U.S. Electricity Grid Watchdog to ERCOT: You Aren't Doing Enough to Keep Lights on in Texas

Categories: Biz

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Gerry Cauley, the chief executive of the North American Electric Reliability Council, the national, industry-funded grid-integrity watchdog, is pretty worried about Texas. Power-reserve margins here have slipped below the levels recommended to meet peak demand, and future projections show it will only get worse. What's more, he says in a January letter, it isn't entirely clear just what Electric Reliability Council of Texas (ERCOT) plans to do about it.

Cauley wants a report outlining a strategy by the end of April.

To be sure, coal-fired power plants across the nation are expected to shutter mostly because of low electricity prices and yet-to-be-enacted rules that will eventually slash the tons of mercury and arsenic emitted from their smokestacks every year. But only in Texas is this predicted to raise the specter of rolling blackouts. The Public Utility Commission of Texas has tried to deal with this by raising the ceiling on wholesale electricity prices and paying larger industrial customers not to use power during peak demand. Yet that hasn't been enough to span the widening gap between power generation and the demands of a growing state.

And it certainly hasn't convinced prospective financiers to pony up for new power plants. Unique among the nation's electricity grids, Texas has a deregulated system in which power generators recoup their investments only through the sale of electricity. And lately, the going price has been cheap, largely thanks to the low price of natural gas, which often sets electricity rates. During boom times, a deregulated market can be lucrative for generators. These days, though, it sometimes doesn't pay to even run a coal-fired plant.

Since deregulation, Texas has gone from boasting robust power-reserve margins to being singled out by NERC for having the worst.

Greg Platt, vice president of Cobisa Corp., which wants to build a 1,750-megawatt gas-fired plant in Greenville to service Dallas, says the smart money isn't coming to Texas. "What we hear from the lenders and investors who are experienced in financing these type of power facilities is that raising the price cap is not enough," he writes in an email to Unfair Park. "What raising the price cap does do is make existing plants worth more. The financing community needs some assurance (note: not 'guarantee') that their investment will be repaid over time and the current ERCOT wholesale market does not provide that."

A capacity market -- where ratepayers pay generators a monthly fee to build plants and ensure ample reserve margins -- is one way to do it, he says.

"The financiers are happy to invest in other domestic and foreign markets until the ERCOT market changes."

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11 comments
Sotiredofitall
Sotiredofitall topcommenter

"Since deregulation, Texas has gone from boasting robust power-reserve margins to being singled out by NERC for having the worst."  Anyone gonna confront our constantly re-elected state officials (and gubernor) about their past approval of this disaster?

ThePosterFormerlyKnownasPaul
ThePosterFormerlyKnownasPaul topcommenter

" A capacity market -- where ratepayers pay generators a monthly fee to build plants and ensure ample reserve margins -- is one way to do it, he says. "

Well they pretty much used the "lower prices in a competitive marketplace" to suck the money out of our wallets; now they have come up with a new way to vacuum the money out of our wallets. 


We pay for electricity based on the highest cost supplier, now I guess we will  be paying for the plants according to the highest cost of capital.


As far as I am concerned, we have two choices.  One is to go back to the regulated utility model and the other is to tie in ERCOT to the neighboring power pools.


Now where is that catalog for solar power panels and gas fired base load generators?

mcdallas
mcdallas

Texas energy plan: 

Y'all come on over here and let's take our assault rifles and fire at the windmills, making them spin a whole buncha real fast.  Those windmills make electricity, right?

roadsidecouch
roadsidecouch

How about we tell the EPA to go to hell and fire up the coal fired turbines?  After all, we have the largest alternative energy generation in the country by far.  But you have to have something in reserve for when the sun don't shine and wind doesn't blow.  Maybe we should just tear down all those wind turbines and go with a more reliable power source.

CitzenKim
CitzenKim

I guess in this great business-friendly state of Texas, the rulers will next turn over water supply to private concerns.  And when they decide one Summer that they can't make a profit, we'll all just die of thirst.

Scruffygeist
Scruffygeist

For the love of little baby Jeebus in his manger with his now obsolete Josh Hamilton jumper, please find a new stock photo for power posts. You've used it almost as many times as Jim's been called a libtard.

scottindallas
scottindallas topcommenter

@mcdallas Sadly, not in Summer.  If we'd spent what we did on wind, on new Natural Gas Plants, we could shutter the dirty coal plants and we'd be far cleaner. 

scottindallas
scottindallas topcommenter

@roadsidecouch sadly, the wind only blows 10% of the time.  And, it tends to be when the sun IS shining and our demand is highest.

A-nony-mouse
A-nony-mouse

@roadsidecouch 

It's not the EPA that is killing coal plants, it's the "free" market. The price of electricity is set by the price of natural gas. Because the drilling companies have become so good at extracting natural gas, we have a major overabundance of supply and so the price of natural gas is very cheap. So cheap in fact that the cost of mining and shipping coal makes it a more expensive option even before you bring operating costs (including regulation) into it.

So people who say "let the market decide" got what they wanted. The market has spoken and coal plants lost.

scottindallas
scottindallas topcommenter

@CitzenKim that's most likely the biggest issue confronting the next State Legislature. 

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