By Robert Bradley Jr. — May 5, 2023
“The supply-side reliability fix offered by the Texas Senate is a direct response to the February 2021 carnage created by, yes, wind and solar taking over a once reliable grid. It is a hard-wired governmental solution to a soft-wired governmental problem. But there is an alternative. Free markets, anyone?”
The big guns of climate alarmism and forced energy transformation are out to prevent Texas from shoring up its grid from the cancer of wind and solar. Out of the blue, the Texas Energy and Power Newsletter (Substack) appears, with the message that renewables are not the problem but the solution, complemented by, in Doug Lewin’s words, “Fast-acting reciprocating engines, batteries, geothermal power, and demand response [to] help with both resource adequacy and operational flexibility.”
In denial about the wounded supply side–where the obvious solution is to demote (government-enabled) intermittent resources–the answer is “smart meters” in the home so Big Brother can oversee demand. “In fact,” states Lewin,
there are 1 million smart thermostats on Texans’ walls right now that are not being used at all! Creating incentives for Texas families to reduce their power use when supplies get tight would create a massive dispatchable resource that could help this summer.
For students of political economy, this is the process of regulation (the Mises interventionist thesis) whereby the problems of intervention lead to more intervention. And in the case of Texas (and California and other states), a wounded supply side raises the call for ever-greater demand-side intervention–all from a centrally planned wholesale market (such as the Electric Reliability Council of Texas).
Texas’s cancer is continuing to grow with wind and solar being added to the system, thanks to 1) extended government incentives in the so-called Inflation Reduction Act and 2) take rules by ERCOT based on marginal cost (wind and solar have higher total costs and very low marginal costs). And the worsening reliability of the grid from expanding intermittency is leading to (first voluntary, then mandatory) “conservation orders,” such as summer temperatures in the home or business of, say, 76 degrees.
The amount of money available to the Energy Statists is overwhelming, and the sudden entry of the Texas Energy and Power Newsletter is part that. They want central planning to reach a total government power market rather than 1) stop and reverse the cancer of spreading wind/solar and 2) work toward abolishing a centrally planned wholesale market.
The supply-side reliability fix offered by the Texas Senate is a direct response to the February 2021 carnage created by, yes, wind and solar taking over a once strong grid. It is a hard-wired governmental solution to a soft-wired governmental problem. But there is an alternative that is obvious and necessary.
Free markets anyone?
Free markets require free people and stripping freedoms away is the imperative – what you can eat, what you can drive, what energy you can use, ad nauseam.
It isn’t going to end peacefully – unless of course you see it on CNN
Taxing any subsidized supplier that is intermittent to provide backup would be one remedy. Texas cannot deal with Federal subsidies as such, but taxing the recipients would be posssible.
Unless some one can find a simple and easily understood explanation proving that CO 2 sensitivity is minimal at increasing levels ; well this debate will be lost and then we’ll you know. Often our discussions here are esoteric. The general public relies on their “ heart of hearts” not “ science “
A simple and direct market solution that doesn’t breach any contract nor violates the merit order (least marginal cost principle), but that requires common sense and political courage, is to assign the inevitable backup generation cost of thermal sources —which would be zero if it wasn´t because of unreliables— which are always the life jacket from intermittent renewable attacks on a power grid and capable of restoring its stability. This would make the renewable levelized cost always way higher than that of any thermal source and it would be the death sentence ‘ipso facto’ to that red, unreliable, non-renewable, unsustainable and very expensive dead weight. If not, Texas will once again have to face another blackout with hundreds of deaths while the wavering political class enjoys watches the show pretending to be saving the planet.
Texit, anyone?
It’s worth looking at where ERCOT has got to so far. For a start it has a new broom in charge – Pablo Vegas. During a panel discussion at CERA week the Honorable Peter Lake, PUCT chairman, said, “Everyone in Texas wants a reliable grid that delivers the lowest cost possible and a transparent and fair market.”
https://www.bicmagazine.com/departments/maintenance-reliability/industry-leaders-weigh-in-on-texas-electricity-market-reform/
Vegas responded:
“Essentially you have three legs of a stool. You’ve got an energy market where energy is bought and sold in real time, the ancillary services market, which the energy market supports, and the capacity market,” Vegas said.
The capacity market, he said, ensures sufficient capacity can meet a market’s energy needs at any point during the most extreme heat or cold, and to send signals based on the reliability standard of what is expected in performance, he said. That reliability standard, in turn, creates a value in the capacity market.
“Texas is a little unique,” Vegas continued. “Texas only has two legs of that stool — an energy market and an ancillary services market. Texas doesn’t have a capacity market.”
For 20 years, Vegas said, Texas businesses have enjoyed some of the lowest cost energy in the world because it was a highly efficient market designed specifically to create the lowest cost energy possible at any point in time.
“That’s a fantastic model which has worked very well,” Vegas said. “But when you’ve got a market which says, ‘I’m only designed for efficiency at a low cost,’ you’re missing a really important leg to that stool, and that stool’s in danger of falling over. We crossed over to that point in 2022 at the peak point of the summer when we relied on renewables to be there. If renewables are not there, the power will go out.”
“I want to be very clear about that,” Vegas emphasized. “As the CEO of ERCOT, I’m accountable for that and I’m accountable to the Public Utility Commission and to the legislature in Texas. I want people to know. I’m telling everybody that if renewables are not available at peak points in time, the power will go out, so we need to change the model.”
The proposal is the so called Performance Credit Mechanism
https://www.texaselectricityratings.com/blog/how-the-performance-credit-mechanism-works/
which has an annual cost anywhere between $460m and $5.7bn, according to which interest groups you listen to. There is clearly a fear of the unknown, as no grid has implemented a scheme quite like this: most run to payments for capacity quite explicitly, perhaps via an auction, rather than leaving it to generators to sell performance guarantees. There’s more on the PUC vision for PCM here:
https://interchange.puc.texas.gov/Documents/53298_23_1265741.PDF
Are these people mental “Fast-acting reciprocating engines, batteries, geothermal power, and demand response [to] help with both resource adequacy and operational flexibility.” I have been in Texas, I don’t think there are many geothermal possibilities, what is going to power those reciprocating engines ….natural gas, I guess…..and batteries are ridiculously expensive and an environmental nightmare and how exactly is a smart meter supposed to work when the grid goes down. I have a much better solution, its quite scenic around Austin, so lets build a nice home where all the proponents of “renewables” can sit around and tell each other stories of how it will all work when the magic happens. It will be much better for all concerned.
The free market already exists. You are free to not use electric power or make your own.
I live in an RV and have 3 generators. If I have a choice I choose to plug in. For example, I was in a New Mexico state park. It was $6/day more for a camp site with power and water. That is more than my fuel cost per day.
My next camp site was in city park in Texas. It was free including plugging into power.
Earlier this week, I took a short cut on a gravel road through a large wind farm driving between two turbines at one point. Very cool!
I am old school. There should be a 25% reserve margin because shit happens.
Of course that cost money and people want cheap power. Do not blame wind because we elect stupid people.
There is no real evidence that CO2 has any effect on global climate so this is not really about climate reality. If they were really wanted to conserve on the use of fossil fuels they need to be gradually replacing ageing fossil fuel burning power plants with nuclear power plants. Solar may be of value to home owners especially as a source of backup power but we need better and cheaper solar panels and batteries all made here in the USA.
Isn’t it interesting that these people understand so little economics? The size of an economy is directly related to the energy requirment to keep it operating. Demand management (reduction) will immediately lead to a reduction in economic output. It does appear that domestic use will receive most of the hit, caused by smart meters etc., but unhappy people with cold houses (or ones too hot in Texas in summer) are not as productive as happy ones. I wonder why this is never realised, as Governments try to extract more and more money from the economy, to fund Green projects (Biden particularly)?