Will Texas’ PUC place costs for reliable electric generation on right parties?

Below is the audio of my full interview with Brent Bennett, Ph.D. of the Texas Public Policy Foundation about “improving the ERCOT Grid Through a Reliability Requirement for Variable Generation.” The question is: What should the Public Utility Commission of Texas (PUC) do to ensure that direct costs for more generation reliability are placed upon the right actors. Will they put the costs created by variable generators, like wind and solar, on those entities or assign such costs directly to ratepayers further distorting the market?

From Dr. Bennett:

Brent Bennett, Ph.D.

Texas is increasingly relying on wind and solar to meet its growing electricity demand, but the lack of a reliability standard for these resources is contributing to an increasing risk of shortages, such as what Texans experienced during Winter Storm Uri.

Key points:

  • The Texas electric grid is experiencing more frequent reliability problems, as evidenced by tight summer conditions from 2018 to 2021 and most of all during Winter Storm Uri.
  • An increasing reliance on wind and solar generation, which is directing investment and revenue away from dispatchable generation and reliability measures, is the primary cause of these shortages.
  • Placing reliability costs on ratepayers, as the Texas model has done to date, provides an implicit subsidy for less reliable generators. The necessary solution to improve reliability is to redirect investment away from variable generation and toward reliability measures.
  • A requirement for variable generators to provide a minimum amount of electricity during high-demand periods will improve reliability while minimizing overall costs and impact on the rest of the competitive market.
  • This requirement could provide nearly 5 GW of reliable backup resources at a cost of less than $500 million annually, far less than the billions of dollars that Texas ratepayers have paid over the past several years through increased scarcity prices.

Download and read the full publication on this
subject (pdf) by clicking this link.

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