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The ERCOT grid failure - why and what should we do next

BRUCE CURATOLA's picture
Consultant BRUCE J CURATOLA

Power generation engineer and manager; developer; asset manager and risk manager.

  • Member since 2007
  • 3 items added with 796 views
  • Feb 18, 2021
  • 796 views

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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Matt Chester's picture
Matt Chester on Feb 18, 2021

The federal government caused this problem over a very long period of time, but they can fix it relatively quickly. 

There's also been a lot of talk about how Texans don't want the federal government stepping in-- do you forsee that being a challenge to any of the solutions you mention here? 

BRUCE CURATOLA's picture
BRUCE CURATOLA on Feb 19, 2021

Matt, funding from the federal level would require a significant shift in the Renewable Energy legislature or inclusion in a future Green Energy bill. The federal solution is unlikely. A bill, HB1359 has been introduced in Texas for citizens to vote for independence in November. With legislation like this pending, I suspect Texas will find  way to solve the problem that the federal government has created - one way or another.

Mark Silverstone's picture
Mark Silverstone on Feb 19, 2021

"...but they can fix it relatively quickly. ERCOT needs about 25,000 mw’s of quick start peaking capacity."

Really? No winterization?  Just add more gas?  No political buy-in of reality? And $100 trillion for the Green New Deal?  This article examines the issue a little more closely.

Robert Pollin, an economist at the University of Massachusetts Amherst, thinks it’s entirely possible to get to net zero by 2050 by spending around 2 percent of GDP each year, or around $18 trillion in total.

Just throw up our hands and bemoan the politicians.  That seems to be the refrain at the moment.  Very chicken hearted.

BRUCE CURATOLA's picture
BRUCE CURATOLA on Feb 20, 2021

It's amazing that the green energy folks ignore the simple reality: the wind does not always blow and the sun does not always shine. More inexpensive natural gas generation is needed in Texas and across much of America. You can believe an economist from some liberal university or someone who has made power generation his life, but renewables = government dependent, unreliable generation. Adding more real generation is mandatory, but so is market restructuring as ERCOT needs a capacity market to have dependable, reserve capacity. This is not a winter only problem - wind and solar are unreliable at all times and battery life, metals, disposals, fires and expense make me question that technology, although I won't rule it out. 

Christopher Neely's picture
Christopher Neely on Mar 2, 2021

"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."

- This means more of the "R" word that keeps Texans and Texas politicians up at night -- Regulation. If the solutions require more regulation or more influence by the federal government, it's hard for me to believe that Texans will buy in. The Texas Legislature is known for waiting for the hysteria of these types to wear out and then doing little.

The only hope I have for change is that the entire state—not just blue cities—experienced the damage. People are fired up right now, but the state's legislature is already having difficulties placing blame, and to penalize the sacred cow of the state's energy industry will be a Herculean task for politicians who need donors to stay in office. 

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