Special ERCOT Board Meeting Tomorrow May Approve Wasteful Spending
The ERCOT Board of Directors will decide in a special meeting Tuesday whether to spend more than $100 million of Texans’ money on a problem that battery storage has largely already solved.
The item follows a board vote in December to spend $50 million for San Antonio’s municipal utility, CPS Energy, to inspect, fix, and operate Braunig Unit 3, a 55-year-old gas plant. CPS notified ERCOT last March that it planned to retire all three Braunig gas power plant units in March 2025. All three were constructed in the 1960s. Power plants generally aren’t built to last more than 40-50 years, much less 60; CPS has been planning to retire them for years.
But ERCOT said no — they’d rather spend Texans’ money to hang onto it.
Tomorrow’s proposal is similar. ERCOT staff is scheduled to ask its Board of Directors to spend yet another $54 million on the infamous “mobile” generators that CenterPoint Energy bought for Houston but didn’t use despite the catastrophe of Hurricane Beryl last summer.
These tens of millions of ratepayer dollars will pay to move the units to San Antonio, replacing Braunig Units 1 and 2, which are just as decrepit as Unit 3 but will actually be allowed to retire. ERCOT is simply using some of the most expensive — and notorious — generation units in the state to replace them.
And two years from now, Texas ratepayers will have nothing to show for the $100 million.
If this sounds like the kind of expensive, wasteful central-planning program you’d expect to see in other states and regions, well, who am I to argue.
Ways to Fix What’s Broken
ERCOT is focused on a problem that appeared in stark relief on Sept. 6, 2023. That’s the evening that the agency declared the only energy emergency it’s issued since 2021’s catastrophic Winter Storm Uri.
The problem that night: strong wind generation in South Texas, and huge demand in North Texas, threatened to overload a transmission line.
Texas’ energy-only market is tailor-made to solve these kinds of problems, leveraging price signals to prompt developers to build generation that meets demand. Further, the boom of affordable solar and battery storage on the ERCOT grid lays out a clear, cost-effective path for addressing these needs at a much lower cost.
The graphic below shows all the storage added (the yellow dots) since September 2023 — and where those units have been built in relation to the transmission bottleneck that caused the energy emergency. It shows that there has been a nearly 150% increase in battery energy storage since then, and much if it is located north of the transmission constraint (shown as the dotted black line) — that is, right where it’s needed.
This map — and the storage buildout it illustrates — shows there are market-based solutions available that logically, effectively, and efficiently address these kinds of problems without punishing consumers with needlessly higher bills.
Unfortunately, ERCOT is instead choosing to spend huge amounts of ratepayer money on resources that our own free market says should no longer exist.
How Did We Get Here?
Over the last year, ERCOT has conducted a lengthy process to figure out whether aging plants should be forced to stay online.
ERCOT has, but seldom uses, an authority to force generators to maintain resources that otherwise would be shut down; it’s called “Reliability Must Run” or RMR. As part of the process, ERCOT must solicit alternatives to an RMR; these are called “Must-Run Alternatives” or MRAs.
In 2024, ERCOT issued two Requests for Proposals (RFPs) asking energy developers for alternatives to replace the Brauning plants. However, the requirements on those requests were so stringent that only one developer submitted a proposal — ERCOT disqualified that response because, the agency said, it didn’t meet the requirements.
ERCOT’s RFP required resources to be available “for as long as ERCOT instructs the Resource to operate, and at any time, 24 hours a day, seven days a week.” But in front of the PUC, addressing a concern that the “mobile” generators might violate air quality standards, ERCOT’s Chief Regulatory Counsel Nathan Bigbee said the generators would only need to run rarely and for short durations:
“We’re dealing with an emergency situation here, you know, and and and these aren’t gonna be running around the clock more than likely, right? These are going to be dispatched for just a few hours a year, less than 50 in the greatest projections that we have of need.”
To put it mildly, ERCOT hasn’t worked nearly as hard to find a more efficient alternative as it has to prop up Braunig and to move the infamous mobile generators. Meanwhile, ERCOT’s preferences keep getting more expensive.
CPS Energy first told ERCOT it would cost $30 million to keep Braunig 3 online for two more years. That estimate recently grew to about $50 million — at the most recent ERCOT Board meeting, executives said the estimate had increased $1.5 million “since yesterday.”
And that’s almost certainly not the end of it. As ERCOT Vice Chair Peggy Heeg pointed out, these increases occurred before inspections began on these machines, which were designed and built before people walked on the moon.
Add it all up, and we’re talking about way more than $100 million in ratepayer money — all to maintain an inadequate status quo for two years, ultimately with nothing to show for it. In two years, even after this investment, Braunig 3 will finally be put out of its misery, and the CenterPoint generators (owned by CenterPoint’s vendor, Life Cycle Power) will … well, who knows what will become of those.
There are far cheaper ways to address this issue and actually deliver a more reliable grid.
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Market Solutions Are Cheaper
Below is a picture of a storage development on the site of CPS Energy’s Spruce power plant, just a few miles from the Braunig site.
The electricity it delivers will grow from 50 to over 200 megawatts this year and to over 500 megawatts of 4-hour duration storage in 2026. And it’s growing through good old-fashioned market demand, with no state subsidy and a far lower cost to consumers.
CPS Energy announced these projects back in August, along with developer Eolian. The company’s CEO, Aaron Zubaty, said in CPS’s press release:
These project locations were carefully chosen years ago to actually reduce the burden on the transmission system and enhance overall market operations by providing resiliency and reliability within load pockets and adjacent to retiring thermal generating units while reducing congestion on key transmission pathways. [emphasis added]
Oh, and here’s the punchline: it was Eolian that submitted the “Must Run Alternative” to ERCOT last year. The company said that for $7 million, it could alleviate the problem without the need to prop up the Braunig unit or give the CenterPoint generators something to do.
ERCOT, apparently, would rather spend much more than $100 million to kick this can down the road for two years.
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Storage Is Smarter
Texas’ own recent success with battery storage demonstrates that a fast, focused investment in storage — one that eases the load on the transmission line between North and South Texas — would fix the problem for a fraction of the cost of the mobile generators or maintaining Braunig Unit 3.
Realistically, I think this issue has progressed too far, with far too little scrutiny, to stop it on Tuesday. But at a minimum, the ERCOT Board must ask hard questions before committing Texas ratepayers to another unnecessary $53 million non-solution, on top of the non-solution that’s already costing us $50 million and counting.
More broadly, Texas leaders need to think about what they want from ERCOT, and what they don’t.
Our state appropriately takes great pride in not having a centrally planned power generation system — the market is supposed to decide what gets built and what goes away.
ERCOT is supposed to administer that competitive market with as little bureaucracy or additional costs as possible. Arbitrarily building a portfolio of zombie power plants — at huge expense to ratepayers — when better alternatives are clearly and obviously available, is, to put it mildly, not something ERCOT should be doing.
So is ERCOT a central planning organization, like they have in other states, or a market enabler? Do the bureaucrats know better than market participants, or can a competitive market solve problems better and cheaper?
I know what I believe. The question is, what do policymakers and ERCOT think ERCOT’s role is?
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