Requiring renewables to purchase replacement power is a mistake for Texas
Several bills—SB 1278 by Sen. Kelly Hancock; SB 4466 by Rep. Phil King; and the omnibus electricity reform legislation SB 3—would require renewable generators to “purchase ancillary services and replacement power sufficient to manage net load variability.” Almost every word and phrase here raise more questions than answers.
To maintain the integrity and functionality of the electrical grid, the amount of electricity generated must match electric load on a second-to-second and minute-to-minute basis. This poses a challenge, as both generation and load are subject to sudden and unforeseen changes.
In order to account for these potential gaps, the Texas grid manager, the Electric Reliability Council of Texas (ERCOT), forecasts the amount of needed short-term capacity (or “ancillary services”), and then contracts on an hourly basis with generators and loads to keep this capacity in reserve. This is known as the “ancillary services market” and might involve a generator operating at less than full potential, with the ability to vary output up or down as needed. Some forms of ancillary services can also be provided by load itself.
There are four types of ancillary services utilized in the ERCOT market, listed in order of increasing response time: Regulation Up, Regulation Down, Responsive Reserves and Non-Spinning Reserves. These are chiefly distinguished by the rapidity of their response.
The need for ancillary services is not due to any particular energy source, but to all sources in aggregate. Renewable generation can increase the need for ancillary services—but so can all other forms of generation. Traditional power plants regularly trip offline, requiring the ERCOT market to keep extra reserves on hand to cover the lost generation. Similarly, there are some industrial consumers, such as steel mills, whose electric demand can spike suddenly, driving ancillary service costs up. There is little evidence that renewable energy is a significant driver of ancillary service costs in the ERCOT grid. In fact, over the last 10 years, annual ancillary service requirements have decreased by more than 6 percent, even as wind and solar installed capacity has increased nearly 300 percent, from less than 10 gigawatts (GW) to nearly 29GW.
Given that renewable generators are not a substantial driver of ancillary services cost, the rationale for singling them out for legislative punishment, as is currently being contemplated, is confusing.
Equally bewildering is the suggestion to require renewable generators to purchase “replacement power.” Currently, a generator who wants to participate in the Texas electric market can bid into any of the several auctions. There is a Real-Time Market (RTM) that generators can bid into to produce power today, and a Day-Ahead Market (DAM) to produce power tomorrow. There is also the ancillary services market, typically procured on a day-ahead basis.
If a generator submits a winning bid in the Day-Ahead or ancillary services market and then is unable to perform, it is penalized and must purchase electricity from the RTM equal to what it had promised to provide. In this sense, generators who participate in these markets are already responsible for purchasing replacement power.
Since wind and solar generators have traditionally only participated in the RTM, it is unclear what the legislation expects renewable generators to replace.
What is clear is that these measures would not have done anything to prevent the February blackouts, and will not prevent such events from happening again. Texas’ troubles were not the result of wind power failure or a lack of installed grid thermal capacity. Rather, outages occurred because weather conditions prevented nearly half of installed capacity in the ERCOT region from operating. That included outages from every energy source, including large amounts of lost generation from natural gas plants. Instead of spending precious time and energy attempting to punish particular energy sources, the legislature should be focusing on the systemic problems that left so many in the dark.
Image credit: hrui