THOSE OF YOU who attended this year’s annual meeting may have heard me briefly discuss the challenges we’re facing in the electric industry. To provide a little more insight on this subject, Clif Lange, general manager of South Texas Electric Cooperative, our generation and transmission provider, has written the following article, which contains an overview of the current power grid situation in Texas.
I hope this information will allow you to have a better understanding of what Texas and our nation are facing and prepare for summer electricity usage.
Mike Ables, San Bernard Electric Cooperative CEO
Who is responsible for the reliability of the electric grid?
That is a question that I have heard expressed by numerous people over the last few months and years. It is a great question to ask, and one that is difficult to answer. So many government agencies at both the state and federal levels make decisions that ultimately affect electric grid reliability, but there is not a single agency that serves as the coordinator to ensure that actions taken by the different agencies coordinate well, or at all. Surprising, I know!
Fortunately, most of the state of Texas is served by its own electric grid that is largely islanded from the rest of the nation and Mexico. It is managed by an entity known as the Electric Reliability Council of Texas, or ERCOT, who answers to the Public Utility Commission of Texas, or the PUCT, and the Texas Legislature. As a result of having our own islanded system that is not participating in interstate trade, we are excluded from federal jurisdiction in some respects, particularly jurisdiction exercised by the Federal Energy Regulatory Commission, or FERC. This allows us to be nimbler and take a Texas approach to managing the reliability of our ERCOT grid.
Despite having the ability to manage our own electric grid without the interference of FERC, we are still exposed to federal externalities that have created challenges for the ERCOT grid. In the late 1990s and early 2000s, the US Congress opted to provide financial incentives for renewable generation development. The Texas Legislature followed suit and set statewide goals for renewable generation; goals that have long since been surpassed. Wind generation technology was further developed at the time of these legislative changes and a proliferation of wind turbine construction soon followed across the country, but particularly in Texas. As a result, Texas leads the nation in the amount of wind generation installed. This has proven to be a great resource for Texans as it has reduced power prices and encouraged economic growth in the state. Now, with the aid of federal subsidies for solar generation we are witnessing extraordinary growth in solar generation installations thereby adding another low-cost source of power to the arsenal and soon Texas will lead the nation in the amount of solar generation installed.
As I previously mentioned, these resources have been great at reducing power prices for ERCOT consumers. However, they have come at a cost to reliability. As wholesale power prices have been suppressed by these subsidized renewable energy sources, dispatchable generation provided by coal and natural gas has been gradually retiring and those resources that remain continue to face economic pressure to retire. Furthermore, there has been little incentive for new dispatchable generation to be constructed in ERCOT. According to ERCOT, between 2008 and 2022 only 1,500 MW of new dispatchable generation has been added on a net basis; most of this generation is sourced from clean natural gas. However, during that same time more than 48,000 MW of solar and wind generation has been added on a net basis.
Renewables afford us an opportunity to reduce our overall air emissions and conserve our natural resources, so why is the retirement of dispatchable generation a problem? That is because we need dispatchable generation to replace renewable energy when the wind is not blowing, and the sun is not shining. While new battery storage technology offers some degree of aid in ensuring reliability, the current battery technology, and the economics of it do not make it a viable replacement for traditional fossil-fueled generation technology. Current battery technology lends itself to short-term usage, but not to the multi-hour or multi-day needs that might arise should we see another catastrophic weather event similar to what we had seen with the prolonged freeze in February 2021. Furthermore, as was demonstrated on July 13th of last year, we can’t always count on the sun being available to bail us out in the summer. On that day we experienced a dearth of wind generation, and solar generation suffered as a cloud deck emerged over West Texas suppressing much of the solar generation in the state. It was only for the fact that we had sufficient dispatchable generation fueled by natural gas, coal, and nuclear that ERCOT was prevented from implementing rolling blackouts to preserve the integrity of the system. However, we no longer have enough dispatchable generation available to backstop instances when Texas’ renewable generation lacks the wind or solar potential to operate. Chairman Peter Lake of the PUCT acknowledged this struggle and in highlighting the challenges we will face this upcoming summer stated, “The increase in demand for electricity is outpacing the supply of on-demand dispatchable power in this new reality. Our risk goes up as the sun goes down because it’s still hot at 9 p.m. Our solar generation is all gone, so at that point in the day we will be relying on wind generation on our hottest days. We may not have enough on-demand dispatchable generation to cover the gap between when the sun sets and we lose the solar, and when our wind generation picks up.”
Our state officials recognize this problem and the Texas Legislature and the PUCT have been grappling with this over the course of the last two years. They continue to look for ways to provide appropriate incentives to convince dispatchable generation to build in the state, but they face a daunting task in the face of federal subsidies. These subsidies have been recently super-charged with the passage and signing of the Inflation Reduction Act by President Biden in August of 2022 and these subsidies will continue to put economic retirement pressure on traditional dispatchable generation.
Not only will dispatchable generation be challenged by competing subsidized technologies, it remains under attack by the federal Environmental Protection Agency, or the EPA. While the goals of the EPA are laudable, the EPA works in a vacuum and does not confer with other agencies on the impacts their regulations have on overall electric grid reliability. Their most recent proposed rule addressing greenhouse gas emissions is an example of this. They assume the commercial availability of carbon capture systems and hydrogen availability for firing of power plants will allow for a substantial decrease in carbon dioxide emissions. But the problem is that carbon capture systems have not been proven to be viable and hydrogen infrastructure is nonexistent. The technology, supply chain, and transportation system does not yet exist to fire power plants on hydrogen at the scale that the EPA insists, and yet they state that their rule will result in a vibrant, reliable, and affordable electric grid. There is no evidence, however, that they have validated that assertion with FERC or any other agency or stakeholder in promulgating that rule.
So, the question still stands: who is responsible for the reliability of the electric grid? I offer that everyone has a stake in that outcome and there needs to be a coordinated effort. South Texas Electric Cooperative will continue to advocate for reliable and affordable power through our connections at the national level with the National Rural Electric Cooperative Association, and at the state level with Texas Electric Cooperatives. We will continue to make our voices heard and ensure that our representatives understand our concerns. The safety and security of our members depends on it.
Clif Lange, General Manager, South Texas Electric Cooperative