ERCOT is pulling out all the stops to avoid another winter emergency

ERCOT secured firm and expensive winter backup generation and is asking shuttered generators to restart and provide additional backup.

The Texas power grid operated by ERCOT has long been famous because it does not exchange power with neighboring power grids like every other electricity grid in the United States. Another reason ERCOT is famous, or some would say infamous, is because it almost collapsed during Winter Storm Uri in February 2021. The Texas electricity grid had lost so many power generators due to the storm that it was only 4 minutes and 37 seconds from collapsing, which would have required a restart from a “black start.” That would have left the Lone Star State without electricity for eight days or longer. ERCOT instituted emergency measures, including rolling blackouts, that saved the grid and its integrity. The state of Texas and ERCOT never want to be in that situation again.

The summer of 2023 pushed the ERCOT grid close to rolling blackouts on many evenings around 8 PM in July and August as the sun set and the wind stopped blowing, resulting in no solar power and little or no wind power. These situations occurred on many evenings during July, August, and September, with September 6, 2023, pushing the grid to a Level 2 emergency, which gave ERCOT additional resources to stabilize the grid.

To avoid more emergencies this winter, ERCOT issued a Request for Proposal (RFP) to secure backup generation for the 2023-2024 winter. The RFP was for “Firm Fuel Supply Service,” which is on-demand power generation from November 15, 2023, to March 15, 2024. Proposals were due by September 1, 2023.

ERCOT received proposals from five Qualified Scheduling Entities. QSEs are pre-qualified power wholesalers who buy and sell electricity on the wholesale market and act as intermediaries between individual independent generators.

The five QSEs that responded offered 32 different generating stations that could provide guaranteed backup power whenever ERCOT calls for it:

• All 32 Generation Resources were all natural gas-fired power generation facilities and were awarded $9,000/MW, which was the cap established by the PUC.

• 31 of the 32 Generation Resources will be backed up by fuel if natural gas is not available.

• 1 Generation Resource offered natural gas storage to guarantee their ability to maintain their natural gas supply

• A total of 3,319 MW of FFSR was procured with a projected total cost of procurement of $29,879,100.00.

By comparison, the first Firm Fuel Supply Service ERCOT obtained for November 15, 2022, through March 15, 2023, was for 13% less capacity and 43% more expensive.

Since the off-peak daily clearing prices for natural gas generation averages $20 per MW, $9,000 per MW is high. However, these generators provide standby generation and guarantee it will be available whenever ERCOT calls for it.

In addition to the “Firm Fuel Supply Service,” ERCOT issued another call on October 2, 2023, for additional winter generation, titled “Request for Proposals for Capacity,” even though ERCOT considers their grid an energy-only market. Proposals are due on November 6, 2023.

ERCOT specifically highlighted that grid reliability problems had been caused by (1) load growth, (2) recent and proposed retirements of dispatchable Generation Resources” which means natural gas-fired generators, and (3) the possibility that recent winter weather events could be repeated:

ERCOT has determined that if the ERCOT Region experienced a winter storm during the 2023-24 winter Peak Load Season comparable to Winter Storm Elliott in December 2022, the risk of entering into an Energy Emergency Alert (EEA) during the highest-risk hour (Hour Ending 8 a.m.) would be approximately 19.9%. 

This would exceed the 10% probability level that constitutes an “elevated” risk under the standard ERCOT has employed for purposes of its studies conducted in support of NERC’s winter resource adequacy assessments.  While ERCOT is not projecting that EEA conditions are likely to occur, ERCOT nevertheless finds this elevated risk of EEA unacceptable.  ERCOT has determined that approximately 3,000 MW of additional capacity would be needed to reduce the probability of EEA below this 10% elevated-risk threshold. 

Based on the risk identified in ERCOT’s analysis, ERCOT intends to issue a request for proposals (RFP) to procure up to 3,000 MW of generation or Demand response capacity for the winter 2023-24 Peak Load Season (December 2023 through February 2024).

ERCOT identified by name the mothballed generators that qualify to respond to this RFP:

1. Ten named “Mothballed Dispatchable Generation Resources (as of December 1, 2023)”

2. Four named “Seasonally Mothballed Dispatchable Generation Resources (as of December 1, 2023)”

3. Seven named “Dispatchable Generation Resources that have decommissioned since December 1, 2020”.

My take: ERCOT is serious about avoiding any repeats of the grid problems encountered in Winter Storm Uri and Elliott and is seeking every available tool to secure the necessary backup generation. Much of the generation named by ERCOT as qualified under their latest RFP is generation units that were recently retired, many because they could not compete with the artificially low prices that heavily subsidized wind and solar can offer, so they are still operational.

A better approach to the complex and expensive efforts ERCOT is going through would be for wind and solar generators to provide their own backup, enabling them to bid fairly with natural gas-fired generation. This approach would increase the value of wind and solar generation and reduce the burden placed on ERCOT to accommodate their unreliability. It would also reveal the actual levelized cost of wind and solar as being one of the most expensive forms of power generation. This approach would take the cost and operational burden off ERCOT and transfer it back to the generators where it belongs.

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