Texas has the most wind capacity of any state, generating about 16% of its electricity from wind. In August, as temperatures rose to over 100 degrees and consumers increased their use of air conditioning, Texas’ grid operators struggled to meet the record demand for electricity. Many of the wind turbines could not operate because the wind was stagnant, a common occurrence on very hot days. As a result, energy costs skyrocketed. In Houston, wholesale power prices spiked nearly 49,000% (to $9,000 per megawatt-hour). The Electric Reliability Council of Texas (ERCOT) warned that reserve margins were so low that it might have to institute rolling blackouts. The independent system operator called for the construction of more gas-fired generating plants.
Facing its second consecutive year of strain on its grid, ERCOT mandated all available power plants to run flat-out, called on factories to cut power consumption, and imported electricity from Mexico.
Power reserve margins were so thin that increments of just tens of megawatts were available to meet demand. The state called the first of its three levels of emergency and hit its market price cap of $9,000 per megawatt-hour to avoid rolling brown-outs. According to ERCOT, if one of the state’s large natural gas plants had gone offline when reserve margins were thin, rolling blackouts might have been unavoidable.
Texas has a deregulated power market in which competition holds down power costs unless demand is high and then spot prices skyrocket. Texas prepared for the hot weather this summer, allowing generators to request permission to disregard air regulations, ordering all generation assets to be available and importing power from the neighboring Southwest Power Pool market.
Aug. 13 and 15 were the toughest days because most of the state’s 26 gigawatts of wind capacity were becalmed in the mid-afternoon, and a few power plants that had been running flat-out for days began to fail from the high temperatures that increased demand across the state. As wind power slowed, ERCOT instituted its first level of emergency alerts, calling on small industrial and commercial generators to pour power onto the grid, and requesting power from Mexico from which an additional 60 megawatts were imported on Aug. 15. Installed capacity numbers for electricity from intermittent sources such as wind and solar mean very little when they fail to produce as wind did in the middle of the hot Texas summer.
ERCOT did not need to institute rolling brownouts since the situation did not escalate beyond the second level of emergency alert in which it would call on about 1,100 megawatts of load to drop off the system.
The Texas power market does not include a capacity market that pays generators to keep power plants available. As inexpensive natural gas and subsidized renewable power pushed down power prices, coal’s market share dipped below that of natural gas and wind. Last year alone, the state retired more than 4 gigawatts of coal-fired capacity, or almost 70 times as much power as was purchased from Mexico on Aug. 15.
The situation may get more dire as additional wind farms are being built. Facebook recently announced a deal in Texas to buy power from the largest single-site wind farm in the country. The power purchase agreement will obtain power from the 200-megawatt Aviator Wind East project, which is scheduled to come online in 2020 in Coke County, Texas. The Aviator East initiative is part of a larger 525-megawatt project. While there are larger U.S. wind farms, those have typically been built in phases, not in the single-phase construction planned for Aviator Wind East.
Texas’s 100% Renewable Experiment
Last October, Georgetown, Texas obtained a $1 million grant from former New York City Mayor Michael Bloomberg’s nonprofit, Bloomberg Philanthropies, in which the city planned to obtain 100% of its electricity from wind and solar power. The grant’s only real requirement, however, was that the city serve as a public relations platform to convince Americans to abandon fossil fuels and switch to renewable energy. The town’s politicians promised that the renewable energy would be cheaper. But, as more wind and solar power displaced natural gas, electricity bills went up.
The city’s municipal utility now has a $7 million shortfall that has to be made up by the city’s consumers through higher electricity bills. Embarrassed, the City Council voted 5-0 to kill the Bloomberg PR deal. It also raised property taxes.
As part of the Bloomberg agreement, Georgetown was planning to install solar panels on homes and obtain a battery storage farm to store electricity when wind and solar power were not available. For Georgetown to be 100% renewable using today’s state-of-the-art batteries from Tesla’s Gigafactory, the city would need a $400 million battery farm weighing some 20,000 tons to avoid a blackout. And, after spending $15,600 for each household for such a battery farm, its backup power would be drained in 12 hours with a single windless night.
A Lesson Well-Learned
The close call in Texas in mid-August should be a lesson for ERCOT to rethink how it is valuing dispatchable, baseload power. The addition of more intermittent capacity to the market will likely make the reliability challenges Texas is facing only more difficult to manage. Further, the 100% renewable goal that several states have instituted should be viewed as a farce as the city of Georgetown recently discovered.
About the Author: Mary J. Hutzler is a Senior Fellow at the Institute for Energy Research (IER). Until she left government in 2006, she was a top energy analyst for the U.S. government, having spent more than 25 years at the Energy Information Administration (EIA), where she specialized in data collection, analysis, and forecasting.