The ERCOT grid failure - why and what should we do next
- Feb 18, 2021 7:17 pm GMT
Texas should have the most reliable power grid in the nation. The diverse types of fuels, including wind generation, kept prices very low during normal situations. Normally, the combined cycle gas plants can be raised and lowered as load or wind generation fluctuates. Many plants are cogeneration units that allow this flexibility during the overnight hours. Beneath this happy power grid lies a ticking time bomb!
Wind in Texas is abundant, but variable. The capacity factors at peak times during peak periods is often 5-15%. Wind blows more during the early morning when loads are down. Add the icing issues experienced in this event and it is obvious that ERCOT needs a robust backup. Depending on other interconnections for reliability is not acceptable as in the event of an artic blast or a heat wave, those regions are likely facing he same dilemmas as ERCOT.
Around 2005, ERCOT had some wind generation, but not nearly the amount it has today. It had an event where the wind was blowing, but suddenly stopped across the state. The grid was almost lost on underfrequency.
In 1989 and again in February 2011, we had abnormally low temperatures and many fossil generating units tripped offline. A winterization standard was created but it was not mandatory.
More recently, in August 2019, a deficit in wind generation pushed prices to the maximum because there was barely enough fossil generation to keep the grid stable.
The problem was caused by federal renewable energy credits. Wind and solar companies receive credits from the federal government. This is in addition to whatever energy price they receive from ERCOT. They are not penalized for “not showing” up. Fossil units are bid into the day ahead market and are penalized if they do not generate in the hour expected.
The bigger problem is a lack of a compensation mechanism to encourage reliable generation. Plant operating budgets are extremely tight, driven by low gross margins due to wind and solar generation over the course of time. These plants only perform mandatory maintenance projects, and they push the reliability envelop of their prime movers because of this situation. There is no funding for non-mandatory projects. Additionally, because of the low gross margins, generating companies are not financially motivated to build gas generation let alone peaking generation, which is very reliable, but often not efficient. There is no mechanism in ERCOT to fund back up generation.
The federal government caused this problem over a very long period of time, but they can fix it relatively quickly. ERCOT needs about 25,000 mw’s of quick start peaking capacity. Some of this capacity can be used daily to back up the natural variations in load and renewable resources. If installed around the grid, these units would provide localized power when hurricanes, heat, winter conditions or other system emergencies occur. This capacity could be funded under a resource adequacy contract, similar to peaking facilities in California or New York. The federal government is looking at spending $100 trillion on the Green New Deal – the cost of this program is peanuts in comparison. CO2 is produced by humans, animals and the combustion process and is essential to produce oxygen and more robust plant life. Since these resources would not operate continuously, the incremental amount of CO2 produced is minimal.
Another solution is to have a capacity market, where generators are incentivized to be available but not necessarily run. In a capacity market, there are often penalties for nonperformance. This type of market design would allow mandatory winterization costs to be more easily absorbed by plant operators.
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