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Infrastructure Upgrades Mean Texas No Longer Wasting Wind Power

According to a report by the Energy Information Administration, curtailments of wind generated electricity in Texas have dropped steadily and substantially since 2011 thanks mostly to the state’s completion of 3,500 miles of transmission lines as part of the Competitive Renewable Energy Zones program.  A curtailment refers to an event where a power plant is asked to slow or stop feeding electricity to the grid.  This happens when the supply of electricity greatly outweighs the current demand for electricity.  When this happens electricity production has to be reduced (curtailed) in order to keep an oversupply of power from causing a disruption of the power grid.

Because wholesale electricity prices in Texas are allowed to fluctuate based on real-time market demand, prices for wind generated electricity have in the past sometimes gone negative.  This creates the odd circumstance where wind power producers actually pay market participants to accept their electricity.  This is only really possible in the world of wind power because federal production credits pay wind producers for every kilowatt of power they produce and sell to the grid; even if they are selling the power for a negative price.  Instances of negative pricing have also dropped substantially since the CREZ project was completed.

Texas experienced a boom in wind capacity from 2006-2009 resulting in the production of over 7,000 megawatts of wind capacity.  Since most of these wind turbines were built in West Texas and most of the state’s population is in the eastern part of the state, Texas experienced what is known as transmission congestion.  There weren’t enough large power lines and transmission equipment to get the power from the western part of the state to where it was needed in places like Dallas / Fort Worth, Waco, and Austin.

In an effort to address this imbalance between the available supply in the west and the demand in the east, the Texas Public Utility Commission in 2008 created a plan which established 5 zones where there was a lot of wind power in place or the potential for a lot of wind power.  These were called Competitive Renewable Energy Zones.  They then authorized a large number of projects to build massive new power lines to carry this electricity to the state’s businesses and homes.

The projects completed in 2013 with a total cost of around $7 billion.  Now that the Texas grid has the capacity to effectively move West Texas wind power across the state, curtailments of wind power have been substantially reduced, and occurrences of negative pricing have all but disappeared.  For 2013 wind generation in Texas was up 13%.

 

Lack Of Water Still A Concern For Texas Electricity Grid

Water scarcity continues to be a concern for the Texas electricity grid.  In the United States, energy production is responsible for about half of the water use across the country. Plants that produce energy through the use of fossil fuels and nuclear fusion need to be continually cooled with a constant water supply. If the water is not available, then the plant cannot be online. When this happens, plants have to be shut down and power production is lost. If enough power plants go offline, the entire Texas power grid could topple.


In Texas, the hot weather in the summer can stretch the state’s limited fresh water supplies. That drought cannot simply be stemmed by importing water from other parts of the country. Water is required to produce electricity, and lack of water could easily result in power outages for the state’s strained electrical grid.

Texas can have especially dry hot summers, which lower water supplies just as electricity demand peaks. There are concerns coming from ERCOT, the Texas regulatory commission responsible for the state’s electricity grid, that the water supply could be depleted or energy production might not reach the levels of demand because of a lack of water.

Studies have shown that greater efficiency in energy production can reduce the need for water to be used as a coolant. The U.S. Department of Energy does not have a policy regarding water use for energy production, but some forms of energy production are more efficient than others.

For example, a plant that uses natural gas to produce energy converts two-thirds of the gas it uses into energy. This results in less waste than from a plant that is fired by coal.  Renewable energies tend to have even less water demand.  However, despite leading the country in wind energy production.  Texas still gets a relatively small percentage of its power from renewable energy sources.

Cheap natural gas has not only brought down electricity rates in Texas, but has managed to displace coal as a source of power generation.  This tends to have a positive impact on the state’s water issues but serious challenges remain with regard to the state’s water and energy needs.

See Also: Texas Gets Its First 100% Solar Energy Electricity Plan
See Also: Microsoft Makes Large Texas Wind Power Purchase
See Also: Water And Energy: A Double Dilemma In Texas

 

 

Texas Tops States in Grid Modernization

Texas ranks at the top of 41 states for the modernization of its electricity grid.  This is according to a report released by a group called Gridwise Alliance in conjunction with the Smart Grid Policy Center.  The report assigned a Grid Modernization Index score (GMI) to 41 states and the District of Columbia.   The GMI value for Texas was 83, putting it alongside California at the top of the 41 states included in the report.  Nine states were not included in the analysis.

The Grid Modernization Index consists of three components.

  • Policy – State policies and regulatory mechanisms that facilitate grid investment
  • Customer Engagement – Investments throughout the state in customer enabling technologies and capabilities
  • Grid Operations – Investments throughout the state in grid enhancement technologies and capabilities.

In addition to a top overall score, Texas obtained top scores in the Policy and Customer Engagement categories.   The Policy score includes components such as the presence of a grid modernization strategy and the presence of Renewable Portfolio standards.

Texas obtained a top score for Customer Engagement which is a metric that includes such things as the availability of dynamic pricing plans or rates that leverage smart grid technology.  In recent years, Texas has seen a proliferation of innovate products made available because of smart grid technology.  These products include Free Nights plans, Free Weekend plans, and prepaid electric plans that rely on smart meter technology.

The Texas electricity marketplace is substantially different from other states in a number of ways.   The Texas grid is independent from the other major electric grids that serve North America.   Texas is also by far the largest deregulated electricity marketplace in the U.S.  The authors of the report point to a positive correlation between a state’s GMI score and the availability of retail choice within the state.

Challenges Remain

Despite Texas’ strong showing in this report, significant challenges remain for the state’s electricity grid.  Capacity has been a concern for a number of years and continues to be so.  Each summer there is concern that the state’s electricity producers will not be able to supply enough power to meet demand; especially in the event of an unusually hot heat wave.  Such concerns have led to, as yet, unsuccessful attempts to convert the state to a Capacity Market for electricity.  Under such a scheme, producers are paid simply to build additional capacity and have it available if needed to meet peak demand.  Such a move would inevitably lead to higher electricity rates.

According to numbers published by the Energy Information Administration, the average Texan pays 11.59 cents per kilowatt hour for electricity.  This average, however, is not indicative of what a motivated consumer who is willing to shop and compare rates should expect to pay.  For example; as of this writing, 4ChangeEnergy is currently offering a rate of 9.0 cents for a 12 month electricity plan in the Houston area.  Month-to-month rates are even lower.  Reliant energy, for example, is currently offing a rate of 7.9 cents in the Dallas area.

See Also: Texas State Senator Pressures ERCOT to Leave Reserve Margins Unchanged

 

Will Texas Switch To A Capacity Market For Electricity?

Texas electricity officials are considering a switch to a “capacity market” as a way to solve the state’s pending supply and demand imbalance.  Under a capacity market, producers of electricity are paid just to build power plants and make the supply available to the grid. 

This would be a change from the current system where electricity producers are paid only when they sell the electricity they generate.  The price the producers receive for their electricity is mostly a function of the available supply and demand for electricity in the real-time marketplace. 

When electricity becomes scarce relative to the current demand, prices spike to many times higher than normal.  It is the prices paid during these brief moments of scarcity that make up most of the profit realized by electricity producers. 

In other words, the current system creates an environment where producers are most profitable when the grid is running right on the edge of having enough power to meet demand. 

The state likes to have excess capacity (called reserve margin) as a safety cushion in case demand jumps or supply is unexpectedly lost.  The problem with this is that building power plants requires a lot of money.  Power producers don’t like to invest large sums of money to build power plants that might set idle and not generate revenue.

Under the capacity market plan the retail electric companies would pay a fee to the Electric Reliability Council of Texas (ERCOT) which would use the money collected to pay generators for building new plants that would add to the reserve margin.   Though on paper the extra fees are paid by the retail electric providers, the money would ultimately come from end users who would pay higher electricity bills to fund the scheme.

Not surprisingly, the idea of a capacity market is backed wholeheartedly by Texas’ two largest producers of electricity; NRG and Luminant. The politics of the situation are made sticker by the fact that the largest generators of electricity in Texas are part of corporate families that also include the largest electricity retailers in the state.  Luminant for example, is owned by the same company that also owns TXU.  Critics contend that this would give such companies an unfair advantage in a capacity market structure.  

Pro & Cons of a Capacity Market in Texas

Pro: Capacity – If the scheme works as proposed it would help alleviate the capacity concerns in Texas.  That is, in fact, exactly what it is designed to do.  It would seek to anticipate future demand for electricity and essentially prefund the future construction of power plants to meet the need.

Pro: Higher electricity rates – While to the consumer higher rates in a con not a pro, the desired outcome for planners is higher rates.  Like the recent increase in the wholesale electricity rate cap, a capacity market would be another way of moving money from consumers to electricity producers.  Many people believe this is necessary in order to incentivize new investment in power plants and ensure enough capacity in the future.  Once you buy this premise, everything else is just a matter of finding the least painful and politically viable way to move money from the consumer to the producer.

Con: Less Competition – Retail electric providers are still feeling the sting of the recent move to increase the cap on wholesale electric rates.  It’s reasonable for them to fear that a move to a capacity market would squeeze them further, increase volatility in the market and increase their costs of hedging in the financial markets.  There is also the concern that it would impart an unfair advantage to the large retail providers who are affiliated with power producers.  All of this could result in fewer electric companies in the market place and less choice to Texas consumers.

Con: Higher Rates – While planners may feel the need for Texans to pay more for their electricity in one form or another, consumers are, understandably, not happy with that notion.   A report by one consulting group predicted that the base rates of electricity could fall in a capacity market.  However, the fixed fees paid to fund the capacity market would more than offset the decrease in base rate.  This would result in a slightly increased total cost of electricity for consumers.

See Also: Nation’s Largest Power Producer Continues To Say No On New Texas Power Plants
See Also: Prepaid electricity

 

Help May Be On The Way For Texas’ Power Grid

TXU ProblemsAs most Texans know, Mother Nature can be severe at times. February 2011 was brutally cold, and ERCOT had to resort to rolling blackouts across the state for several days because our electricity production capabilities were not able to keep up with demand. That same year had an extremely hot summer, and rolling blackouts were narrowly avoided, though we had to purchase power from several states and even from Mexico in order to keep the lights on.

Texas is unique to all of the other lower 48 states in that we have our own power grid. The rest of the continous states receive their power from two electric grids, one for the eastern half of the US and one for the western half.

Up to this point, Texas has tried to stay independent from the other two grids in order to avoid federal oversight. Although we currently have a few lines connecting outside the state, Texas may soon have to increase its cross-border connections in order to avoid future blackouts.

One proposal that is currently on the table is called Tres Amigas, and would cost an estimated $2 billion. The plan would allow a New Mexico facility to connect to all three power grids of the lower 48 states, though the Texas connection would be added after the connection of the eastern and western grids.

Another proposal, the Southern Cross, would also cost about $2 billion and it would include a trasmission line that could move electricity from the Tennessee Valley Authority to East Texas and Mississippi.

Other ideas are currently being batted around, but clearly something needs to be done. As it currently stands, Texas can only bring in enough electricity from outside the state to handle 1.5% of our peak demand. Although we certainly do not want more federal regulators overseeing our every move, we have to take steps to make sure we don’t have to endure rolling blackouts every time Mother Nature reminds us of her power.