of the Texas grid.
But the commission said it would hold off on implementing the credit until the state’s legislature provided guidance.
Following the announcement, various power companies announced they were prepared to build thousands of megawatts worth of dispatchable generation contingent upon the PCM being implemented.
Chris Moser, the head of competitive markets and policy at billion-dollar electric generation company NRG, “Having a functional PCM is a critical step” to the company’s development plans. …snip…
“On the hottest days of summer, there is no longer enough on-demand dispatchable power generation to meet demand in the ERCOT system,” [state Sen. Kelly Hancock] said.
“From 2008 to 2020, Texas’s on-demand dispatchable power supply grew only 1.5%. In that same timeframe, our population grew 24%. The increase in demand for electricity is outpacing the supply of on-demand dispatchable power.”
He noted that, on the hottest summer nights, when solar power generation declines, the state’s grid will largely depend on wind conditions to cover the gap.
“We are expecting to have to rely more on renewables during peak conditions than we ever have before,” added Pablo Vegas, the current president and CEO of ERCOT. “As a result of this dynamic, this summer could have tighter hours than last summer with a higher risk of emergency operations.”
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