“You may be right. I have stated earlier that the ERCOT market’s reliance on scarcity pricing did not foresee an environment with high penetration of zero-marginal cost resources. Back in 2005 I generically simulated an energy-only market to demonstrate how scarcity pricing would work. I never anticipated the mass introduction of renewables at that time.”
— Robert Borlick, electricity expert (below)
The once-proud, sturdy Texas electric grid is under severe stress–yet again.
Growing demand (electricity is life!), hot (almost) summer weather, and disappearing renewables (wind in the day, solar at night) have exposed a wounded grid.
The wounds are evident in prematurely retired natural gas and coal generation capacity, as well as a lack of new capacity. Why? Renewable energy severely diminished incentives for baseload generation that would have prevailed without (government-enabled) wind and solar capacity.
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Robert Borlick is a prominent name in the ISO/RTO planning field–and expert on Texas’s PUCT/ERCOT operation. The two of us have been at it for a few months now on social media:
The latest exchange below, occurring after another Texas emergency, was a ‘thaw’ of sorts in our exchanges. It is becoming more and more obvious that the reliable generation is in bad shape and, short of a conspiracy theory, it is because of bad incentives. The subtle, indirect, and ‘unseen’ side of renewables taking over the grid cannot be ignored as it was during the freeze by the planning intelligentsia and the mainstream media.
To use an term of environmentalists, there are “limits to growth” when it comes to renewables. The exchange follows (I report, you decide):
Bradley: Ditto … years of bad price signals/incentives for reliables has consequences. Atlas Shrugged.
Borlick: That’s a silly statement. The generators have a strong incentive to have their plants up for the summer season because that’s when prices are highest and the earn most of their profits. Stop beating that dead horse.
Bradley: But how do you get financing for a new plant based on a casino scenario? I have quotations to that effect from the Houston Chronicle.
What about natural gas and coal capacity that was retired because wind and solar were cheaper on a marginal cost basis?
Fact: renewables have taken over the market from reliables where reliables have no bench, to use a baseball analogy.
I don’t know how much longer you can blame natural gas for what renewable energy did. Natural gas needs maintenance, after all, for running so hard because of renewable no-shows.
In short, incentives matter.
Borlick: [in response to another comment] Gee, [energy ISO markets] have worked quite well for 20 years. What is “ long-term?”
Bradley: Long-term, I’d say, is here.
You can live or die by the spot price. And predictably, politics enters. Also, can’t disconnect customers in the new Texas law.
It took renewables (indirect effect, not only direct) 20 years to ruin the Texas market.
And I’d say the several tens of billions of dollars in Blackout rates cancel out the gains for retail competition.
Sad, but predictable. Was predicted.
Borlick: The blackout was not caused by renewables; it was caused by a lack of weatherization of fossil generator and natural gas assets. It is well known that renewables are intermittent and have to be backed up by firm capacity. They were – except that those backup generators couldn’t perform when needed. It is not that they didn’t exist.
Bradley: They did not perform because some did not have power (SNAFU from a disjointed industry, a regulatory issue), and some did not weatherize because it was a cost that could be skipped because of low margins from MC renewable pricing. (And winter were getting warmer from CO2, right??)
Please consider that the indirect effects of renewables are as or more important than the direct effects.
Without renewables, the ‘reliables’ capacity would be much, much greater–and the capacity would have stronger margins to perform.
Incentives matter.
Borlick: Really? Have you modeled this scenario? Have you seen any analyses by reputable sources concluding this?
Bob, you can’t just wave your arms in the air. you have to examine the specific interactions.
When generators earn less during low energy price hours they make it up through scarcity pricing in the hours when capacity becomes short. This suggests that as more renewables enter the market and further depress energy prices the incidents of operating reserve shortages and price spikes will increase.
Bradley: I agree. We need a formal study of what a small-to-no renewable generation profile would have looked like for Texas, producing a range of additional thermal capacity, baseload and peaking.
But where there is smoke, there is fire. And Texas is ablaze in a way that is is unprecedented in the history of the electric industry.
Short of a formal study, we have lots of anecdotal evidence of industry decision-makers saying that the incentives were wrong for reliables. And with lawsuits, we will get more evidence …
Will a fair study be done? Not now–it is too politically incorrect. Maybe it will emerge in the lawsuits–even dueling studies. But in time, I predict it will become so patently obvious that it will be less politically incorrect and be done.
Borlick: You may be right
I have stated earlier that the ERCOT market’s reliance on scarcity pricing did not foresee an environment with high penetration of zero-marginal cost resources. Back in 2005 I generically simulated an energy-only market to demonstrate how scarcity pricing would work. I never anticipated the mass introduction of renewables at that time.
The introduction of a substantial amount of price responsive demand would go far to relieve the problem but I am not sure that it would ultimately solve it.
Bradley: This is a very big point. I believe that it will be renewables that brings down the PUCT/ERCOT regime.
I am very critical of the current setup, but I will admit that sans renewables, the model is functional and would not be under such attack as it is today.
It sounds like Texas made the same mistake as the UK in not incentivising the creation of storage technologies as renewable capacity was expanded. With experience it’s clear you need both but storage tech has been slower to innovate and roll into production.
Storage is very, very expensive and should not rescue bad investments. Texas needs to stop adding intermittent generation by requiring full payment for transmission (on CREZ) and working to eliminate special subsidies.
Existing generation should be put on trial too.
Two ISO designed markets to compensate natural gas-fired plants in New England: 1. the wholesale energy market, (includes ancillary reserve market) 2. the “forward capacity market”. The influences outside of ISO that inhibits natural gas-fired plant operations. 1. RGGI, a carbon penalty administered by state agencies 2. State subsidized treatment of solar, wind and storage products allowing these renewables to corrupt the wholesale energy market and displace NG with low or 0 pricing. 3. An ISO that is slave to government and responds obediently to further the erosion of natural gas generation to the benefit of wind, solar and storage at the expense of customer electric costs and reliability i.e. (The elimination of MORP ( Minimum Offer Price Rule), a key performance metric of the forward capacity market that keeps honesty in pricing.)
Renewable??? There’s no such things as renewables and renewable energy!!!
The energy locked inside uranium is just as freely available to humanity as the energy locked inside wind or locked inside radiation from the Sun. The trick is how to get that energy out, through the building of machines, to turn it into useful electricity or heat. Also – as should be centre-stage for all of humanity’s endeavours – with minimal environmental impact.
For advanced, industrialised nations, states or regions, the electricity has to be in the despatchable, 24/7/365 form. Uranium machines – nuclear power plants (NPPs) are designed to generate 24/7/365 electricity. Wind and solar power plants (WASPPs) can only generate intermittent electricity and, at present, have to have natural gas-fuelled machines for backup for frequent periods: ‘When the Sun don’t shine and the wind don’t blow’.
In low-carbon economies of the future, [Texas???] with high WASPP penetration, greenH2-fuelled machines will be essential to solve the ‘Intermittency Problem’. An overbuild of WASPPs for manufacturing the greenH2 fuel is needed, which approaches 50%, because the ‘conversion’ of intermittent electricity to 24/7/365 electricity is through a dismal 30% efficient power-to-gas-to-power (P2G2P) cycle.
The UK’s Committee for Climate Change’s (CCC’s) ‘Sixth Carbon Budget’ calls for 80% of UK electricity (635 TWh per year) from WASPPs by 2050.
172 uranium machines, in the form of the Rolls-Royce 470 MW UK-SMR, which commences operation in 2030 could be in place by 2050, to supply 635 TWh per year of 24/7/365 electricity for lifespans of 60 years, with near certain (more profitable) life extensions to 80 years.
The numbers of wind and solar machines with greenH2 backup machines to do exactly the same, are:
33,400 x 10 MW offshore wind machines
452,000,000 – 2m x 1m x 0.04m solar machines
18,542 x 4.8 MW onshore wind machines
1,235 x 400 MW greenH2-fuelled gas machines
It must be obvious to anyone with a modicum of common sense that the environmental impact of the CCC’s recommendations is the stuff of nightmares:
https://colin-megson.medium.com/there-is-no-such-thing-as-renewable-energy-b42863ab3685
It must be obvious to anyone with a modicum of common sense that the cost of the CCC’s recommendations is insane:
https://colin-megson.medium.com/by-2050-the-cccs-sixth-carbon-budget-calls-for-635-twh-year-of-despatchable-electricity-from-d1cac83a213
The ‘indirect effect’ of marginal cost pricing slamming the reliables is now going mainstream.
https://www.realclearenergy.org/articles/2021/06/20/why_marginal_pricing_in_wholesale_electric_markets_may_need_reform_782085.html