Texas Electricity Demand to Outpace Dispatchable Supply for First Time Ever, ERCOT Officials Announce - The Texan

Texas Electricity Demand to Outpace Dispatchable Supply for First Time Ever, ERCOT Officials Announce | The Texan

“Operationally, the ERCOT grid is ready for this summer,” Lake said, unveiling the 2023 Seasonal Assessment of Resource Adequacy (SARA) report. “The reliability reforms that were put in place have been tested and continue to work. We’ve made the grid we’ve got as strong as possible using every tool available.”

The SARA report, as Lake stated, is an estimate of electricity demand and supply for certain scenarios based on past data, not a forecast of what is to come this summer.

It estimates peak demand to reach 82,739 megawatts (MW); for comparison, 1 MW can power about 200 homes during the peak demand hours of the late summer afternoon through evening. To cope with that demand, the state expects to have 97,000 MW of capacity available — two-thirds of which is thermal generation, combined with 13 percent from solar and 11 percent from wind.

However, Lake tinged the grid’s readiness with an omen.

“Data shows for the first time that peak demand this summer will exceed the amount we can generate from on-demand dispatchable power,” Lake warned. “There is no longer enough dispatchable generation to meet the demand of the ERCOT system. So, we will be relying on renewables to keep the lights on.”

The State of Texas is adding about 300,000 people per year, which means a larger and larger demand for electricity on the state’s largest power grid.

“In this new reality, our risk goes up as the sun goes down,” Lake added.

Vegas likened the situation to a car: the metaphorical vehicle — the physical grid itself — is up to par on maintenance, but it lacks the necessary fuel — the electricity supply — to power its full trip ahead.

Lake said that ERCOT’s dispatchable supply fleet only grew 1.5 percent from 2008 to 2022. During that time, its renewable footprint grew substantially with now more than 30,000 MW of wind power installed and more than 10,000 MW of solar.

The influx of renewables is driven primarily by the Production Tax Credit — a federal subsidy that pays renewable generators 2.6 cents per kilowatt-hour produced — which has given wind and now solar an advantage over thermal generation sources. ERCOT has 31,000 MW of solar generation in the queue along with 5,000 MW of wind.

In contrast, only 800 MW of dispatchable power has been added in the last year, according to Lake.

He didn’t want to speculate on potential legislation, but his message from the press conference was clear: the ERCOT market’s current trend of plateauing dispatchable power capacity and a rapidly rising renewable sector is not sustainable.

The SARA report estimates potential load shed — brownouts or rolling blackouts — in only one risk scenario: a high peak load of 83,412 MW, extreme unplanned thermal outages of 6,173 MW, and extremely low wind output of 61 MW.

Vegas said the probability of this scenario playing out is less than 1 percent.

Last year, the ERCOT grid set 11 all-time peak demand records, including the current record of 80,038 MW last July; no emergency conditions were triggered throughout that summer.

After the 2021 blackouts, the state expanded the use of “break in case of emergency” power plants — called “peaker plants” — deploying them earlier and more frequently than in previous years. The adjustment worked, preventing any emergency conditions during that string of record-supplanting-record, but it came with a price: a sizable monetary cost for ratepayers that continues to this day.

The peaker plants were primarily deployed when renewable output was expected to wane, providing a backstop for the standard generators operating on the wholesale market.

During that period, Lake told The Texan, ERCOT faced at least 12 days last summer within the 8 p.m. to 10 p.m. window where wind power produced at less than 20 percent of its capacity. The grid operator said that during those periods it counts on at least 50 percent wind output at 9 p.m. to maintain a comfortable margin.

“At the end of the day, zero wind times infinity windmills is zero electricity, and the sun sets every night,” Lake stated in response to a question about giving renewables more incentives. “In those gaps we have to have generation with an on switch.”

To counteract this generation imbalance, the PUC has recommended a Performance Credit Mechanism (PCM) — a function that’d provide financial rewards, or credits, to generators who produce during periods of high grid stress. It’s meant as an incentive to draw out more thermal generation investment, mainly in natural gas, to grow ERCOT’s dispatchable portfolio.

Where other parts of the country have a “capacity market” in which the grid regulator and state take a more active role in power supply, ERCOT is more hands-off, dependent on price incentives piled on top of price signals.

The Texas Legislature is debating an array of market reforms, including its own twist on the PCM. Two other possibilities include a two-digit-billion-dollar subsidization program to build 10,000 MW of natural gas generation capacity, and a firming requirement, an allocation of reliability costs to generators — namely renewables — that drive uncertainty on the grid.

It is unclear just what the Legislature will approve — and Lake said the PUC will follow all current and future directives from the Legislature — but until then, the sustainability of the power grid is in question.

The same booming population that brought with it commercial growth no state has ever seen before is also ushering in an infrastructural dilemma for which Texas seems unprepared. Lake did his best to sound that alarm Wednesday: the ERCOT market is facing a dispatchable power shortfall, and if the wind stops blowing while the sun sets, then rolling blackouts — however unlikely — are possible.

###
512-200-4035

Disclosure: Unlike almost every other media outlet, The Texan is not beholden to any special interests, does not apply for any type of state or federal funding, and relies exclusively on its readers for financial support. If you’d like to become one of the people we’re financially accountable to, click here to subscribe.

Brad Johnson

Brad Johnson is a senior reporter for The Texan and an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad quoting Monty Python productions and trying to calculate the airspeed velocity of an unladen swallow.