The ERCOT Board will meet tomorrow (Feb. 27), and the Reliability & Markets Committee meets this afternoon at 12:30CT. Here are some additional takeaways (I published a few on W.S. Heather last week) from the presentations that are already posted and what I’ll be listening for during the meetings:
1. It’s the end of the line for NPRR 1186. When I first wrote about this protocol revision undercutting energy storage, it looked like it would sail through. And it did sail through the ERCOT Board — unanimously. But the PUC rejected it and now ERCOT staff is recommending to withdraw a similar protocol revision, NPRR 1209. It appears they understand the PUC does not support punitive measures that would slow down development of highly dispatchable and flexible batteries.
2. ERCOT staff is recommending the Board approve the expansion of the Aggregated Distributed Energy Resource (ADER) pilot to participate in ECRS, the backup reserve service former Commissioner McAdams described as the “stealth fighter” of the suite of reserves ERCOT uses. The ADER pilot is helping the state find ways to use virtual power plants, microgrids, and other small sources to put power on the grid when it’s needed and to reward consumers in the process. Such distributed energy resources are absolutely essential to a reliable and resilient grid. If the ERCOT Board approves this, and it looks like they will, they (along with the PUC and stakeholders) deserve a ton of credit for advancing this forward-looking policy.
3. The Independent Market Monitor will present on the costs of Texas grid management policies to the Reliability & Markets Committee but, notably, not to the entire Board. This is a mistake. The IMM function is too important to be relegated to a committee; the whole Board needs to hear this presentation.
Major takeaways from the IMM:
· The “all-in” cost of electricity was up 88% in 2023 compared to 2022, despite the fact that natural gas costs were ~65% lower. The two main reasons for this: (1) 2023 was, historically speaking, an exceptionally hot year. (It’s important to remember that due to climate change — which, to my knowledge, ERCOT has never even acknowledged — 2023 could look more like an average year going forward.) (2) ERCOT procured more reserves than in past years, and likely procured more than was needed.
· The money made by generators was more than enough to justify private-sector construction of new power plants. Those profits also sent a strong signal to older, more inefficient plants to stay in the market (in fact, there have been basically no retirements in the last three years except for one 1950s gas plant). The IMM measures this incentive with “Peaker Net Margin,” a measure of net revenues for peaker plants — generators that typically operate only during times of scarcity. A high peaker net margin means high profits for generators; the last two years have been very good for generators.
· The IMM outright says what some state leaders have a hard time acknowledging: “wind played a key role” in keeping the lights on during Winter Storm Heather last month. Yes, there were times when wind power was low, but look at the four times demand went above 75,000 megawatts: wind power contributed in a major way at each of those times (and solar during two of them). When the wind slowed down, the wind chill also dropped, leading to lower demand. This is a pattern we saw during Winter Storm Elliott in 2022, too.
· ERCOT CEO Pablo Vegas will make a presentation to the full Board on Tuesday. He includes a slide about interconnecting ERCOT to other national grids that leans on generalities, saying it’s “a complex issue that will require extensive analysis” and input. It’s notable what he doesn’t say, which has been the position of Texas power grid decisionmakers for decades: he doesn’t say it’s unnecessary. This seems to indicate increased openness to interconnection — probably because keeping the heat on during the next Winter Storm Uri, when demand will likely surpass 92 gigawatts, will be virtually impossible without interconnection. How it gets done is “complex,” to be sure; that it needs to be done is not.
Also, for the first time, Vegas’ presentation includes a slide about NOGRR 245 (Nodal Operating Guide Revision Request), which would require inverter-based resources (IBRs, i.e., wind, solar, and batteries) to have equipment that would help them “ride through” frequency disturbances. But ERCOT’s approach — which requires retrofits that, in some cases, don’t exist — does not have enough support among stakeholders to move forward, nor does an alternative proposal put forward by generators.
The lesson of NPRR 1186 — which hopefully ERCOT staff has learned — is that the PUC is increasingly willing to exercise its legislatively mandated oversight role of ERCOT. That means ERCOT needs stakeholder support, and the inverter retrofit issue begs for compromise. Hopefully, the stakeholder process will work as intended and find a resolution that isn’t perfect for anyone but is workable for everyone.