The Electric Reliability Council of Texas' (ERCOT) reserve margin has shrunk because renewable energy sources have been given priority over dispatchable energy sources, Pablo Vegas, CEO of the council, said in a news conference.
"So what's happening with this shrinking reserve margin is year-to-year we are developing more generation resources," Vegas said. "The majority of those resources that are being added to the ERCOT grid tend to be renewable resources like solar and wind, solar being the largest portion of that coming online. During the winter, solar capacity doesn't have the ability to deliver to the degree that it can in the summer, because of the nature of the weather and the sun performance. So the amount that gets added to the grid is not proportional to the amount that gets planned in terms of expected generation supply available ...You don't get the same value for solar in the winter."
At the same time, demand for electricity is growing in Texas as the population increases, the CEO said.
"With not having the same growth of dispatchable generation – so that's generation with an on/off switch, generation that you can call on whenever you need it, regardless of what the weather conditions are – we're not seeing the same amount of growth in that kind of generation as we are in renewables. That's the reason why that reserve margin is shrinking."
In response to the winter storms that left millions of Texans without power in February 2021, the Texas Public Utility Commission (PUC) has proposed a plan that would add dispatchable energy sources, such as natural gas power plants, to Texas' grid that could be relied upon in extreme weather scenarios.
A report from Energy Alliance found that since 2018, almost 80% of new generation that has been added to Texas' electricity market has been renewable energy, and less than 20% has come from dispatchable energy sources. That 20% comes entirely from natural gas. The report states that this "lack of diversity that has resulted from this over-reliance on renewables has come at a great cost to Texans." The report found that from 2006 to 2021, renewable energy generators have benefitted from approximately $1.6 billion in local subsidies, $10.3 billion in state subsidies and $12.3 billion in federal subsidies, for a total of more than $24 billion.
Last year in a formal letter, Gov. Greg Abbott directed the Texas Public Utility Commission to take immediate action to improve reliability of the Texas power grid. Actions meant to be specifically and immediately taken included streamline incentives within the ERCOT market to foster the development and maintenance of adequate and reliable sources of power, like natural gas, coal and nuclear power; allocate reliability costs to generation resources that cannot guarantee their own availability, such as wind or solar power; instruct ERCOT to establish a maintenance schedule for natural gas, coal, nuclear and other non-renewable electricity generators to ensure that there is always an adequate supply of power on the grid to maintain reliable electric service for all Texans; and order ERCOT to accelerate the development of transmission projects that increase connectivity between existing or new dispatchable generation plants and areas of need.
On Nov. 10, the Public Utility Commission of Texas (PUCT) released a report containing reviews conducted by E3 on a range of proposed market designs. This report provides an independent assessment of potential long-term market design reform options to promote the supply of dispatchable generation and focus on reliability as outlined in Phase 2 of the Blueprint published by the PUCT in December 2021. Under the direction of the PUCT and its staff, the consulting team of E3 and Astrape Consulting developed and analyzed six specific market design options and compared the impacts of each against a status quo Energy-Only market design.
The Austin Journal reported that at a Texas Senate Business and Commerce Committee hearing on Nov. 17 regarding the PUC's report, Katie Coleman, who spoke on behalf of the Texas Association of Manufacturers, said, "All the reliability issues with installed capacity that this report seeks to solve are a product of this assumption that 11,000 megawatts of generation are going to retire and so if you call into question that assumption, you call into question the basis for all of the administratively complex proposals and costs that are being put forth in this. So that is one of our big concerns. I think you heard Ms. (Carrie) Bivers (of Potomac Economics of Austin) talk about some of the issues with the assumptions in the report. We share those concerns. The report itself acknowledges it did not seek to achieve a full equilibrium in its modeling, it essentially just assumed we were going to retire coal and gas and that creates a problem that we have to solve."
Texas State Sen. Charles Schwertner tweeted, "TX needs to build new dispatchable energy resources for when the grid is stressed in extreme weather/higher energy use. Unfortunately, PUC's current market design proposal falls short of this fundamental goal. Let’s work together this session to get it right for Texans. #txlege"
As of 2021, natural gas comprised 42% of ERCOT’s energy sources, wind accounted for 24%, coal accounted for 19%, nuclear accounted for 10% and solar accounted for 4%.