New Texas Grid Operator Report on the Clean Power Plan Is No Cause for Alarm

October 20, 2015 by John Moore, Senior Attorney, The Sustainable FERC Project

Written with the assistance of David Wooley

The headlines on the Texas power grid operator’s new report on the Clean Power Plan say “problem,” but the report itself says otherwise. Yes, coal plants may close, but wind and solar power and energy efficiency will more than make up for any shuttered plants. And yes, new transmission may be needed, but in small amounts relative to the size of the Texas power grid, and over a long period of time. In short, the report says just about what we would expect at this point on any study of the Clean Power Plan’s grid impacts -manageable and no cause for alarm.

Reliability – not a Texas-sized problem

The Electric Reliability Council of Texas (ERCOT) first looked at the Environmental Protection Agency’s proposed standards to cut carbon pollution from power plants last year. Now, in its report on the final standards, ERCOT predicts that only about 4 percent –in the worst case – of power plant capacity in ERCOT might retire because of the Clean Power Plan.

More specifically, in a system with 105,000 megawatts (MW) of power, ERCOT estimates that up to 4,000 MWs will retire over more than a decade because of the Clean Power Plan. That’s far less than the nearly 17,000 MWs of power plants retired between 2005 and 2014 in Texas, and eminently manageable. At the same time, ERCOT predicts large amounts of renewable energy will be added in Texas over the next 5 years – nearly 14,000 MW of solar and 9,400 MW of wind power.

As you would expect with any shift in the power mix, the grid will need improvements to maintain reliable service. Yet the needs will be minimal in relation to the entire grid. Considering that ERCOT manages 43,000 miles of transmission lines, the study reports the potential for localized transmission issues affecting only 329 miles of power lines and equipment. That is child’s play to a grid planner. Each year ERCOT approves transmission upgrades on hundreds of miles of transmission lines.

As any transmission engineer will tell you, reliability challenges are met with time and good planning. According to ERCOT, five years are required to plan and construct large new lines. With well over a decade for Texas to plan for and implement the Clean Power Plan, ERCOT has the tools and the time to maintain and even improve reliability during this period.

Texas Wind Farm

 

 

 

 

 

 

 

Gaps in the report

Notably, the ERCOT report omits the valuable role of rooftop solar, energy storage, combined heat and power, and other “distributed energy resources” in contributing to grid health. ERCOT is in the middle of a multiyear stakeholder process to assess whether to open up its power markets to these resources.

ERCOT’s DREAM Task Force highlights the grid reliability values of these resources. (Yes, that’s right – DREAM, as in “Distributed Resource Energy and Ancillaries Market Task Force.”) Their values include:

  • Less energy lost through transmission inefficiencies;
  • Less capital costs for high voltage transmission interconnection facilities; and
  • More resilient low-voltage power lines that protect neighborhoods against the consequences of large-scale transmission line failures.

While more difficult to model than large central station power plants, these resources will become more prevalent in the years to come, so grid operators need to adapt and plan for them.

Nor does the report mention the high value of demand response (customer-driven reductions in consumption in response to price signals). There is a great untapped market for demand response in Texas, and ERCOT can provide more leadership in this area.

Whither energy efficiency?

Regrettably, ERCOT’s report fails to appreciate the potential for energy efficiency as a Clean Power Plan compliance tool. It mostly ignores energy efficiency improvements from large industry, even though Texas oil/gas/manufacturing companies are national leaders in embracing combined heat and power and other industrial energy efficiency solutions.

Texas is still largely an untapped market for energy efficiency potential in homes and small businesses. If nothing else ERCOT’s report should be clarion call to increase energy efficiency investments in Texas, which the American Council for an Energy Efficient Economy most recently ranked 34th in the country.

More affordable than meets ERCOT’s eye

Grid operators are not especially well-suited to predict the consumer rate impacts of the Clean Power Plan, since they frequently underestimate the savings potential of clean energy investments. ERCOT’s overly conservative estimate that prices could rise from 8 to 18 percent by 2030 relative to “business as usual” omits key countervailing factors:

  • The price-reducing impacts of more rooftop solar, small wind, energy storage, and other distributed energy resources;
  • More demand response: experience in northeast states shows that demand response alone can dramatically reduce wholesale electric prices, and that those benefits flow to home and commercial customer bills; and
  • Reinvesting the revenues from state or regional carbon trading markets into new efficiency programs and other consumer savings options.

Adjusting for these and other factors, consumers will be more likely to save money. They certainly will be better off than they were from 2000 to 2013, when residential electricity prices rose 43 percent!

Flexibility and time — keys to reliability and affordability

The Clean Power Plan gives Texas enormous time and flexibility to continue to move towards a cleaner, low-carbon future while maintaining and even improving reliability. Despite the headlines, a close look at ERCOT’s report confirms that Texas should have no problem meeting the Clean Power Plan’s carbon pollution limits.

Written by John Moore