By Tom Kleckner

Most ERCOT market participants have come to grips with the fact that “9-ish percent” reserve margins are likely “the new normal” in Texas’ energy-only market, as former FERC Chairman Pat Wood III recently said.

In 2019, for the second summer in a row, the state’s grid withstood extreme heat and loss of wind power during some of the hottest days to meet multiple demand peaks exceeding the previous year. Despite beginning both summers with single-digit reserve margins, ERCOT resorted to emergency actions just twice.

“The reliability of our markets has been the story of the last quarter-century in our state,” said Wood, also a past Texas Public Utility Commission chairman. (See “Wood Reflects on Electric Industry’s Past — and Future,” Texas Reliability Entity Briefs: Dec. 11, 2019.)

“What we’ve built here is something everybody should be proud of,” attorney Katie Coleman, representing the Texas Industrial Energy Consumers trade group, said during a PUC workshop on ERCOT’s summer performance. (See “ERCOT MPs: Market Worked as Designed in Summer,” Magness, Walker to Explain ERCOT Reliability to NERC.)

Real-time prices did hit the $9,000/MWh systemwide offer cap several times, mostly because Texas wind generation hits a lull during the early-afternoon hours.

“But [that’s] how an energy-only market is supposed to work and part of [its] success,” Texas Competitive Power Advocates’ Michele Gregg Richmond said.

“You do live closer to the edge than what I’m used to, but you do a fantastic job of managing it,” NERC Trustee Ken DeFontes said during the Texas Reliability Entity’s December board meeting.

ERCOT, which has a 13.75% planning reserve margin, projects its reserves will climb to 10.6% next year and 18.2% in 2021, before shrinking to 12.9% in 2024. (See ERCOT’s Reserve Margin Climbs to 10.6% in 2020.)

Renewables will provide the majority of the incoming reserves with solar (64.7 GW) and wind (32.3 GW) accounting for almost 88% of the more than 110 GW of capacity under study in ERCOT’s generation interconnection queue.

With not a single megawatt of coal capacity in the queue, wind is expected to surpass coal’s share of the fuel mix in 2020. Coal accounted for 20.43% of ERCOT’s energy production through November 2019, with wind right behind at 19.76%. The Norwegian research firm Rystad Energy has predicted that Texas wind farms will generate about 87 TWh of electricity this year, compared to 84.4 TWh from coal.

Wood said during the Texas RE’s annual meeting that the state is the country’s largest carbon-emitter, “but this power system is much cleaner than it used to be.” He said the shift to cleaner-burning fuels has only just begun.

“That’s going to happen in the country. I know President Trump doesn’t like it, but that’s inevitable,” Wood said.

With more than 27 GW of installed wind capacity, Texas has more wind than any other state in the nation (including 22.4 GW in ERCOT). Solar capacity is coming at an even faster rate, with the 3 GW of capacity at the end of 2019 expected to double to more than 6.2 GW in 2020. ERCOT expects to have more than 11 GW of solar capacity on hand by 2022.

Battery storage, with its falling costs and improving technology, is fueling much of that increase. There is about 1 GW of storage on the system right now, but another 7.2 GW is under study.

Recognizing the need to be prepared for the wave of storage resources, ERCOT last year suggested creating a Battery Energy Storage Task Force to develop policy recommendations related to the resources’ integration into the grid. The group will consider operational and market design policies that can be implemented in the short term and rules that can be implemented on a longer timeline. (See “TAC Approves BESTF Leaders, Scope,” ERCOT Technical Advisory Committee Briefs: Oct. 23, 2019.)

Another task force has developed real-time co-optimization’s key principles, which will go before the Board of Directors in February for final approval. Staff and stakeholders will then draft the revision requests and other documents necessary for the implementation of the market tool, which procures both energy and ancillary services every five minutes to find the most cost-effective solution for both requirements.

Staff are also developing rules and requirements for distributed generation. ERCOT has limited interconnections of new distributed generation projects in the meantime.