Month: February 2021

The Eyes of Texas are on ERCOT

A price contour map of ERCOT showing high electricity prices across the whole state.

Joshua Rhodes and Caitlin Smith in Forbes:

The energy world is currently transfixed by what is going on in Texas. Usually ERCOT gets attention in the dog days of summer when temperatures soar above 100 degrees F, air conditioners work round-the-clock to keep us cool, and the grid strains to keep up. But this Valentine’s Day cold snap makes our sweltering summer peaks look like child’s play. Wholesale electricity market prices are at all-time highs and have been in the $1000s of dollars per MWh all weekend. On average, ERCOT prices are much lower, generally in the low $30s.

Volatility and high prices are nothing new for the electricity wholesale market in Texas. (Note that the vast majority of residential customers are not paying these high prices to keep their homes warm as their electricity providers offer higher retail rates in exchange for buffering them from these price spikes, but more on that later.) In fact, very high prices for a small number of hours of the year is a feature of the Texas electricity market, not a bug, as the price spikes are useful incentive for prodding developers to build more generating capacity. However, we generally expect price spikes to happen on hot summer afternoons, driven by air-conditioning. And we expect those price spikes to be brief, lasting minutes or hours, and in isolated locations. This swath of high prices that span the state and have already lasted more than a day and are likely to last several more days is wholly new territory.

On some level, it is a classic case of supply and demand. However, there are two markets involved and both are competing for the same thing. Texas is, as a whole, a summer-peaking state. Our energy use and electricity price spikes are driven by hot summer afternoon air-conditioning use. But, even on a bad day, the temperature difference between the outside air (105F) and a “comfortable” inside temperature (75F) is at most 30F (105F-75F). Temperatures are forecasted to get down to 10F in Austin, so the indoor/outdoor difference between a “comfortable” indoor temperature of 70F is 60F (70F-10F),  double what we are trying to control in the summer. Keep in mind our homes are designed with insulation for a 30F differential and a preference for shedding heat, not a 60F differential with a desire to retain heat.

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Winter Weather Will Challenge Texas Grid

Utility Dive:

  • The Texas electric grid is bracing for record winter peak demand next week, as a cold snap is expected to drive heating consumption. A new all-time winter system peak record is possible Monday morning, the Electric Reliability Council of Texas (ERCOT) warned on Thursday. 
  • The grid operator also sent a message to market participants on Monday, warning generators to “prepare to preserve fuel to best serve peak load, and notify ERCOT of any known or anticipated fuel restrictions.”
  • ERCOT’s current winter peak demand record is 65,915 MW, which was set in January 2018. The grid operator issued a Seasonal Assessment of Resource Adequacy (SARA) report in November that forecast a winter peak demand this season of 57,699 MW.

The November SARA report identified almost 83,000 MW of resource capacity that ERCOT expected to be available to meet winter peak. But Texas is experiencing a stretch of cold temperatures that is expected to culminate next week, and the grid operator wants to be prepared.

“This statewide weather system is expected to bring Texas the coldest weather we’ve experienced in decades,” ERCOT President and CEO Bill Magness said in a statement. “With temperatures rapidly declining, we are already seeing high electric use and anticipating record-breaking demand in the ERCOT region.”

Higher peak demand could cause Texas electricity prices to soar. When the state set its January 2018 winter peak demand record, prices briefly topped $2,200/MWh.

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Solar is Cheap. Why aren’t We Using More of It?

Popular Science:

Many of us might assume that the reason so much energy still comes from gas and coal power plants is simple economics: those fuels are cheaper. But though it was once true, that assumption has actually been obliterated by a recent decline in solar and wind costs over the past decade.

When it comes to the cost of energy from new power plants, onshore wind and solar are now the cheapest sources—costing less than gas, geothermal, coal, or nuclear.

Solar, in particular, has cheapened at a blistering pace. Just 10 years ago, it was the most expensive option for building a new energy development. Since then, that cost has dropped by 90 percent, according to data from the Levelized Cost of Energy Report and as highlighted recently by Our World in Data. Utility-scale solar arrays are now the least costly option to build and operate. Wind power has also shown a dramatic decline—the lifetime costs of new wind farms dropped by 71 percent in the last decade.

Natural gas prices decreased over that time, too, though by a lesser amount—32 percent—but that’s due to the recent fracking boom and not a longer term trend like that seen in renewables, the article states. The cost of building coal plants stayed relatively stable over the decade.

Solar became cheap due to forces called learning curves and virtuous cycles, the article describes. Harnessing the power of the sun used to be so expensive that it was only used for satellites. In 1956, for instance, the cost of one watt of solar capacity was $1,825. (Now, utility-scale solar can cost as little as $0.70 per watt.)

The initial demand for satellites fueled a so-called “virtuous cycle.” The more panels were produced for satellites, the more their price declined, and the more they were adopted for other niche purposes. As the cost further declined due to technology improvements and the rise of economies of scale, solar was able to eventually debut as a viable general-purpose energy source. Since 1976, each doubling of solar capacity has led to a 20.2 percent average decline in the price of panels.

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