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ERCOT, PUC, and deregulation got us here

cactusflinthead

By cactusflinthead
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High Plains Drifter
High Plains Drifter

I was driving around just now, listening to NPR, and they called out Abbot for his bullshit. I believe the direct quote was something like "Governor Abbot falsely claimed renewable energy was the caus

Hugo Stiglitz
Hugo Stiglitz
Bullneck
Bullneck

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Biff Tannen

Biff Tannen 45743

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5 hours ago, wildcat09 said:

These fucking idiots are going to get so many more Texans killed if we can’t elect Democrats to replace them.

I'm not holding my breath.  People in this state are just fucking stupid and/or don't pay attention.  I really am not sure how much longer I can see myself living here.

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jimmyjazz

jimmyjazz 46172

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Has anyone asked for a simple explanation of the $9,000 per kwhr price cap?  That's almost 200X the nominal base price of electricity in Texas.  This seems grossly disproportionate to the problem.

We lost, what, 30% generation capacity?  Shouldn't the price cap reflect that which is needed for providers to stay revenue neutral AT MOST?  Lose half capacity, double the price.

Obviously, this is overly simplistic, but in what world does a 30% decline in generation justify a 200X increase in price?

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swraith

swraith 347

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The price cap level was justified using the concept of the Value of Lost Load (VoLL).

 

https://en.wikipedia.org/wiki/Value_of_lost_load

 

http://www.ercot.com/content/gridinfo/resource/2015/mktanalysis/ERCOT_ValueofLostLoad_LiteratureReviewandMacroeconomic.pdf

 

http://www.ercot.com/content/wcm/training_courses/123737/Resource301_-_1_Overview.pdf

 

http://www.ercot.com/content/wcm/lists/167026/2018_12_20_ERCOT_MERM_Report_Final.pdf

 

Oh....you asked for a simple explanation.  Yeah, no, you won't find one.

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jimmyjazz

jimmyjazz 46172

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16 minutes ago, swraith said:

The price cap level was justified using the concept of the Value of Lost Load (VoLL).

I'm gonna guess they way overestimated that value, because it implies that an ordinary residential customer would be willing to pay (for instance) $2,000 per day for electricity when they ordinarily pay $10/day.  Obviously, customers on fixed rate plans don't see that boost, but I find it extremely unlikely that the floating rate customers had to absorb that much cost.

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swraith

swraith 347

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VoLL is not purely based on residential load.  1mw of residential load is the same as 1mw of industrial load.  Who is first to shed load and at what price? Its an open debate.  Some of the pdfs I linked above get into that.  $9k price cap or $3k price cap....likely accomplishes the same load shedding.  

 

Ultimately though, generators repeatedly told the PUCT that they needed higher prices to incentivize generation investment.  When the $9k cap first came about, many generators were very scared about forward hedging and then tripping offline, and going bankrupt as a result.  It didn't happen...until now.  They knew the risk, it just took years for the risk to appear.  

 

Please don't take the above as me defending VoLL.  I've never really bought into the concept, but its the academic vehicle that was used to justify raising the caps.

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jimmyjazz

jimmyjazz 46172

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I fully understand that residential customers aren't the only ones on the grid, but unless I'm mistaken, some of them did end up paying that $9K per kwhr.  It's just completely out of whack.  NO customer should have to pay that much.  It's at least an order of magnitude indefensible.

(I'm not trying to argue with you, I'm just furious that our "utility" systems are anything but.  Next up?  Water.)

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StassneyHorn

StassneyHorn 6641

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If you guys haven’t listened to Scott Braddock’s and Jeremy Wallace’s podcast Texas Take, you should. Did a good run thru for the saga so far. He has an all-time petty hate war going on with Dan Patrick. First 20-25 minutes on the subject before it delves off.

https://omny.fm/shows/texas-take/unscrambling-the-eggs

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JimmyJames

JimmyJames 12271

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8 hours ago, High Plains Drifter said:

 

 

Huh, its almost as if, stay with me here, the free market isn't the best way to run critical infrastructure/utilities.

 

 

It’s almost like people don’t understand why it’s actually called a “utility.” Like you can’t do without it as a society.

But sure let the free market decide. Morons.

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elfenix

elfenix 34333

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On 3/18/2021 at 11:51 AM, Hagbard Celine said:

https://www.dailykos.com/stories/2021/3/17/2021478/-This-Gov-Abbott-crony-promises-Wall-Street-Texas-freeze-profits-are-safe-as-Texas-citizens-screwed?detail=emaildkre

used to be that texas hated out of state banks and insurance companies with a passion.  it's part of why we have such broad exemptions from collection by creditors, and why you could only get a 1st mortgage for a long time on your home. 

thanks, republicans, for making us subservient to wall street.  it's what you wanted. 

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Nice Guy Eddie

Nice Guy Eddie 13523

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On 3/18/2021 at 11:51 AM, Hagbard Celine said:

https://www.dailykos.com/stories/2021/3/17/2021478/-This-Gov-Abbott-crony-promises-Wall-Street-Texas-freeze-profits-are-safe-as-Texas-citizens-screwed?detail=emaildkre

The PUC chair apologized to the banks and investors about Texas citizens inquiring about electricity price relief from the companies  who made obscene and unauthorized profits during the freeze? Who is this guy?

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elfenix

elfenix 34333

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"AUSTIN, Texas — Texas officials on Thursday raised the death toll from February’s winter storm and blackouts to at least 111 people — nearly doubling the state’s initial tally following one of the worst power outages in U.S. history."

https://www.marketwatch.com/story/death-toll-from-texas-winter-storm-nearly-doubles-to-at-least-111-01616708656

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JimmyJames

JimmyJames 12271

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15 minutes ago, elfenix said:

"AUSTIN, Texas — Texas officials on Thursday raised the death toll from February’s winter storm and blackouts to at least 111 people — nearly doubling the state’s initial tally following one of the worst power outages in U.S. history."

https://www.marketwatch.com/story/death-toll-from-texas-winter-storm-nearly-doubles-to-at-least-111-01616708656

I got a whole raft of shit from the turds  in the DT safe space for claiming a couple hundred Texans died in the storm. They were so pleased when the preliminary numbers were “only” 57 and tried to shove that number in my face. As if that really matters.

These people are so far gone. 

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Francisco 2.0

Francisco 2.0 32430

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https://www.texastribune.org/2021/03/25/warren-buffett-texas-power-plants/

 

Quote

As the Texas Legislature debated how to respond to last month’s winter storm-driven power crisis, executives at billionaire Warren Buffett’s Berkshire Hathaway Energy were pitching lawmakers an idea: The group would spend over $8 billion to build 10 new natural gas power plants in the state. Lawmakers would agree to create a revenue stream to provide Berkshire a return on its investment through an additional charge on Texans’ power bills.

Representatives for Berkshire Hathaway Energy have been in Austin meeting with lawmakers and state leaders for the past week and a half, according to a person working closely on the issue.

 

Quote

The proposed company, which would likely be known as the Texas Emergency Power Reserve, would build and maintain plants that sit idle during normal times, according to a slide deck obtained by The Texas Tribune. Whenever demand for power in the state threatened to surpass supply, these new plants would kick in to make up the difference, if ordered to do so by the state’s grid operator.

“When you flip that switch and say, look, demand has exceeded supply, it has to come on in 10 minutes,” Chris Brown, CEO of Berkshire Hathaway Energy, said in an interview Thursday with the Tribune. “That’s the Texas Emergency Power Reserve promise — that’s the promise that we’re making to the citizens of Texas.”

 

Quote

In the presentation, the representatives estimated the cost of that new charge to consumers as $1.42 per month for residential customers, $9.61 for commercial customers and $58.94 for industrial customers. The pitch to state leaders also included a poll conducted by Republican pollster Mike Baselice suggesting that Texans would be broadly supportive of paying a little more on their power bills to increase reliability. The poll was conducted from March 17-21 among 800 likely voters in Texas, according to top lines of the poll obtained by the Tribune.

Over the past week, Berkshire Hathaway Energy, part of Buffett’s multinational conglomerate company Berkshire Hathaway, has hired eight lobbyists in Austin at a cost of more than $300,000, according to records filed with the Texas Ethics Commission. One of those lobbyists is Allen Blakemore, a Houston political consultant who serves as a top strategist to Lt. Gov. Dan Patrick. Blakemore did not respond to a request for comment.

Executives also met privately with key legislative leaders, including the lieutenant governor, who presides over the Senate, and new House Speaker Dade Phelan, R-Beaumont.

 

 

Spoiler

A senior adviser for Patrick confirmed the lieutenant governor met with Berkshire Hathaway executives earlier this month. And a spokesperson for Phelan said the speaker met with the executives recently. A spokesperson for Gov. Greg Abbott, who has so far pushed for the weatherization of power generators as a legislative solution, did not immediately respond to a request for comment.

If approved, the deal would signal a move away from decades of a competitive electricity market in Texas in which all power generators in Texas are paid for the energy they produce and sell, rather than the power they could potentially generate. Berkshire Hathaway Energy executives say their plan would not create a “capacity” market, but instead serve as highly regulated backup electricity generation.

The company says that building extra power generation in Texas would help ease fears of a repeat of the February power outages, during which more than 100 people died.

“We’re not in favor at all of getting rid of [the deregulated market],” Brown said. “We think competition is to Texas’ benefit. We’re not dipping into the market at all.”

Power grids must keep energy demand and supply in balance at every moment or risk uncontrolled blackouts. The February outages were ordered by the grid operator, the Electric Reliability Council of Texas, in a move to prevent a bigger catastrophe that could have left most of the state without power for weeks.

Under Berkshire Hathaway’s plan, ERCOT would control when the new power plants are activated to avoid the threat of such widespread power outages, and customers would pay a fixed fee only to cover the project’s costs, while the price for energy supplied to the market would go to the state, not the company. It’s a similar model to how transmission and distribution utility companies are regulated.

Brown said that while the company is not against the state’s procurement process, it believes it’s “uniquely suited” to carry out the idea because of its $8.3 billion investment and a commitment to have those 10 plants, totaling 10 gigawatts of additional generation capacity, operational by November 2023. Under its proposal, the company would also owe the state $4 billion if it did not have the plants online by then, Brown said.

“Certainly there’s other entities out there that could potentially do it,” he said. “That list is pretty short.”

Texas deregulated its electricity market decades ago, theorizing that the price of electricity in the market — based on demand — would attract a sufficient amount of power supply. When demand for power is high, the price for power increases, and companies that can supply electricity to the grid make more money. The more cheaply a power plant can generate electricity, the higher the profit margin when it sells it in the wholesale market. Conversely, a plant that has been expensively weatherized to be able to operate in the extreme cold, or a plant that only operates on the few hottest days of the year, represents a big upfront investment for what may be little return in Texas.

Other regions of the country, including New England, tackle this potential mismatch by using government funds to subsidize the cost of plants that sit dormant for much of the year but turn on when demand is high. That’s the type of plant Berkshire Hathaway Energy wants to build in Texas — but instead, grid operators would decide when the plants ramp up.

Since a deadline to file legislation at the Legislature has already passed, the proposal would likely get tacked onto existing legislation. It was unclear Thursday which bill the pitch could be added to if lawmakers decided to act on it, though the company said it was talking with lawmakers about multiple pieces of legislation and working toward getting a committee hearing on the proposal sometime next week.

Texas’ competitive and deregulated market structure has come under criticism in the aftermath of the February power crisis. Power companies did not prepare plants to withstand severe winter weather, in part because companies build plants as cheaply as possible to maximize their profit margins. When the plants tripped offline during the winter storm, unprepared for the extreme cold, there wasn’t enough power generation available to the grid. Power prices spiked, and the Public Utility Commission of Texas ordered ERCOT to set prices at the artificial cap — $9,000 per megawatt-hour — to signal to power companies that any and all power was desperately needed.

But energy experts have expressed doubt that merely having more power plants would have prevented the crisis. Electric generation tripped offline due to freezing temperatures and a shortage of natural gas, which fuels many plants in the state.

“We didn’t have a shortage of power plants, we had a shortage of power plants that could work in the cold, and the gas to run them,” said Dan Cohan, an associate professor of civil and environmental engineering at Rice University. “Texas has an enormous amount of natural gas plants already. It’s not at all clear that there’s a need to have more power plants built.”

Berkshire Hathaway’s presentation argues that adding power generation capacity would be more cost effective for the state than upgrading existing plants to withstand extreme weather. Brown, the CEO, said that the natural gas plants would be winterized and maintain seven days of natural gas storage on site to ensure they could operate during an emergency.

Lawmakers in recent weeks have quickly moved on legislation to address the February power crisis. Last week, the Texas House State Affairs Committee moved forward a bill that would mandate the weatherization of power plants, or mandate that power plants can function under extreme weather conditions. On Thursday, the Texas Senate Jurisprudence Committee advanced Senate Bill 3, a wide-ranging winter storm bill that also mandates winterization for power plants and the natural gas supply chain.

Another bill and a joint resolution filed in the House by Rep. Dan Huberty, R-Houston, would aid power companies in funding those upgrades. But that legislation, as filed, includes language that would allow the low-cost loan program outlined in the bill to be used for building new power plants as well. It would direct the funds to prioritize projects that prepare facilities for cold weather, but it would also prioritize projects that provide excess power to the grid for periods of high demand — in other words, new power plants.

J.P. Urban, senior vice president and acting CEO of the Association of Electric Companies of Texas, a trade association of electric companies in the state, warned lawmakers earlier this week against subsidizing new power plants in their response to last month’s outages.

“We believe the program should only focus on bolstering resiliency and existing facilities to avoid disruption in the competitive market,” Urban said during a committee meeting Tuesday.

But lawmakers responded that they want more power generation on Texas’ grid, not just for future storms, but generally for the growing state population.

“We’re going to be a little bit more open to the types of investments that need to be made,” said Rep. Richard Peña Raymond, D-Laredo, responding to Urban. “We’re going to need more power in Texas, period. Freeze or no freeze.” The committee left the legislation pending on Tuesday, but witnesses and lawmakers indicated they would support the Huberty bill.

Even with the support of the Legislature’s top leaders, the Berkshire Hathaway deal will need to win the approval of the rank-and-file members — a lesson Buffett learned in a past session. In 2017, after the billionaire met with Abbott and Patrickat the Capitol, the Senate used emergency powers to quickly craft legislation that became known as the “Buffett Bill,” a special-interest carve-out allowing Buffett to be exempt from a state law that was barring people from owning both a vehicle manufacturing company and auto dealerships. The bill was effectively killed after Tea Party activists blasted it — and the attempt to fast-track it — as special treatment for a rich and powerful business owner.

Other lawmakers and officials have expressed doubts about letting Buffett and his companies play too big of a role in Texas.

Speaking at Texas Energy Day at the Capitol on Wednesday morning, Texas Railroad Commissioner Wayne Christian, one of the state’s oil and gas regulators, criticized President Joe Biden over his energy policies and, in doing so, swiped at “Warren Buffett’s company.” Christian said canceling oil and natural gas pipelines would put more trains on railroad tracks, and “Warren Buffett’s company makes a lot of money from it.”

 

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swraith

swraith 347

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NRG and Vistra would be expected to fight that Buffet idea tooth and nail.

Why pay for gas plants to sit idle for months or years at a time? If you want to subsidize natural gas generation, other more competitive means of subsidies could be created.

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cactusflinthead

cactusflinthead 27604

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16 minutes ago, swraith said:

NRG and Vistra would be expected to fight that Buffet idea tooth and nail.

Why pay for gas plants to sit idle for months or years at a time? If you want to subsidize natural gas generation, other more competitive means of subsidies could be created.

They gotta case?

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pantone159

pantone159 719

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I doubt that the plants would be idle for years at a time. It sounds weird to talk about generating plants that are normally not used, but if they are normally used then they are not really surplus capacity. Ideally, I think, there would be a pretty liberal use of special conditions where ERCOT calls up these plants, so they can at least keep things in working order. And I would presume that BH wants to be able to spool up in minutes and sell electricity if the price goes to $8K again.

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swraith

swraith 347

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1 hour ago, pantone159 said:

I doubt that the plants would be idle for years at a time. It sounds weird to talk about generating plants that are normally not used, but if they are normally used then they are not really surplus capacity. Ideally, I think, there would be a pretty liberal use of special conditions where ERCOT calls up these plants, so they can at least keep things in working order. And I would presume that BH wants to be able to spool up in minutes and sell electricity if the price goes to $8K again.

Presumably these would be tied to EEA events if ERCOT is going to dispatch them.  ERCOT doesn't experience EEA events very often.  With a mild summer you could easily have these plants sit idle for long periods of time.

 

On the face of it....I can't see this getting through the legislature.  It is effectively a capacity market paid to a single resource owner....as opposed to a competitive auction like in PJM.  Historically, Texas Legislature has hated anything resembling a forward capacity market.  I run through the list and think of all the other entities that would oppose this.  Heavy industry, manufacturing, retail energy providers, existing generation owners, existing municipally owned utilities likes Austin Energy, Cooperatives like Pedernales.

 

I have to think that if this got built...the dispatch of the plants...would require that prices remain high in realtime.  The market would almost instantly see price drops in real time with this generation coming online....unless it is full on grid collapse....which again....isn't very often.  ERCOT already has over 1000mw of responsive reserve (generation that is online but not dispatched...in case plans trip offline) and also procures non-spin...generation that can be brought online is a very short period of time.  Obviously it does not procure 10,000 mw of these types of reserve a day....as that is absurd in a normally functioning market.

 

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wildcat09

wildcat09 29409

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13 hours ago, elfenix said:

"AUSTIN, Texas — Texas officials on Thursday raised the death toll from February’s winter storm and blackouts to at least 111 people — nearly doubling the state’s initial tally following one of the worst power outages in U.S. history."

https://www.marketwatch.com/story/death-toll-from-texas-winter-storm-nearly-doubles-to-at-least-111-01616708656

We should get to execute 111 state officials with various degrees of responsibility for this.

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Mrs Whiggins

Mrs Whiggins 13050

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Either they go first and turn off their AC and the AC/electricity at every legislature member's home, business, second home, and what not or I vote we get pitchforks and urge them to get busy making those windmills turn with their hot air they keep emitting. Conservation my ass. Rake in 16 billion and piss on the dead and buried Texans who didn't have heat or water and now they're going to lean into this? Gah.

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Satchel

Satchel 6949

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2 hours ago, Mrs Whiggins said:

Either they go first and turn off their AC and the AC/electricity at every legislature member's home, business, second home, and what not or I vote we get pitchforks and urge them to get busy making those windmills turn with their hot air they keep emitting. Conservation my ass. Rake in 16 billion and piss on the dead and buried Texans who didn't have heat or water and now they're going to lean into this? Gah.

I averaged around four black outs in Coppell over the last three summers and I’ve kept all of the ETR texts from Oncor.

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Biff Tannen

Biff Tannen 45743

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Posted (edited)
10 hours ago, bluto said:


Supposedly these warnings were due to planned maintenance down time.... still mind bottling that half the state was below 75* and the high this afternoon was mid 80s on the border. 151.75 kB · 0 downloads

Planned what?

Edited by Biff Tannen
Weird, it expanded to show the full sentence when I quoted. So nevermind.
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