GEORGETOWN, Texas — The Texas Renewable Energy Industries Alliance GridNEXT conference brought together more than 100 industry leaders, producers, developers, utilities, large consumers, entrepreneurs and policymakers to discuss the latest energy trends and developments. They attended workshops and participated in panel discussions on new technologies and the smart grid, integrating renewables and corporate energy management.
ERCOT Market Awaits Coal Retirements’ Effects in 2018
Cyrus Reed, conservation director for the Lone Star Chapter of the Sierra Club, moderated a panel discussing emerging issues in the ERCOT market. Reed has long led the fight against fossil-fueled generation in Texas, a fact NRG Energy’s Bill Barnes couldn’t help alluding to.
“Four thousand megawatts of coal retirements … I figured you’d be in a tuxedo,” Barnes deadpanned, referring to Luminant’s recent decision to close three coal plants. “This is what you’ve been waiting for.” (See Vistra Energy to Close 2 More Coal Plants.)
In a way, so are others involved in the market. Steve Reedy, deputy director of ERCOT’s Independent Market Monitor, noted that the ISO hasn’t seen a summer with tight reserve margins since 2007. He said the Monitor is anxiously waiting to see how the market performs in 2018.
“Will we see coal generators making profits that justify future investment?” Reedy asked. “We did see too much capacity on the system, more than justified for the load. If the load doesn’t rise fast enough to justify the generation, we expect to see retirements. So we will see if retirements in the market work.”
“We’re in Steve’s camp,” Barnes said. “We’ve made market improvements, but we still need to live through the events we’ve set up. We haven’t had a true scarcity event in years, but if we have severe weather, we could have one. That’s when we can all sit back and say, ‘Yes, that’s how it’s supposed to work.’ Or will there be temptation to intervene in the market?”
“The ERCOT market … is brutally competitive,” said The Wind Coalition’s Walter Reid. “You have true competitors, with a very low barrier to entry for new generators. You also have the wild west of open access to true transmission. Generators are able to interconnect with the lowest impediment anywhere in the country.”
Reid credited the state’s regulators and legislators with helping bring a sense of order to the market.
“They’ve adjusted the market, as opposed to making dramatic changes,” he said. “Any time you make a dramatic change, you’re disrupting entrepreneurial energy. Only entrepreneurial energy will help us when we have energy shortfalls.”
Asked by Reed why real-time co-optimization makes him “scream like a 13-year-old girl at a Justin Bieber concert,” Reedy acknowledged the Monitor is a “really big fan.” Of several market-design improvements the Public Utility Commission of Texas is considering, “our favorite idea is real-time co-optimization,” he said. (See ERCOT, Regulators Discuss Need for Pricing Rule Changes.)
“It’s effectively choosing on an every-five-minute basis where you get [the] spare reserve capacity you’re paying for. That’s your insurance policy,” Reedy said. “And you’re paying for it effectively and appropriately.”
The Monitor agrees with the proposals being offered by a report commissioned by NRG and Calpine, Reedy said, but not all the implementation details.
“We also like factoring marginal [line] losses into the price. Prices are important. They’re the signal to tell people where to invest and how to operate. If energy is less valuable — if all the wind farm is doing is heating up the lines — it’s not really as useful. To the extent it’s doing that, it should be factored into the price.”
“It’s easy to support an energy-only market when the prices are low … but logic can tell you that it can’t last forever,” Reid said. “It’s going to take some courage to stay the course and say this is how the market is designed to work. There’s periods of low prices, then high prices which incent new development and bring about a period of lower prices.”
Does Grid Resiliency Override Solar & Storage?
Speaking on a panel devoted to solar energy and storage, Judy McElroy, CEO for Fractal Energy Storage Consultants, surprised some in the audience when she focused her comments on grid resiliency and the importance of baseload generation.
“Don’t confuse [solar and storage] with resiliency. You still need to have conventional generation with solar and storage,” McElroy said. “While I’m at 50% renewable energy, I still need that conventional generation on standby and pay it to maintain the system. You’re never going to be free from that conventional generation.
“I know we want it so bad and we’re working so hard to make it happen, but we have to do it responsibly. If you’re a grid operator or someone who’s in the service utility industry, your job, first and foremost, is to keep the lights on, and we have to be responsible about that.”
As Tesla’s Topher Blunt said, “Solar doesn’t work if you don’t have grid power. When your challenge is to rebuild the grid, what do you do when your whole rooftop array is rolled up like a burrito?
“We’re finding storage is not necessarily the thing you have when power is out,” Blunt said. “Trying to plan for the absolute worst scenario, and have batteries at the ready, is not the best use of batteries.”
DERs Pose Big Changes for the Grid
The coming of distributed energy resources means big changes for the consumer, said Enbala Power Networks’ J.T. Thompson.
“The costs have gone down, and the grid is inverting. We’re moving from a centralized grid to one very much at the edge,” Thompson said. “We have to be ready for that, our utilities have to be ready for that, and we have to help our customers be ready for that. All of this is taking place at breakneck speed.”
Scott Hinson, director of engineering for Pecan Street — a research project at the University of Texas involving several Texas utilities, energy retailers and technology companies — related the story of one 12-year-old consumer who understood the future grid. Hinson was working on a residential microgrid controller in one participant’s garage, while the young man watched.
“He was dubious of the amount of space it took up in the garage,” Hinson said. “When I explained how it worked, he said, ‘So the power goes out, but I get to keep playing Xbox?’
“‘Yes, you do.’ He gave me a thumbs-up, and then he was out in the yard.”
Public Power Still Has Role in Texas’ Market
Panelists discussing public power issues agreed that the state’s municipalities and co-operatives, many of which have not opted into ERCOT’s competitive market, still have a role to play.
“When we talk retirements and reserve margins, it’s the munis and co-ops … that can provide the cash flow to help the market,” said the city of Georgetown’s Chris Foster. “We’re at that level that if the rest of the market goes belly up and prices are expected to rise, we expect the PUC to turn to us and say, ‘Can you help?’”
“As a rural cooperative, we’re not an early adopter by any means,” said Ingmar Sterzing, with Pedernales Electric Cooperative. “We appreciate CPS [Energy] and Austin [Energy] getting out in front so we can learn and grow from that. We also have a traditional mindset of lower-risk investments. We take things in a prudent, measured approach.”
Georgetown’s commitment to 100% renewable power presents another example of public power leadership.
“We went 100% renewable in our contracts because they were price competitive,” Foster said. “It was a pretty easy adoption for us. It speaks to the competitiveness of those resources. Why aren’t more utilities adopting that strong of a stance?”
“You can’t just spin around and diversify [your] assets,” said Austin Energy’s Khalil Shalabi, referring to the utility’s nuclear and coal generation. “If we sign a bunch of renewables contracts, we have to keep rates affordable. But to go to a net-zero utility — with nuclear and 65% renewables — we’ll almost be there by 2027.”
‘Decarbonized’ Economy Poses Big Challenges
Jan Vrins, Navigant’s global energy practice leader, said there’s no doubt the economy will decarbonize. When, he would not say.
“The pace by which and how is up to debate,” Vrins said during a “fireside chat.” “We’re going through a huge transformation … and the energy markets are not working anymore. We have to fix them. DERs will be 10 times more disruptive to our markets than renewables have been. There will be a complete value shift away from generation to transmission, distribution and beyond. Smart cities will create more value to customers and citizens. That’s where the investment will go, not to generation.”