Tag Archives: energy storage

Latest Brattle Report Suggests Either Energy-Only Market or Capacity Market will keep lights on in Texas

In a long-awaited report ordered by the Public Utility Commission, the Brattle Group’s study entitled “Estimating the Economically Optimal Reserve Margin in ERCOT” was released last week and showed that Texas has many options to keep the lights on, including potentially doing nothing.

The study was ordered by PUC Chairman Donna Nelson to determine the most economic reserve margin – literally the amount of supplies over the amount of demand – in Texas. The answer? A reserve of only 10.2 % would be the most economic approach and the good news is based on normal weather patterns Texas’ market would actually provide a 11.5 percent reserve margin in the coming years. In other words, in purely economic terms, Texas’ energy-only market would provide reliable and economic electric power. In fact, in normal years, one would expect less than an hour of reliability issues out of 8760 hours in a year.

Nonetheless, the study also presented an alternative market structure, and suggested that a 14.1 % required reserve margin would be more reliable long-term though slightly more expensive to maintain. The study did suggest that in extreme weather situations – like the 2011 heatwave – the 14.1% required reserve margin would be cheaper during that year because energy prices would  volatile in any energy-only market. Thus, overall a capacity market during an extreme weather year would cost consumers $3 billion less because of lower power outages, while during a normal year, a capacity market would be about $400 million more expensive.

Table. What the Brattle Study Says about the Reserve Margin

Category Energy-Only Case Capacity Market Case Difference
Equilibrium Reserve Margin 11.5% 14.1% 2.6%
Loss of Load Events Per Average Year 0.33 0.23 (-.1)
Loss of Hours Average Year 0.86 0.23 (0.63)
Energy Price  -$/MWh $58 $48 (-$10)
Capacity Price ($/kW-yr) $0 $39 $39
Total Customer Cost ($B/YR) $35.7 $36.1 $0.4
Extreme Weather Year Energy Price $99 $65 (-34)
Extreme Weather Year Capacity Price 0 $76 76
Total Customer Cost (Hedged) $44.7 $41.5 (-3.2)

It is important to note that the Brattle report – like all economic studies – made assumptions about load growth, weather, the impact of demand response, and the amount of wind generation at peak – all of which can be challenged. As an example, the study still assumed that wind production only generates 8.7% of its total capacity during peak summer hours, a number that has been shown through repeated studies and actual data to significantly undercount the value of wind. Thus, the assumed margin are probably in reality higher than reported in the Brattle report.  But the essential message – that the energy-only market in most years would provide reliable and economic energy – at least gives policy makers breathing room and time to make any needed changes to the market.

The Sierra Club believes the answer is actually somewhere in the middle – that a required reserve margin slightly above the economically optimal reserve may be needed assuming that extreme weather events continue to face Texas. As an example, the report notes that assuring a reserve margin of 12.9% would meet the Southwest Power Pool’s reliability standards even in extreme weather events. We believe that assuring some build-out of new generation and new demand response programs – largely through expanded ancillary services — could assure this targeted reserve. Thus, the long-term solutions are not necessarily the imposition of a forward capacity market as has been imposed in markets like PJM and New England at great costs to consumers, but rather targeted programs meant to grow new resources like energy efficiency, demand response, energy storage and solar to meet Texas’s growing electric demand and supply needs. Paying older power plants a capacity payment just for being around is not the way to meet these new needs.

Texas will need to make significant investments in new transmission grids, continued smart meter development and other technologies like energy storage and demand response, while making the market work for these new technologies. It will also need to economically retire its older, dirtier power plants and transition to cleaner forms of energy. Look for our solutions soon!

In the meantime, PUC is expected to schedule a workshop on the Brattle report, as well as an additional study looking at the cost and benefit of each approach to keeping the lights on and ERCOT’s latest supply and demand projections, which are still being debated at the ERCOT Board of Directors.

Demand Response Service Moves Forward at ERCOT; so does Hogan B+

In the non-descript building in South Austin which houses the offices of the Electric Reliability Council of Texas, there is a lot of discussion about proposed changes occurring in the ERCOT market. The way it works in ERCOT is every issue or change that someone wants is filed either by the market participant or ERCOT staff through a “Nodal Protocol Revision Request” or NPRR and goes through a working group or subcommittee. Assuming it moves through these groups it eventually goes to a voting committee called the Protocol Revision Subcommittee. From there it goes to the Technical Advisory Committee, and eventually to the Board of Directors of ERCOT.

Sierra Club is currently a member of ERCOT and yours — Cyrus Reed – is spending way too much time here, but this stuff is actually important.

There are four important NPRRs being discussed today at PRS.

The first — NPRR 564 — was approved by PRS today and allows a new 30-minute “demand response” service to serve as an “Emergency Response Service” for those times when ERCOT determines there is an emergency. Demand response is a service that lowers energy consumption during peak times of use. A 30-minute demand response service would be for resources that are capable of providing demand response within a 30 minute time-frame. Examples of the types of energy consumers who might be able to be paid by ERCOT for agreeing to turn down or off power during an emergency might include a large commercial operation with air conditioning or even a city’s wastewater treatment plant. Some examples of the kinds of sites that are interested in ERS 30 include higher education, irrigation & water treatment, and different kinds of manufacturing. Market participants believe that this new product could open the door for more demand response to participate not only in these emergency products but eventually in the energy market itself.

A second NPPR – 571 – Weather-Sensitive Loads — would add another DR product — more focused on residential air conditioning programs, that could be added to the ERS service if companies were able to aggregate these loads and create a program for ERCOT. This NPPR was not approved but sent to a separate committee for further work.

While getting new demand response programs into these emergency response services run by ERCOT, more important will be allowing loads to actually bid into the energy market by providing a “Negawatt.” ERCOT has already approved “Loads in SCED 1.0” which will be implemented next summer. This change will not allow loads to bid into to sell the negawatt but it will allow them to do a “bid to buy,” meaning they will offer to not consume power at a certain price. Market participants like Sierra Club are now working on a a Loads in SCED 2.0 that would allow much more active participation for demand response. Stay tuned.

A third NPPR — 560 — Floors and Caps for Energy Storage — was delayed a month to allow ERCOT to do a full analysis of the impact on its staff to implement the changes. The protocol revision would help set the rules for energy storage facilities like batteries. Batteries can provide short-term energy into the market as needed without producing pollution at the time they are dispatched. A good new resource in the ERCOT market. Two large-scale compressed air energy storage facilities are also being developed that could be on-line by 2016, providing energy largely derived from wind turbines.

Finally, after a decisions by the Public Utility Commission to create a Operating Reserve Demand Curve that would create an additional payment to those providing energy or capable of putting energy into the market (and ancillary services), the PRS discussed NPPR 568, which implements the ORDC. ORDC is sometimes referred to as Hogan B+ after the MIT professor who came up with the concept. The new scarcity pricing mechanism would be implemented by June of 2014, and is likely to increase energy prices during times of scarcity. However, voting on the NPPR 568 broke down over how to treat “loads” — those bidding into buy energy or turn off their consumption — as well as issues like the ERS programs. PRS was scheduled to retake up the issue on Friday.

ERCOT latest planning documents shows more gains for Wind, Solar

It ain’t the most exciting meeting in the world, but once a month, I attend the “Reliability and Operations Subcommittee” at the Electric Reliability Council of Texas, which runs the Texas electric grid.

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And once a month, our group – composed of generators, consumers, market players, retailers and wires companies among others — gets a monthly planning update known officially as the “System Planning Monthly Status Report.” Click here for access to the report itself.

And that report not only shows how much energy was used in ERCOT that month, it also shows how much from various types of resources, and more importantly, what resources — be they wind, solar, storage, gas, or coal — will be serving future loads. All of those proposed projects must go through financing, environmental permitting, and a complicated registration and study process with local wires companies known as an “Interconnection Agreement.” Even getting an approved interconnection agreement done is no guarantee a project will be built, because environmental permits, financing and market conditions still must exist for a project to move forward. Just ask the developers behind coal projects like Las Brisas and White Stallion where their projects are today. Fortunately, market conditions and a spirited citizen’s campaign, including the Sierra Club, helped doom those projects.

So what do the latest figures tell us? They suggest that there are some 13,000 MWs of proposed energy projects that have already signed an Interconnection Agreement or are in the process of getting an interconnection agreement (some 31,000). Of those, only two projects – the Summit Power Plant in West Texas and the  Sandy Creek project — are coal, and that represents only about 1,000 MWs of power, a relatively modest amount. In fact, there are slightly more MWs composed of solar projects in the process — at 1,264 MWs — than coal. Just last month, the White Camp Solar project in the panhandle became the first proposed solar plant in Texas of at least 100 MWs to officially sign an interconnection agreement with American Electric Power, which runs the electric grid in that area of the state. There is also almost 1,000 MWs of storage being looked at, and get this — some 22,000 MWs of wind power, much of which is located along the coast. The rest – about 19,000 MWs — is gas, much of intended only to meet peaking power needs.

The wind story is impressive and the ERCOT document further reports that if all of the wind projects with signed interconnection agreements actually go forward, wind production within ERCOT would go from about 10,500 MWs today to some 15,000 MWs in 2015. Currently, that wind is providing anywhere from a fraction of Texas’s electricity needs, to some 35% on certain days when the wind blows hard, particularly in the spring.

Fuel Type

Confidential Projects (MW)

Projects Under Full Study (MW)

Public Projects (MW)

Suspended Studies (MW)

Grand Total (MW)

Gas-AllOther                         449                         –              6,903
Gas-CombinedCycle                     6,506                         –            12,457
    Total Gas               2,615                   9,790                     6,955                         –            19,360
Nuclear                      –                          –                            –                         –                     –
Coal                      –                          –                     1,165                         –              1,165
Wind               2,748                 13,859                     5,062                         –            21,669
Solar                   395                       719                         150                         –              1,264
Biomass                      –                          –                            –                         –                     –
Storage                      –                       874                           40                         –                  914
Petroleum Coke                      –                          –                            –                         –                     –
Grand Total               5,758                 25,242                   13,372                         –            44,372

Source: ERCOT, Summary of Generation Interconnection Requests, June, 2013.