Texas Power Grid Boss Sees Tight Winter Supply as Demand Grows

Pablo Vegas, the chief executive officer of the Electric Reliability Council of Texas, said he’s doing everything possible to ward off the threat of blackouts this winter as power consumption grows faster in Texas than anywhere else in the US.

(Bloomberg) — Pablo Vegas, the chief executive officer of the Electric Reliability Council of Texas, said he’s doing everything possible to ward off the threat of blackouts this winter as power consumption grows faster in Texas than anywhere else in the US. 

The Lone Star State’s grid, which is designed to rely on market forces to ensure there’s enough supply to meet demand, is under stress amid aging infrastructure, more frequent severe weather brought on by climate change and the dynamics created by intermittent renewable energy sources. With that backdrop, Ercot has warned there is 20% probability of a grid emergency this winter, versus a 7% chance in last year’s assessment. 

Texas just squeaked by without a widespread blackout during the summer amid record-setting heat that frequently topped 100F. 

“We do operate the most complicated electric market I think in the United States, from a retailer’s point of view, from a consumer’s point of view,” Vegas said in an interview with Bloomberg News in Austin on Tuesday. “It was a challenging summer where, you know, we were stretched and stressed at points.”

The winter ahead, when demand peaks tend to happen overnight and therefore can’t be met by solar power, looks tighter. 

The interview has been edited for length and clarity. 

Q: Are you 100% confident in the grid this winter?

I’m 100% confident that we have done everything that is available to us to ensure reliability of the grid. We’re not leaving any stone unturned with what is out there, that I am confident of. Now the variables that drive reliability on a day-to-day basis, many of those are out of our control, which include the weather, which include the performance of intermittent resources, which include the performance of thermal resources. 

We have to deal with the combination of the deck that’s dealt to us on any given day and try to manage through the issues that arise from that. 

Read more: Texas’ New Electricity Rules Sent Grid Prices Soaring

Q: Should Texans expect to be asked to conserve this winter?

Last winter, we were able to get through winter with no conservation calls. What people can expect is openness and transparency from us. We’re going to do everything we can to try to make it so that they don’t have to hear from us. 

Q: This summer Ercot made 11 conservation calls to help keep the grid stable. Are you concerned that frequent alerts will eventually make consumers complacent?

I definitely get concerned about oversaturation of messages that potentially would not get paid attention to as much. But what we’ve tried to do is leverage the specific communications that are calling for action only when we really felt it was necessary to do that. What we really don’t want is there for people to feel surprised when there are challenges on the grid.

Q: People are frustrated that they are asked to voluntarily conserve while Bitcoin miners are paid to shut off. Is there any plan to provide stronger consumer incentives? 

Yeah, very much so. We’re looking to define what that potential could be at a consumer level and size it and scope it in a way that it could be a meaningful part of grid operations. There’s a much more sophisticated interaction with large industrial consumers. We have direct visibility into their power consumption in some cases can control it ourselves.

If we were to talk about 5, 10 years down the road, what does the future of the electric grid look like? It’s one where we actually have visibility to the photovoltaic on your rooftop to the electric vehicles that you’re plugging in at home to the battery wall that you have installed and to your HVAC system. If we understand that and we can put that into a forecast, we can plan our generation. 

Q: You think people are ready for that kind of visibility?

I think some are. The opportunity in terms of the value of it has to be elevated and it has to be more visible because, well, ‘What’s in it for me?’ Let’s be practical about that and really define a value case where it makes sense for a consumer.

Q: The RFP Ercot released last week for 3,000 MW of new supply stunned many people in the Texas power market, partly because it cited an “unacceptable” level of risk of a winter emergency. What led to the concern and RFP?

The simple answer is the demand growth. The demand growth from last year to this year is what is different. We got through Winter Storm Elliot last year in a way that was much more reliable than a lot of other parts of the country largely because of the weatherization work that has gone on. It’s getting to a second level of evolution right now with a new set of requirements. That is something that I think is gonna continue to put us at the leading edge of winter performance and summer performance. Now that being said, you can have everything running that is available, but if the demand exceeds supply then you know you have a problem.

Q: A big concern at Ercot is that traditional power plants are shutting down faster than you’d like and not enough is getting built, despite generators making record profits. Why are they shutting down or not investing more? 

Generators spend more time looking at the longer-term view of what their ability is to continue to operate and maintain and support the capital investments. For a build decision, that’s probably the most long-term view that they’re trying to work their way through.

It’s really more of a structural design, looking ahead and making sure that they feel that they can continue to be profitable.

Q: Some power-plant owners and bankers have said that Ercot market rules are in such a state of flux that it’s hard to make long-term investments. How do you fix this problem? 

The way that you incentivize generators is through consistent market design operations. That I think is one of the key issues that we’ve heard — that the risk of continual change is something that brings a lot of pause. 

But there are a lot of factors in addition to what you’ve noted that generators are thinking about as well. The US Environmental Protection Agency rules that are being contemplated, the greenhouse gas rule, the good neighbor rule, all of those have impacts to different sets of existing generation fleet and have significant considerations.

Some of the things we’re hearing from the legislature clearly is a desire for reliability and consistency. You need to have continued operational flexibility because we’ll continue to have one of the most advanced resources mix in the country. And that resource mix is uniquely challenging in Texas because of the size of our state. Things that happen in our grid happen much faster and with bigger intensity than they do in other grids. And so that creates greater operational challenges on a day-to-day basis.

Q: What do you think are the chances that voters will approve Proposition 7 this November to create a $5 billion fund to provide low interest loans and grants to build power plants? 

It’s well supported across the legislature. So I think there’ll be strong advocacy. I think it’s very likely that it’ll go through.

Q: Should we be expanding generation from renewables or do you think natural gas is still the best way to go? 

What’s adding to the grid right now is solar and renewable and energy storage, and that’s been incredibly helpful in the summer and we want to continue to see that happen. Solar in particular is useful in the summer because it meets the peaks. Energy storage resources are particularly useful in the summer because the periods of highest risk are during the ramp from that peak through the solar sunset.

That doesn’t happen in the winter. The peak in the winter happens when it’s dark outside, when there’s no solar. You can have a cold storm that has an overnight cold that carries the same level of cold during the day for many, many, many hours. So when those circumstances arise, your duration limited resources [like batteries] are of lower value because they will be consumed. Your solar is of little to no value because it’s not available at the peak. So then you’re left with thermals and wind. And so it’s really not one answer that is the answer to the challenges of the grid. There’s also demand-side solutions that can be added and brought into the mix. 

–With assistance from Rachel Adams-Heard and Julie Fine.

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