Interested in Utility Scale Renewables ? Delve into ERCOT

[jbcarioca]

... They do have one small (?) interconnect eastward, and surprising to me, an inter-connect to Mexico. So one not small part of their resiliency breakdown is their voluntary semi-isolation. That is one of the prices a state pays when it cannot play nice with others. It is irony (of the type I like) that their inter-connect to Mexico was I presume unhelpful because it in turn relied on Texas NG
...

Good points. The Mexico interconnect is actually a natural gas pipeline extension that was only activated last year.
U.S. natural gas exports to Mexico set to rise with completion of the Wahalajara system - Today in Energy - U.S. Energy Information Administration (EIA)
As the article shows that pipeline produced ~40% of all US gas exports. The associated map shows how that pipeline continued through most of the most heavily populated parts of Mexico. Just as the rest of the pipeline form the Permian basin to 90% of Texas and Mexico was not weatherized, when Texas froze Mexico had gigantic power loss plus huge problems with snow that Mexico was not prepared to deal with. To my profound irritation, not to mention all of Mexico's chagrin, the US press almost totally ignored the catastrophe fomented on Mexico because of Texas' lack of preparedness. More or less as it has always been, Texas also largely ignored the Rio Grade Valley. Were it not for Boca Chica there would have been even less awareness.
Millions In Northern Mexico Also Stuck With Cold-Related Power Outages
The Mexico electricity and energy policies have been more reactionary than has been ERCOT:
BNamericas - What’s in store for Mexico’s electric power ...
The problems have been evident for some time, exacerbated by the pipeline extension from Texas.

 

[mspohr]

Deconstructed: Texas Republicans Ran a Twenty-Year Experiment. The Results Are In.

 

[CrazyRabbit]

there are 2 ties to the eastern grid and three with mexico.

 

[jbcarioca]

there are 2 ties to the eastern grid and three with mexico.

ERCOT has no such ties.The parts of Texas that are included in non-ERCOT territory are the ones that have not had long outages although almost all have had some interruptions. each of them is geographically closer to the non-ERCOT groupings than they are to the rest of Texas.

They are:
Beaumont and surrounding areas that are served by Energy and are part of the Eastern pool.
El Paso and surrounding areas are part of the western pool.
Lubbock and the panhandle are part of the Southwest all BUT Lubbock is about to join ERCOT for 2/3 of it's needs. We will see how that works out.
All the non-ERCOT areas weatherized, much after the 2011 outages that were largely ignored by ERCOT despite a large >300 page report recommending serious weatherization for wind turbines, gas generators and transmission lines among other things.

 

[mspohr]

Texas energy companies celebrate 'hitting the jackpot' in system that rewards failure with billions

For electricity providers in Texas, this has been the best week ever. The same goes for natural gas companies. And coal companies. And drilling companies. And on down the line. The entire energy industry, including the owners of Texas wind farms, has seen a tremendous surge of profit. That surge was so great that on just two days this week, Monday and Tuesday, providers could easily have cleared more profit than they do in a full year of ordinary, full-scale production. Not providing adequate electricity to Texas is much more profitable than providing every Texan with the power they need. By design.

 

[jbcarioca]

Texas energy companies celebrate 'hitting the jackpot' in system that rewards failure with billions

For electricity providers in Texas, this has been the best week ever. The same goes for natural gas companies. And coal companies. And drilling companies. And on down the line. The entire energy industry, including the owners of Texas wind farms, has seen a tremendous surge of profit. That surge was so great that on just two days this week, Monday and Tuesday, providers could easily have cleared more profit than they do in a full year of ordinary, full-scale production. Not providing adequate electricity to Texas is much more profitable than providing every Texan with the power they need. By design.

FWIW, that happens in similar fashion in many industries and in many electrical markets. Such situations are typical in many industries. Every one can be described as unconscionable by anyone on the short side. I do think the unconscionable part was regulatory failure to mandate weatherization.

Decades ago, when I was managing a bank in a small country there was a currency mismatch that raised overnight rates to 210%. By coincidence my largest customer had received a huge payment the prior day and left it with my bank at the then one week nominal rate. I ended out meeting our annual profitability target in two days.

Things like that do happen in open markets. They do not necessarily mean nefarious motives.

 

[mspohr]

FWIW, that happens in similar fashion in many industries and in many electrical markets. Such situations are typical in many industries. Every one can be described as unconscionable by anyone on the short side. I do think the unconscionable part was regulatory failure to mandate weatherization.

Decades ago, when I was managing a bank in a small country there was a currency mismatch that raised overnight rates to 210%. By coincidence my largest customer had received a huge payment the prior day and left it with my bank at the then one week nominal rate. I ended out meeting our annual profitability target in two days.

Things like that do happen in open markets. They do not necessarily mean nefarious motives.

Enron

 

[diyguy]

.... Right now Elon is all high on all the stuff that Texas lets him do but when his Austin factory is up and running and gets shut down for days during the next event and costs him money I wouldn't be surprised to see him build his own generation capability. ....

The shine must be off the reality of moving to Texas these days. New meme - ‘Texas plumber’.

 

[mspohr]

Texas freeze shows a chilling truth – how the rich use climate change to divide us | Robert Reich
Texas, for-profit energy companies have no incentive to prepare for extreme weather or maintain spare capacity. Even if they’re able to handle surges in demand, prices go through the roof and poorer households are hit hard. If they can’t pay, they’re cut off.

Rubbish. The loss of power from frozen coal-fired and natural gas plants was six times larger than the dent caused by frozen wind turbines. Texans froze because deregulation and a profit-driven free market created an electric grid utterly unprepared for climate change. In Texas, oil tycoons are the only winners from climate change. Everyone else is losing badly. Adapting to extreme weather is necessary but it’s no substitute for cutting emissions, which Texas is loath to do. Not even the Lone Star state should protect the freedom to freeze.

 

[mspohr]

Republicans eye federal funds to help pay Texans’ exorbitant energy bills

“The current plans with the federal assistance bill are to help the homeowners both repair, because we have a lot of water leaks, a lot of water damage, pipes bursting, but also [pay] their electricity bills as well,” he said. Host Dana Bash challenged him, saying: “I’m hearing you say that the federal government is going to help to bail out, and to pay bills in a state which is in part in this mess because it wants to be separate from the federal government. That’s kind of rich, don’t you think?”

 

[mspohr]

How Texas’ Drive for Energy Independence Set It Up for Disaster How Texas’ Drive for Energy Independence Set It Up for Disaster

The energy industry wanted it. The people wanted it. Both parties supported it. “Competition in the electric industry will benefit Texans by reducing monthly rates and offering consumers more choices about the power they use,” George W. Bush, then the governor, said as he signed the top-to-bottom deregulation legislation. Mr. Bush’s prediction of lower-cost power generally came true, and the dream of a free-market electrical grid worked reasonably well most of the time, in large part because Texas had so much cheap natural gas as well as abundant wind to power renewable energy. But the newly deregulated system came with few safeguards and even fewer enforced rules.

 

[Tessaract]

How Texas’ Drive for Energy Independence Set It Up for Disaster How Texas’ Drive for Energy Independence Set It Up for Disaster

The energy industry wanted it. The people wanted it. Both parties supported it. “Competition in the electric industry will benefit Texans by reducing monthly rates and offering consumers more choices about the power they use,” George W. Bush, then the governor, said as he signed the top-to-bottom deregulation legislation. Mr. Bush’s prediction of lower-cost power generally came true, and the dream of a free-market electrical grid worked reasonably well most of the time, in large part because Texas had so much cheap natural gas as well as abundant wind to power renewable energy. But the newly deregulated system came with few safeguards and even fewer enforced rules.

I think a similar prinicipal in generally operating in most areas that are deregulated. In a derugulated environment, things go reasonably well during normal times, but really fall apart during unusual times, precisiely because the benefits of deregulation result from cutting the corners that we rely on to save us during unusual times. The unconsciounably high death rate due to COVID of old people in Long Term Care homes is another case in point here. There are, unfortunately, many examples to select from.

 

[SageBrush]

precisiely because the benefits of deregulation result from cutting the corners that we rely on to save us during unusual times

I'm not sure I buy the causality, although the association is there.

Spoiler: Mandatory XKCD Cartoon

 

[jbcarioca]

I'm not sure I buy the causality, although the association is there.

Spoiler: Mandatory XKCD Cartoon

View attachment 638918

There is no question that it is possible to allow open competition while demanding basic elements of safety and dependability. There could even be specified consumer protection standards. ERCOT effectively eliminated any consumer (meaning electricity consumers of any type) protection at all. Pricing could be anything imaginable including "wholesale" with zero limitation on price variability. Providers effectively had no 'prudential provisions' so safety and stability were pretty much completely up to the energy producer. Energy transmitters did not have performance standards either.

When they said 'deregulation' they meant laissez-faire.

Such solutions work just fine when conditions are stable and predictable. If weather or sudden demand changes happen...it's the consumers problem. Now what happens? Maybe the federal Government should bail us out, as long as they don't want us to change anything or ever pay for the bailout.

Stories like that have been recurrent forever. They produced the Sherman anti-trust Act in 1890 and the Federal Reserve Act in 1913. Even the Glass-Steagall Act of 1932 prohibiting commercial banking and investment banking together was repealed in 1999.
Many of those restrictions have been largely eliminated and the supervision weakened.
It is possibly most dramatic with the emasculation of FAA supervision of aircraft manufacturers by means of the magical 'designated representative' that allows self-regulation.

All such things can easily overreach on both extremes, and regularly do. I have been a part of those changes in financial services, aviation and automotive. I helped break a few of those barriers. In retrospect I am sad to say I regret my role in every one of those. There is no question that financial such 'innovations' are lucrative. There is also no question that those same innovations have directly led to abuses that have produced serious economic, social and environmental harm.

Sadly much of the world has merrily followed such steps.

ERCOT is just another case following the trail of Long Term Capital Management, AIG, Enron, GM, Chrysler, Penn Central, almost all large US banks, Boeing (including Boeing Bank, known less pejoratively as ExIm Bank, and so on.

'Those who fail the remember the past are condemned to repeat it.' George Santayana
(FWIW he was a Spanish immigrant to the US)

 

[mspohr]

In anti-government Texas, catastrophic storms prompt calls for regulation
All the groceries spoiled and the water was out for days. Then Melissa Rogers, a believer in the Texas gospel that government should know its place, woke up to a $6,000 energy bill before the snow and ice even melted.

Now, the emerging response to a winter catastrophe that caused one of the worst power outages in US history is not the usual one in Texas: demands for more regulation.

 

[SageBrush]

I was curious about 'Griddy,' the retail supplier most identified with sky high residential bills during the storm.

Background
Griddy charges $10 a month, and then sells electricity at wholesale rates. I don't know what fraction of their wholesale purchases are spot market and what fraction are futures contracts.

Griddy keeps in close and frequent contact with their customers by phone to keep them updated on wholesale rates. I get the impression that it can be multiple times a day. One day before the storm hit Texas, Griddy advised its customers to switch to another provider since the rates were expected to skyrocket. I also read that Griddy is a Pay-as-you scheme, so you need to have a balance on file. I'm not sure why that requirement did not prevent unexpected bills; perhaps it was waived for the duration of the storm.

My take
I'm not inclined to view Griddy too negatively. First, they made more than reasonable efforts to keep their customers apprised of the cost of electricity. Second, customers of other providers on fixed rate plans simply had their electricity cut off by the provider to prevent massive losses to the vendor; Griddy customers could have achieved the same effect by not using electricity. The Griddy customer paid the speculator's going rate during a severe shortage.

Should scarcity be managed by market supply/demand ? It happens every time a new-fangled game console comes out. It happens during every hurricane followed by cries of gouging ... but the system remains. I'd like to see people share a scarce resource, but Americans at least do not play nicely with each other, and of course the speculators and resource sellers that win are much in favor of the market mechanism. I have also read reasonably convincing economic arguments that the market is the most efficient mechanism during scarcity because the price signal reduces waste. As in, even the rich do not keep their thermostat at a Texas nominal 80F.

 

[mspohr]

I was curious about 'Griddy,' the retail supplier most identified with sky high residential bills during the storm.

Background
Griddy charges $10 a month, and then sells electricity at wholesale rates. I don't know what fraction of their wholesale purchases are spot market and what fraction are futures contracts.

Griddy keeps in close and frequent contact with their customers by phone to keep them updated on wholesale rates. I get the impression that it can be multiple times a day. One day before the storm hit Texas, Griddy advised its customers to switch to another provider since the rates were expected to skyrocket. I also read that Griddy is a Pay-as-you scheme, so you need to have a balance on file. I'm not sure why that requirement did not prevent unexpected bills; perhaps it was waived for the duration of the storm.

My take
I'm not inclined to view Griddy too negatively. First, they made more than reasonable efforts to keep their customers apprised of the cost of electricity. Second, customers of other providers on fixed rate plans simply had their electricity cut off by the provider to prevent massive losses to the vendor; Griddy customers could have achieved the same effect by not using electricity. The Griddy customer paid the speculator's going rate during a severe shortage.

Should scarcity be managed by market supply/demand ? It happens every time a new-fangled game console comes out. It happens during every hurricane followed by cries of gouging ... but the system remains. I'd like to see people share a scarce resource, but Americans at least do not play nicely with each other, and of course the speculators and resource sellers that win are much in favor of the market mechanism. I have also read reasonably convincing economic arguments that the market is the most efficient mechanism during scarcity because the price signal reduces waste. As in, even the rich do not keep their thermostat at a Texas nominal 80F.

I don't think Griddy is the problem here. They are just passing through prices.
The generators are the problem. When there is a shortage, they make monopoly profits. It doesn't cost them more to generate during the shortage but they can charge more. Regulation needed?

 

[SageBrush]

Regulation needed?

To do what, exactly ?

I don't think it is well known but ERCOT is regulated by the Texas PUC. During the storm, the PUC required that ERCOT increase the maximum retail supplier charge from $1 to $9 a kWh to manage the scarcity.

'Regulation' is not a magic pill. Details matter, or you just end up with corrupt and incompetent regulators.

 

[mspohr]

To do what, exactly ?

Cap disaster profits

 

[SageBrush]

Cap disaster profits

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