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Texas has focused all year on reducing use of nonrenewable energy sources following the February winter storm, which claimed more than 100 lives and cost the state nearly $300 billion. The Texas Public Utility Commission (PUC) has been assigned the task of ensuring that catastrophes such as the February blackout don't happen again.
The Texas wholesale electricity and energy market needs reform, and critics argue the PUC has had a strawman proposal in the works for since October after PUC commissioners heard comments from stakeholders discussing issues including operational reliability, flexibility and resiliency, winter grid standards and voltage support.
Throughout November, the PUC held multiple work sessions in response to the comments. On Dec. 3, a second strawman version of the reform blueprint was released, and stakeholder comments are due back by Dec. 10. After one more meeting and vote, the PUC is expected to issue a final reform blueprint by Friday.
Brent Bennett, policy director for the Texas Public Policy Foundation (TPPF) energy education initiative Life:Powered, told Houston Daily that the PUC is working to have a plan finalized by the end of the year in case a storm such as Winter Storm Uri happens again.
“In the terms of the state bureaucracy and especially by the PUC historical standards, they are moving at light speed. It’s hard to keep up with how much they’re doing,” Bennett said. “I give them credit for that.”
When asked if he believes PUC will make fundamental reforms, Bennett said yes, but that the true question should be if they are the correct reforms. He said the state should be cautious in making sure it's doing the right thing and not funneling money into where it is not needed.
What would be the correct reforms? In an October paper, Bennett pointed out that despite the cost of generating solar and wind energy, the increasing variability in the state’s electricity supply and spiking energy demand is straining Texas’ power grid and ability to provide adequate electricity on the hottest and coldest days of the year.
“The fundamental problem that [PUC] needs to solve is [...] a weather resiliency problem and a firm capacity problem,” Bennett said.
Texas experienced significant outages in 2011 as well. It has since invested nearly $60 billion in new wind and solar generation, but has invested nearly nothing in more dispatchable capacity and weather resiliency, according to Bennett.
“That’s fundamentally the problem that we need to solve,” he continued. “We don’t necessarily need to add another X-billion number of dollars into the market, we need to make sure that we reallocate some of that $60 billion toward what we actually need. It’s not that we can’t build any wind or solar, it’s just that if we’re going to, for however much wind and solar we build, we also need to make sure that we’re building out reliability measures.”
The Lone Star Standard reported that the Electric Reliability Council of Texas (ERCOT), in conjunction with lawmakers and the PUC, agrees that changes are necessary. PUC Chairman Peter Lake said “Texans deserve a more reliable grid, and we’re aggressively moving to make that a reality.”
The renewable investments have certainly cost Texans, critics charge. According to the Energy Alliance’s Bill Peacock, wind and solar power generators received subsidies nearing $30 billion from local, state and federal incentives. A University of Texas study projected that Texas-only subsidies for oil and gas were $1.8 billion, $1 billion for wind and $19 million for solar, as reported by Texas Monthly.
Federal subsidies, Bennett said, are the cause of the state’s energy investment imbalances where taxpayers are shouldering the brunt of energy development costs. These subsidies, he added, will likely a permanent fixture in the landscape for at least another 20 years.
Further investments in wind and solar infrastructure are futile if the system can’t provide reliable support. The TPPF proposal to the PUC suggests requiring wind and solar providers to buy backup power for peak demand times.
“They either need to buy generators or energy storage to make sure that they can provide some level of firm capacity during peak demand hours,” Bennett said. “That performance requirement is directly targeting the goal, which is to get more dispatchable capacity to close the gap between demand and firm capacity. Wind and solar needs to pay for some of that in order to solve this investment imbalance.”
Bennett previously told the Houston Daily that if the renewable energy producers are going to be real contributors to the energy market in Texas, they need to be playing by the same rules as other producers and meet certain reliability thresholds. He also gave a nod to Texas Gov. Greg Abbott’s response to the crisis.
“We think that a lot of the governor's directives are actually spot on, especially the second one where they're asking for wind and solar to basically confirm their requirements, basically saying they have to firm up some of their capacity if they're going to bid into the market,” Bennett said in August.
“They have to provide some level of guaranteed capacity, especially during times of peak demand. If they’re going to play in the market, they have to come closer to approaching the characteristics of the other generators in the market," he added. "Otherwise, it's not a fair market. And you're basically giving them a free ride on providing the reliability services the grid needs.”
Multiple organizations have shown high levels of support for the renewable energy industry and the investment that Texas specifically has allocated to producing energy from renewable, clean sources. For example, Renewable Energy Buyers Alliance (REBA) stated it "firmly believes that Texas' economic growth will be enhanced through...the continued availability of renewable energy.”
In a similar vein, the American Clean Power Association noted that solar and wind energy projects in Texas would pay Texas landowners in the range of $4.8 billion and $7.3 billion during the project lifetime. The American Council on Renewable Energy noted that Texas attracted more than $70 billion in renewable energy investment.
Regulator interventions change the market, Bennett said. Currently, prices determine how much energy capacity the state is paying for. Firm wind and solar financial contributions would preserve the majority of the market.
Reliability and transmission are among the highest costs to renewable energy consumers. While wind and solar producers have reduced energy wholesale prices by 5-10% in the market, they’ve added close to $10 billion in transmission costs, Bennett said. Texans are paying double in transmission costs than they were 10 years ago.
“We should be paying for things like voltage support, backup power, ramping and so on. We’re not paying for enough of that right now,” Bennett said. “We’re draining money from dispatchable generation, that revenue that could be going to dispatchable generation is instead going to wind and solar generators. That is reducing the incentive for dispatchable generators to maintain their plants, extend their life and be online 24/7. We are seeing extreme price volatility in the shoulder months like right now.”
Until wind and solar energy can be stored cheaply, these sources will only be available for marginal energy production, Bennett said, adding that renewables and traditional energy currently cannot coexist in the market without subsidies.
“[Renewables] are able to provide cheap energy and free fuel whenever they’re online, but they aren’t really eating into the capacity that we need to support our demand,” Bennett said. “They're just kind of add-on to provide cheap energy when they’re available and to offset the costs of coal or natural gas. … The only way to get more and more [renewables] into the grid is if we have really, really cheap energy storage.”
Solar energy harvested in midday, for example, can’t be stored all night for the following day, he said. Solar energy can’t be stored all winter to brace against storms like Uri.
“This was a problem when I was in graduate school 10 years ago, and we’ve done better at it," Bennett said. "We’re seeing energy storage providers do more and more, but it’s a very slow process. There’s a huge gap between where we are and where the green dream says we need to be in 10 years. Maybe it’ll happen later in the future, but it’s not going to happen in 10 years. Renewables can coexist on the margins right now, but until we get really cheap energy storage, they can’t reliably and cost-effectively coexist beyond that.”