TEXAS NEED ENERGY

BLOOMBERG - Oct 3, 2023 - The Texas grid operator is seeking to secure an extra 3,000 megawatts of power reserves this winter to avoid an “unacceptable” risk of an emergency in extreme conditions.

The Electric Reliability Council of Texas estimates that there is an almost 20% probability that the state grid it manages will enter into an energy emergency alert, or EEA, if there is a repeat of last year’s December storm, Ercot said in a notice Monday. Procuring 3,000 megawatts will cut that probability to less than 10%.

“Ercot is not projecting energy emergency conditions this winter season, but we want to be prepared and ensure all available tools are readily available if needed,” Pablo Vegas, chief executive officer of the grid, said in a separate statement.

The Texas grid’s push to solicit seasonal power capacity is unprecedented in a region that has long relied on market forces to procure supplies and spare reserves. Texas electricity consumption is growing faster than any other grid in the country, and demand can no longer be met with traditional sources of energy. While wind and solar have been a boon, the renewable sources are inherently intermittent. Efforts to secure backup reserves may lead to higher costs for consumers.

When Ercot ran the same analysis ahead of last winter, the probability was 7%, Ercot Chief Operating Officer Woody Rickerson said at the Gulf Coast Power Association conference in Austin Tuesday. “We feel like that 20% probability is just not acceptable. It’s too high,” he added.

Just because Ercot is asking for the additional reserves, that supply may not all be available or “it may be too expensive,” Rickerson said. “This will educate us as to what the market is capable of providing,” he noted.

The highest risk hour for supply shortages this winter is from 7-8 a.m. local time, according to the notice. Eligible resources that may place bids include providers of demand response — where consumers are paid to curtail energy usage — along with about 2,100 megawatts of older plants that were mothballed in recent years. Some new dispatchable generation projects, which can turn on when ordered by the grid, may also be accelerated to come online faster, Ercot said.

But not all power producers are convinced. This solicitation for new supplies is adding to uncertainty in the grid and will make it more difficult for people to invest in building more Texas power plants to meet rising demand, Chris Moser, head of competitive markets and policy at major independent power producer NRG Energy, said at the Gulf Coast Power Association conference Tuesday.

“Uncertainty is rarely attractive to capital,” Moser said. “You can’t snap your fingers and have new generation here.”

The largest plants on Ercot’s mothball list are the 840-megawatt J.T. Deely coal-fired plant that CPS Energy had closed in 2018 and a 292-megawatt unit at Talen Energy Corp.’s Barney Davis natural gas-fired plant that is slated to be shut Dec. 1.

Ercot will announce awards for this three-month contract starting in December on Nov. 23.

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