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ERCOT Announces Electricity Market Redesign, Warns Of More Energy Conservation Requests

A coal-fired energy plant is seen at  sunset.
Branden Camp
/
AP
Texas energy officials announced a major overhaul of the state’s electricity market at a Thursday press conference.

Texas energy officials announced a major overhaul of the state’s electricity market at a Thursday press conference.

The previous “crisis-based model” rewarded generators with high prices during times of scarcity.

“We've completely turned that model on its head,” said Public Utility Commission of Texas (PUC) chairman Peter Lake, explaining that the grid operator will now purchase more electricity reserves sooner in response to potential scarcity. “And that's happening now. That makes the grid more reliable for this summer. And in the meantime, we're working on redesigning the market structure, so we don't run into those market incentive problems in the future.”

But there are many open questions about what the redesigned market structure will look like.

Earlier this month — about two weeks after receiving a $1 million donation from a natural gas executive whose company made more than $2 billion during the winter storm — Gov. Greg Abbott told the PUC to incentivize gas, coal and nuclear power while adding costs for renewables.

Doug Lewin is an energy and climate consultant.

“If (the PUC commissioners) take that path — as was outlined pretty clearly in the governor's letter — and just favor one resource over another, I think there'll be all kinds of lawsuits that will hold up the implementation for a long period of time,” he said. “And even if they win those lawsuits, then you're going to end up with a lot of suboptimal outcomes: I don't think we're going to really increase the resiliency and reliability of our grid, but one thing that would be guaranteed by that kind of path is higher prices.”

In what Lewin described as a “newsworthy” proclamation, PUC chair Peter Lake said the ERCOT market will not become a “capacity market,” where power plants are compensated for the ability to produce power, even if it’s not used. The capacity market design is typically more expensive. The current design is an “energy market,” where generators are primarily compensated only when they produce power.

Lake said he doesn’t know exactly what the future market will look like. But while Gov. Abbott has tried to strictly define “dispatchable” power as coal, gas and nuclear, Lake and his colleagues have emphasized “technology-neutral” approaches, where reliability and low prices are achieved through a mix of resources.

“So (the commissioners are) saying those things,” Lewin said. “Renewables, especially if they're coupled with storage, can be completely dispatchable. So, if they do this right, it's going to be a competitive market that renewables and thermal and storage and demand can all participate in, setting up maximum competition in order to drive prices as low as possible for consumers while meeting that high reliability standard.”

According to officials, Texans should expect more energy conservation requests as hotter temperatures arrive. But, they said, there’s no cause for alarm. Brad Jones — CEO of the Electric Reliability Council of Texas (ERCOT), which operates the grid — said the organization has been inspecting power plants and reviewing their summer weatherization plans.

“We also were able to translate best practices that we have learned from other facilities,” he said. “So, we're able to communicate with them to review that they've met their own emergency operation plans, as well as improve those plans overall.”

The full market redesign is likely to drag on as stakeholders provide input on new rules. There are also questions about how a proposed “clean electricity standard” at the federal level could impact the Texas grid.

To hear more about why the Texas grid is the way it is, listen to the first episode of NPR member station KUT’s new podcast, The Disconnect: Power, Politics and the Texas Blackout.

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