Interested in Utility Scale Renewables ? Delve into ERCOT

[mspohr]

You can try that ...
it has been tried, many, many times

One negative outcome is a black market
Other negative outcomes are hoarding and inefficient distribution
And when you are unlucky, it causes a supply reduction

Not sure how "hoarding" and "supply reduction" would work in electricity. They could shut off their generators but then they wouldn't have anything to sell at any price. That seems worse than selling at a profitable (but capped) price.

 

[jbcarioca]

In the last few posts we've discussed pricing.

What we should address, in my very humble opinion, is how to establish service level standards and resilience minima. were that to happen there would be vastly less volatility than there is now because the outages would be reduced through a combination of increased resilience (battery storage etc) plus reduced outages due to inadequate system resilience.

The Tesla model could work very well, even in times of stress, if the system resilience were part of basic system design. The failure was one of basic attention to system requirements, just as similar weaknesses have caused disasters in aviation, shipping, refineries, chemical plants and other industries. Deregulating prices need not mean abdicating performance standards and risk management minima.

 

[SageBrush]

Deregulating prices need not mean abdicating performance standards and risk management minima

That is exactly my take on the matter

 

[mspohr]

That is exactly my take on the matter

So you are in favor of regulation?

 

[SageBrush]

They could shut off their generators but then they wouldn't have anything to sell at any price. That seems worse than selling at a profitable (but capped) price.

The problem is that 'profitable' is a moving target.

If a generator can get e.g. 25% of its pre-emergency output back online but it costs them huge sums to make it happen, will the profit motive work as you intend ? One of the weaknesses of state regulated commerce is that it is slow to react. Gotta have a couple month period of citizen comment, ya know ? And just about every citizen says a variation of "look out for me, F everybody else."

 

[SageBrush]

So you are in favor of regulation?

Yes, with quite a few Ifs and Maybes.

Mostly I favor requiring mitigation hedges against catastrophic weather. The key word here is hedge.
I also do not look kindly on the ERCOT island but that is probably beyond my pay grade since it strays into politics.

 

[nwdiver]

The problem is that 'profitable' is a moving target.

If a generator can get e.g. 25% of its pre-emergency output back online but it costs them huge sums to make it happen, will the profit motive work as you intend ? One of the weaknesses of state regulated commerce is that it is slow to react. Gotta have a couple month period of citizen comment, ya know ? And just about every citizen says a variation of "look out for me, F everybody else."

Capacity Markets might be a good solution to that.

The way I heard it explained is you can kinda think of it as being like insurance. If the capacity isn't needed they still get paid. If it is needed and they can't deliver there can be YUGE penalties because they're legally obligated to provide the capacity they're contracted to deliver similar to how insurance works.

 

[SageBrush]

Capacity Markets might be a good solution to that.

The way I heard it explained is you can kinda think of it as being like insurance. If the capacity isn't needed they still get paid. If it is needed and they can't deliver there can be YUGE penalties because they're legally obligated to provide the capacity they're contracted to deliver similar to how insurance works.

Perhaps, but I suspect that the ERCOT island prevents that type of solution for this type of major anomaly. Insurance companies have money reserves in the form of derivatives. No such mechanism can exist in Texas as it stands today because restricted supply is the fundamental problem.

 

[nwdiver]

Perhaps, but I suspect that the ERCOT island prevents that type of solution for this type of major anomaly.

It does. Hopefully it's becoming clear that you can't rely on energy markets to provide acceptable reliability. This is only going to get worse as renewable generation increases. If it costs $20M/yr to maintain 1GW of gas but there's a 80% chance you won't produce a single MWh over a 10 year period.... who is going to take that bet? IMHO it's a better move to offer $30M/yr to have that GW available if needed.

 

[SageBrush]

Hopefully it's becoming clear that you can't rely on energy markets to provide acceptable reliability.

They can be a good mitigation, if far enough away.

Tres Amigas, anyone ?
You mentioned that project the other day. It caused me to wonder if the solution is to build the backbone South of the border. Take the 'state rights' rancher parasites out of the picture

 

[mspohr]

Texans Demand Answers as They Grapple With Storm’s Lingering Wrath Texans Demand Answers as They Grapple With Storm’s Lingering Wrath

Many lawmakers were unabashed in their criticism. “This is the largest train wreck in the history of deregulated electricity,” Senator Brandon Creighton, a Republican, told Bill Magness, the chief executive and president of ERCOT. Mr. Magness acknowledged the devastation caused by the power outages, but in his testimony, he said that, even with the benefit of hindsight, ERCOT would not have acted differently. He said the grid was barreling toward a collapse — it was four minutes, 37 seconds away, to be exact, as demand surged and supply plummeted. The consequences of that, he said, would have been even more devastating.
“The colossal failure of our power grid was not an unpredictable event — it was the result of unsustainable and reckless neglect by leadership,” the political arm of Deeds Not Words, a progressive advocacy group for women, said in a statement.

 

[SageBrush]

Latest estimates are that $2B bills are unpaid, some by consumers and a huge amount by retailers who have not paid generators.

The politicos get to decide who shares what fraction of the burden. Personally, I would reel in the profits of the speculators and the profiteers but we are talking Texas here, where the politicos are bought hook, line and sinker. The only thing they will agree on is that the Feds should pay.

 

[SageBrush]

Mr. Magness acknowledged the devastation caused by the power outages, but in his testimony, he said that, even with the benefit of hindsight, ERCOT would not have acted differently.

Obviously.

The ERCOT recommendations for weatherization were ignored for 10 years, and then some idiot politician demands to know why ERCOT did not fix things in a day

 

[mspohr]

Obviously.

The ERCOT recommendations for weatherization were ignored for 10 years, and then some idiot politician demands to know why ERCOT did not fix things in a day

I think the idiots here are ERCOT. Why did they ignore warnings for 10 years?
I know, Profit! They missed the"Reliability" part.

 

[mspohr]

Griddy loses access to Texas power grid, all its customers

HOUSTON – Texas’s power grid operator on Friday canceled Griddy Energy LLC’s access to the state’s power network, and shifted all its customers to other utilities, according to a notice by the grid operator.

 

[SageBrush]

I think the idiots here are ERCOT.

NO

ERCOT recommended weatherization 10 years ago, the generators ignored ERCOT.
You have to understand ERCOT's scope.

You should also consider an unintended side effect of the Texas (mostly) unregulated market: when one generator decides not to invest in resiliency, it leads to a snowball effect in other generators who do not want to be at a price disadvantage in the wholesale market since their business requires them to pass on the costs of weatherization in the form of higher rates.

Climate mitigation ends up being an all or none endeavor, and since ERCOT could not force *any* generator to weatherize -- let alone ALL of them -- resiliency was a non-starter.

That is not ERCOT, that is the Texas state gov that gives ERCOT its powers (or lack thereof.)

--
The more interesting story here is that Texas does not mandate climate mitigation, in part because of AGW denial. Will last week wake them up a little ?

 

[mspohr]

NO

ERCOT recommended weatherization 10 years ago, the generators ignored ERCOT.
You have to understand ERCOT's scope.

So ERCOT is a regulator but has no power to regulate?
If so, it seems like the generators were making a rational free market choice to not spend money on weatherization since the investment would just cost them money with no return. Actually, there is a perverse incentive to not weatherize sine that would drive up prices and they could make more money.

 

[SageBrush]

So ERCOT is a regulator but has no power to regulate?

No power to require weatherization -- correct

Your follow-up comment is correct.

The free market handles catastrophic, rare events by diffusing risk. Would you like to buy a derivative that exposes you to $90/kwh energy ? How much would you want your note apr to be ?

 

[SageBrush]

@mspohr,

This is not a bad read from the Texas electricity retailer POV

 

[mspohr]

@mspohr,

This is not a bad read from the Texas electricity retailer POV

Thanks. Sounds like the retail market is collapsing.

Mymped to $9,000, making it almost impossible to run a business at these costs. The commission has yet to do anything about these prices and is about to cause significant impacts to retail books but allow generators to profit immensely off of these prices. I ask that you guys seriously ask yourself if it really costs any generator $9,000 to produce a mWh? Every year we have had high prices on the grid (2008, 2011, 2014, 2019, and now 2021) is because generation does not show up and they either mothball plants, trip plants, or disappear for some reason. Each of these years the generators have produced record profits."

"There needs to be an intervention before defaults happen. Generators have caused a significant problem and now the retail electric providers will pay the price. Generators will have record profits from this," the CEO of the REP wrote to the PUC