Earlier this month, I attended the 2016 Electric Reliability Council of Texas (ERCOT) Market Summit. The summit brought together thought leaders and stakeholders to discuss the future of Texas’ electric grid. Many of the discussions at the conference centered around the expected boom in new solar and wind energy capacity in Texas, and how ERCOT is planning to cope with the evolution of its electric grid and market as more and more renewable energy is added. While Texas will add a lot of new wind and solar capacity over the coming years, the grid operator is more than prepared to manage the reliability of the electric grid into the future.

Even More Wind Energy on the Horizon

Since the early 2000s, Texas has emerged as the national leader in wind energy. Last year, Texas sourced 11.7 percent of its electric energy from wind, with wind eclipsing nuclear energy, which provided 11.3 percent, for the first time ever. On an instantaneous basis, wind energy has provided about 45 percent of electric power on more than one occasion. On December 20 of last year, wind peaked at 44.7 percent of total power generation and provided about 40 percent of instantaneous generation for 17 straight hours. And on February 18 of this year, wind peaked at 45.1 percent of total generation and provided roughly 40 percent of instantaneous power generation for the entire day.

Texas isn’t done adding wind energy yet. Over the next two years, Texas is expected to add more wind energy than ever before thanks in part to the declining cost of wind turbines and the extension of the federal wind energy production tax credit, which gives wind energy an extra 2.3 cents for every kilowatt-hour of energy produced.

The Electric Reliability Council of Texas (ERCOT) expects another 10,249 megawatts of wind energy capacity to be installed by the end of 2017. Of the anticipated wind installations, 6,232 megawatts have signed interconnection agreements (IAs) and have provided evidence of financing. Another 3,926 megawatts have signed IAs but haven’t yet provided evidence of financing. (Source: ERCOT)

With all of the new anticipated wind energy capacity, expect Texas to continue breaking wind energy integration records for the foreseeable future.

Solar Breaks into the Texas Market

For the first time, wind energy isn’t the only form of renewable energy expected to see significant growth in Texas over the coming years. Thanks to steadily decreasing costs for utility-scale solar plants and the extension of the federal investment tax credit, which covers 30 percent of upfront investment costs, Texas is expected to add 1,725 megawatts of new utility-scale solar capacity between now and 2017 — increasing the total amount of solar capacity installed more than six-fold.

The Electric Reliability Council of Texas (ERCOT) expects 1,725 megawatts of utility-scale solar energy capacity to be installed by the end of 2017. Of the anticipated solar installations, 1,193 megawatts have signed interconnection agreements (IAs) and have provided evidence of financing. Another 572 megawatts have signed IAs but haven’t yet provided evidence of financing. (Source: ERCOT)

All of the anticipated solar installations in Texas are solar farms that use photovoltaic panels to convert sunlight directly into electricity. ERCOT doesn’t track the amount of solar capacity installed in the form of rooftop photovoltaic panels, so there might be even more solar energy installed than meets the eye.

A New Market Design for the Future

Texas benefits from a large fleet of flexible natural gas generation that has the capability to balance the output from wind and solar energy with the rest of the electric grid with relative ease. However, as the amount of wind and solar capacity increases, there will be less and less flexible generation available on a real-time basis to compensate for the additional intermittency introduced by wind and solar energy.

Fortunately, ERCOT is already in the midst of a major electricity market redesign to ensure electric reliability even as wind and solar make up a larger and larger share of total electricity generation.

To operate the grid reliability, it is important to perfectly balance electricity supply with demand in real time. Today, this balance is maintained by flexible generators that provide “ancillary services,” which refers to a collection of services procured by the grid operator to maintain electric reliability no matter what. ERCOT ancillary services consist of “regulation” (generators that adjust their output to maintain the second-to-second balance between supply and demand), “responsive reserve” (generators that are spinning and ready to supply power in case of a contingency), and “non-spinning reserve” (generators that are offline but ready to turn on in a pinch if needed). All of these services are procured in the market and are part of the total cost we pay for electricity.

Beginning with a concept paper released in 2013, ERCOT proposed a newly designed ancillary services market better able to cope with rising solar and wind energy intermittency as conventional generation makes up a smaller share of overall generation. The new design proposes unbundling balancing services traditionally provided by fossil generators into separate services that more adequately address the needs of a heavy-renewable grid and are compatible with new grid-balancing technologies like energy storage.

This figure compares the Electric Reliability Council of Texas’ (ERCOT’s) current ancillary services (CAS) to the proposed future ancillary services (FAS). The “limited duration” services are geared toward energy storage, which can quickly provide power on-demand, but only for a limited duration. (Source: The Brattle Group)

The newly designed ancillary services market doesn’t just help integrate wind and solar energy, it also makes the electricity market more economically efficient overall by breaking up conventional ancillary services into their component parts. An independent analysis from the Brattle Group, widely considered a thought leader in electricity markets, found that ERCOT’s proposed future ancillary services market would provide $137 million in cost savings over the next ten years, or ten times the anticipated implementation cost of $12 to $15 million.

Texas Set to Lead the Way

With lots of solar and wind energy on the horizon, and a new electricity market design in the works, Texas is set to continue its role as a leader in the integration of renewable energy with the grid. This might come as a surprise considering the state’s frequent legal battles with the federal government over environmental regulations. It just goes to show how the technology-agnostic nature of competitive markets can lead to renewable energy growth even where local government is against carbon dioxide regulations of any kind.


Agenda image: Horse Hollow Wind Farm, Texas; Source: Flickr Creative Commons