The new year began in Texas with an arctic cold front sweeping away the previous week’s 80- to 90-degree temperatures and bringing ice, snow and a brutal reminder of last February’s destructive winter storm.

This time around, ERCOT has inspected 324 generation plants and transmission facilities to check compliance with new winterization rules. The Public Utility Commission has tweaked market rules to allow the grid operator to set aside more operating reserves and to do so sooner. And effective New Year’s Day, ERCOT’s systemwide offer cap has been set at $5,000/MWh, down from the $9,000 cap that sent several retailers and cooperatives into bankruptcy after the February storm.

Electricity usage during the cold snap was down too, over 20 GW less than the record peak demand on Feb. 14 that the ERCOT grid was unable to handle. The return of springlike temperatures later this week, exemplifying the dry La Niña conditions expected this winter, has further eased concerns.

“Easy peasy,” energy consultant Alison Silverstein, a former FERC and PUC staffer, said Saturday. “Pretty sure ERCOT can handle this shift.”

But another February storm, which became energy Twitter’s story of the year?

ERCOT, the PUC and Texas Gov. Greg Abbott say the system is ready.

“Texans can be confident the electric generation fleet and the grid are winterized and ready to provide power,” said Woody Rickerson, ERCOT vice president of grid planning and weatherization.

“The lights will stay on,” promised PUC Chair Peter Lake during a December press conference. (See Texas PUC Chair Lake: ‘The Lights Will Stay On’).

Texas power plants “are good to go,” Abbott tweeted.

The problem is, the same can’t be said of the natural gas system, which has borne the brunt of the blame from FERC, NERC and others for the storm’s outages because of fuel unavailability. A Federal Reserve Bank of Dallas study has estimated it will cost as much as $50,000 to winterize a wellhead. (See FERC, NERC Release Final Texas Storm Report.)

Texas lawmakers passed legislation requiring both the electric and gas industries to weatherize against extreme temperatures. However, a loophole allows gas facilities to opt out for a nominal fee. The gas network is being mapped to determine those facilities critical to power production, but that process isn’t expected to be finished until 2023.

Yes and no — thanks to the power plant winterization initiative.

“The odds are much, much lower that half of ERCOT’s generation fleet will fall to freezing weather,” Silverstein told RTO Insider. “But because neither the gas producers and pipelines have made comparable efforts to winterize their production, we have no guarantee that freeze-ready natural gas plants will have fuel to burn.”

Silverstein said ERCOT’s more conservative operating plans and a better statewide communications plan to improve awareness of winter-weather threats and potential electric shortfall could also help avoid repeats of another major winter power outage, similar to those of 2011 and 2021.

“If they can get through 2022 without another major outage or call for conservation, that’ll look like success,” Silverstein said. “But that’s a sadly low bar.”

Energy-only No Longer?

PUC, ERCOT and their stakeholders are also taking a second look at the grid operator’s energy-only market, which pays generators only when they are providing energy to the market. The PUC has developed a two-phase process, with a Phase 1 implementation plan due Jan. 10.

The second phase will evaluate a proposed backstop reliability service and a load-side reliability mechanism that Lake has been pushing since October. ERCOT staff have promised to provide a report on what it will take to design and build each of the Phase 2 proposals on Feb. 15, the one-year anniversary of when the outages began. (See PUC Forges Ahead with ERCOT Market Redesign.)

PUC staff issued a memo laying out the Phase 2 proposals and requesting stakeholder input. The commissioners received 54 filed comments before a Dec. 10 deadline but have yet to publicly address those comments.

Lake has favored the load-side reliability mechanism, but the other three commissioners have offered some pushback. The mechanism will be developed according to a set of principles that include offering economic rewards and providing “robust” penalties or alternative compliance payments based on a resource’s ability to meet established standards; building on ERCOT’s existing renewable energy credit trading program framework; providing a forward price signal to encourage investment in dispatchable generation; using dynamic pricing and sizing to ensure reliability needs are met without over-purchasing reserves; and mitigating market-power concerns for generation companies that also serve retail customers. (See Study Suggests Texas LSEs Can Provide Reliability.)

The proposed backstop reliability service would procure accredited new and existing dispatchable resources as an insurance policy to help prevent emergency conditions. The service’s principles include nonperformance penalties and clawbacks for noncompliance; deploying resources in a manner that doesn’t negatively affect real-time energy prices; and allocating costs to load based on a load-ratio share basis measured on a coincident net-peak interval basis.

“Phase 2 … is a grab bag of a bunch of different ideas with basically no specifics. It’s unclear, confusing, and it’s impossible to tell what it will mean for the market,” Stoic Energy President Doug Lewin said. “The regulatory uncertainty around this vague ‘blueprint’ will likely slow down development from lots of different developers, including storage developers.”

The renewable industry has criticized backstop reliability, saying there are ways to improve reliability without favoring generation. They point to storage, demand response, energy efficiency and real-time co-optimization, which has been pushed back to 2024, at the earliest.

“We saw comments from [clean-energy buyers] that really pointed to the risk of the commission trying to add new reliability costs to renewable energy,” said Colin Meehan, a clean-energy analyst, during a December virtual panel discussion. “Their members represent about 500,000 employees in the state of Texas. These are … big businesses that are very concerned about the commission’s moves to add costs to renewable energy.”

“Renewables are clearly very important to our energy future, but the Texas PUC is considering changes that would make renewables more expensive at the behest of Gov. Abbott and his fossil fuel industry contributors,” Environment Texas Executive Director Luke Metzger said in a statement. “That could lead some projects to get canceled or scaled back, making the grid less reliable and dirtier. That’d be like cutting out our nose to spite our face.”

Metzger issued the statement after ERCOT last week released its latest long-term look at its expected capacity. Texas already leads the nation in wind production, with the grid operator listing more than 28 GW of installed capacity. The grid already has more than 10 GW of solar, a number that is expected to exceed 19 GW by the end of 2022.

That doesn’t take into account second thoughts developers might have, given the regulatory uncertainty over ERCOT’s future market design. Texas politicians were quick to blame renewables for the February disaster, but half of the grid’s thermal generation was inoperable during that time.

On Sunday, more than 10 GW of thermal generation was unavailable during the year’s first cold snap.

Silverstein is among the many stakeholders calling for a more significant reliability analysis to determine exactly what reliability issues need to be solved.

“That is not at all clear. … [It] requires a significant amount of sophisticated analysis that nobody has done at ERCOT and no one has done anywhere else either,” she said.

Unless the commission “commits to a slower, more deliberate pace with more transparent analysis and broader consideration of options,” Silverstein said, the market design’s second phase will be “another disaster for those of us in the public and industry who want to see Texas’ electric system and market follow a thoughtful, stakeholder-informed, analytically based, transparent and provably reasonable policy development process with outcomes that are demonstrably reliability-improving and cost-effective.”

Lewin said the PUC wasted “precious time” on the load-side reliability mechanism, “an extremely unpopular idea which had the support of only a handful of stakeholders out of scores of commenters.”

“The PUC spent very little time on ideas with more support,” he said, listing needed improvements to black start, increasing energy efficiency and demand response, and finding ways to increase storage. “I hope there’s a pivot to focus on changes that will meaningfully increase reliability.”