Thread by @douglewinenergy

Big day @PUCTX as two new concepts are introduced & discussed by Commissioners and stakeholders:

*Dispatchable Energy Credits from Cmsr McAdams
*Strategic Reserve Service from Cmsr Cobos

I'll tweet about it on this thread and put some key links below. #txlege #energytwitter

https://twitter.com/PUCTX/status/1461695840473526272

The dispatchable energy credits would come from a kind of Dispatchable Portfolio Standard akin to the Renewable Portfolio Standard and renewable energy credits. There are traded RECs for renewables, there could be traded credits for DECs soon.
interchange.puc.texas.gov/Documents/5237…

Cmsr Cobos proposal is to take a phased approach with a lot of quick actions to increase resilience and reliability while building toward a Strategic Reliability Service, mostly designed for winter, which is described here:
interchange.puc.texas.gov/Documents/5237…
#txenergy #txlege

The meeting has just begun and can be viewed here:
texasadmin.com/tx/puct/work_s…

Also important to note the filing of former FERC & PUCT staffer Alison Silverstein who calls for increased focus on #energyefficiency.

Important to remember that no 1 thing will solve these problems. Not DECs, not SRS, not efficiency. It will take a lot.
interchange.puc.texas.gov/Documents/5237…

Lake says there's no silver bullet and says solutions can come from supply side and load side. Continues: "Long term details will not be solidified in December" but rather Commissioners will set a direction.

#txlege #txenergy

First up today is Sam Newell from @TheBrattleGroup. He says he's going to talk about ramping needs in the market with increasing renewable penetration and the Operating Reserve Demand Curve (ORDC).

Doesn't appear these slides are online unfortunately. If you see them, please @ me.

Newell starts with a discussion of what Resource Adequacy is and focuses on not just capacity, but available capacity. Also talk about "operational responsiveness"...

Newell says there are risks from large thermal like coal, gas or nuke plants going off and the more predictable problems associated with solar reducing as the sun sets. Says that can absolutely be managed reliably but need to balance with doing it "in market" at lowest cost

"You can't get so focused on market design and lose sight of possible catastrophic risks," says Newell.

Need to also focus on how to roll outages, do black start better..

YES! Not nearly enough attention on these things.

See @PhilJankowski's great work
statesman.com/story/news/202…

Newell is now talking about LSERO+, a modified version of the Load Serving Entity Reliability Obligation. Newell looks at @BillBarnesATX of @nrgenergy and says we modified that proposal to require generation companies to bid all power to mitigate market power...

And also to give Independent Market Monitor to watch that. Also would modify NRG's proposal to allow LSEs to procure their obligation just before the season starts. He says this is the most direct way to address resource adequacy but there are pros and cons, he'll discuss later

Another option is Backup Reserves similar to what @NextEraEnergyR proposed and a variation of that which is very close to the Strategic Reserves just proposed by Cmsr Cobos yesterday.

Newell from @TheBrattleGroup talking about LSERO+ pros and cons. He says you will argue a lot over resource accreditation, he says some industry advocates he knows spend 90% of their time on these arguments.

Imo, this is a major problem. A step toward an administered market...

... where market participants spend more time working the refs for more money than providing innovation and lower cost options.

#txlege #energytwitter #txenergy

Meant to include his slide on the last tweet, here it is.

Under enhancements (what Brattle Group would recommend adding to the LSERO concept put forward by NRG and E3), Newell talks about a "big fish" auction in which generators would be required to bid in their capacity.

Wonder if @nrgenergy would even support this with that change?

He's unsure how this would impact forward bilateral contracts and could be really difficult for Load Serving Entities since they won't know the price ahead of time and couldn't necessarily hedge.

And here's Newell's option 2.

Here's your requisite reminder that if we don't weatherize gas supply none of this will matter a whole lot. We're contorting ourselves to pay for backup fuel or "fuel firming" instead of just requiring the producers to weatherize!

And I know, of course, and it's important to say @PUCTX can't require weatherization of gas supply.

But #txlege, Gov Abbott, and @txrrc can.

Here Newell addresses this point. Says there was a "systemwide supply shortage... we saw in NERC report it was freezing wellheads" etc."

@TheBrattleGroup's Newell says sometimes you see 6GW worth of gas plants couldn't get supply but "that understates the problem" bc the 20GW that couldn't work bc of broken equipment probably couldn't have run even if nothing broke bc they couldn't get fuel.

Yup.
#txlege

What Newell is now discussing, paying 20+GW of gas to be available with firm fuel supply would be massively expensive, probably billions put to customers.

Again, per @DallasFed, it's not as expensive to *mandate* weatherization of gas supply.
dallasfed.org/research/econo…

Now pivots to "Backup Reserves" which he says is very similar to Cmsr Cobos' proposal. "It's a few thousand MW more available for many situations"

Makes sense, imo, is probably affordable. Should be coupled with bringing more demand side resources into the mix.

Importantly, Newell says this needs to be "outside the market." Says this should be foocused on existing generators: "the ones that are the last ones in the stack that are barely going to run anyway."

He says taking those out of market will cause prices to go up. Points to @VistraCorp's retirement of 4GW of coal in 2018 which caused forward curves to go up. Cmsr McAdams says it was 7GW but he might be counting '17 also. In 2018 it was 4GW

He says the higher prices are a good thing bc it signals to the market for new investment.

Here are 3 options but option 0 is not really an option of course.

Weird there's no discussion of Dispatchable Energy Credits here. Wouldn't that be another option?

In addition to Newell ignoring Dispatchable Energy Credits, he is also ignoring energy efficiency even though any solution without addressing the need to reduce demand will be more expensive.

These options are conspicuous in their absence.
#txlege #energytwitter

He says LSERO+ would lead to a 7% increase on generation portion of the bill. He says there will be "a lot of money hinging on administrative processes... would be subject of ongoing argument ... and subject to regulatory capture."

My view: It's a move away from competition.

Here are the cost impacts. Note: @TheBrattleGroup is using $3 natural gas. Not sure there's a lot of smart money betting on $3 gas at this point so that's a curious input to their model. I'd like to see this w/ $5 gas. High gas prices are a good reason to have fuel diversity.

The "duck curve" is not that big a problem "even if we we're facing a 20GW ramp"

@TheBrattleGroup believes we can meet ramping needs caused by higher renewable penetration entirely "in-market" with non-spin reserve service and ERCOT contingency reserve service.

#energytwitter

Again forgot to attach the slide to that last tweet. Here it is.

He says to meet a 20GW ramp you probably need 3.9GW or so, perhaps an extra 1GW on days when there's more uncertainty. It's not very large.

Now discussing cost allocation. Says if you want to charge renewables "it's much harder to do than you think it would be..."

When allocating costs, there are big differences between fixed solar panels vs. trackers, coastal vs. inland wind, big vs. smaller turbines, whether they have batteries and what size they are.

This would be very complicated to do, Newell says.
#txlge #txenergy

Newell puts a plug in for Real Time Co-optimization. Says it will directly impact all of this, integrating renewables and demand side resources.

Unfortunately, it's still several years out.

Great question from Cmsr McAdams, if industrials opt out of LSERO, woudl that 7% be concentrated more heavily to residential and small commercial customers?

Newell says he doesn't think many industrials could opt out.

I think he might be underestimating co-gen in Texas, ~17GW

McAdams: In other areas of the world where there are LSERO type models, are there opt-outs?

Newell says yes. He says #demandresponse essentially works like an opt out so yes, they all have that.

Important discussion there about economic benefits of #demandresponse. A load that is curtailable would not have to procure capacity under LSERO. Newell says the curtailable load wouldn't have that cost and no one would have that cost.

When load reduces at peak we *all* save.

Cmsr Glotfelty: According to this, there are only two options?

Newell says yes, in my opinion.

Glotfelty says there are 7 or 8 other options that haven't been considered.

Newell says that's not true, Brattle considered them but they were either close to these or wouldn't work

Glotfelty asks if they modeled the other options.

Newell says no. But he says we've considered these in other places.

Glotfelty: Have you ever recommended anything different than capacity market or LSERO?

Newell says of course.

Glotfelty says he thinks there are many otehr solutions and thinks it's disingenuous to present only two options. Says he thinks there are better "suites of options."

Imo, that's right. this is overly simplistic and doesn't address a lot of potention options.
#txlege #txenergy

Newell: What specifically is not included here that could contribute to resource adequacy?

Glotfelty: I've seen proposals out of national labs that contribute to resource adequacy on the demand side of the equation that contribute to reliability.

I don't see that here.

Glotfeltly continues:

Resource adequacy is not about GW scale plants but by lots of smaller resources distributed throughout the system with less contingencies. I think we're looking backward at how it used to be instead of the way things are going.

More Glotfelty: In the end we don't capacity. We need energy. That's the valuable commodity here.

Newell does not respond. Chair Lake jumps in says we asked them to present the solutions they thought would work.

Chair Lake says we need to be technology agnostic. (interesting given the obvious preference for gas)

Glotfelty apologizes to Newell for coming at him like that but says he is frustrated at lack of options presented. Says he will file more options in the docket

Cmsr McAdams: California, Australia, and Singapore have LSERO correct?

Newell says no, Singapore does not. Australia's is quite different. California also has resource planning and doesn't have a competitive market like ERCOT.

A clear disagreement here among the Commissioners about whether LSERO+ would basically amount to Texas adopting the California model.

Chair Lake tells Cmsr McAdams to ask for a side by side comparison. McAdams looks at Newell and says "I'm asking for it."

Newell says in an LSERO+ and in centralized capacity market #energyefficiency and #demandresponse are folded into the market.

It's true but at very low volumes. Scale is drive by state level policy. And it's capacity not focused on solving peak problems.

Importantly he says you could increase your #energyefficiency program but that was "outside our scope"

Wth? Why? One of the most impactful, lowest cost solutions to directly benefit customers is not in scope?!?

That makes no sense.
#txlege #energytwitter
aceee.org/press-release/…

I missed earlier where Cmsr Cobos made the point that there have been actions the PUCT has taken (e.g. weatherization, small increase to ERS)... this is a discussion about longer term changes. Says backup Strategic Reserve Service could be a bridge to longer term solutions.

There's now a presentation on ORDC still not posted.

@PUCTX could you kindly post the presentation?

Danke.

Cmsr McAdams now talking about the memo linked below about ERCOT Contingency Reserve Service (ECRS) and Emergency Response Service (ERS)

interchange.puc.texas.gov/Documents/5237…

Memo also discussed "Winter Firm Fuel Ancillary Service." Cmsr McAdams proposes a 2GW procurement with firm "fuel supply arrangements to ensure winter performance for several days." That language is in SB3.

Chair Lake says we don't have to pick the quantity on Dec 16.

Chair Lake says on Dec 16, they give up a thumbs up or thumbs down and then "take 3-6 months" to decide details.

Cmsr Cobos says she agrees and thinks "there's consensus" on this. She wants to focus it on "onsite fuel" or offsite with firm transport.

Cobos wants to move dual fuel availability off the table bc it's expensive. The bulls eye is onsite or offsite with firm transport.

Should be procured like blackstart is procured. Need to test to ensure they can provide the service and are cost effective. Wants 2 yr contract.

She says issues with fuel acc'g to ERCOT ranged from 6-10GW (but Newell just said it was far higher). She thinks we need 5-6GW. Not sure if she's talking just about Winter Firm Fuel AS or other products too. This seems very expensive

... and again, if #txlege requires weatherization of gas supply, far less of this would be necessary.

The state of Texas is essentially saying Texans should pay for reliability at billions when the oil and gas industry could pay for it for hundreds of millions.

Great.
#txenergy

Cmsr McAdams comes out for $6,000MWh HCAP, higher than earlier discussions of $4500MWh. Also wants mimimun contingency level (MCL) at 2800MW.

Cmsr Cobos might want it higher around 3000MW to avoid conservation alerts.

Chair Lake says 2800MW is NERC mandated emergency...

So Lake would like MCL to be 3GW instead of 2.8.

Cmsr McAdams says he has a "runner-up" which woudl be $5000 HCAP and 3GW.

ERCOT says they're mandated by NERC to ask for conservation in EEA2. If they ask in advance that's discretionary.

Recessed until 12:30.

Commissioners have been discussing Dispatchable Energy Credits for the past 30 minutes or so. I'll try to catch up.

It's an interesting proposal and I think it's potentially a good one *if* there are also substantive steps to address the demand side.
#txlege #txenergy

The idea is to get "new steel" in the ground for dispatchable sources, it does assign the cost to load serving entities (similar to the LSERO). It would only allow the credits to go to sources at transmission voltage with low heat rates, which would exclude existing sources...

and sources on the demand side. There was a discussion of aggregating @Tesla powerwalls. That would not qualify for Dispatchable Energy Credits. It would appear other sources (geothermal, SMR nukes) could qualify and 2 hr storaage can qualify.
interchange.puc.texas.gov/Documents/5237…

Aaron Zubaty from Eolian is up now, comments linked below, to discuss the Disptachable Energy Credit proposal (DEC) proposal. A distintction between DEC and AS is that DECs are only paid when they generate, AS are essentially capacity payments.
interchange.puc.texas.gov/Documents/5237…

One note, Chair Lake said we have 67GW of thermal generation but according to @ERCOT_ISO's last CDR it's 74-75GW.

Rumor is a new CDR and Seasonal Assessment of Resource Adequacy out today at 3 so maybe he has new numbers.

Ok, take that back, SARA is out. h/t @AndrewDessler

https://twitter.com/AndrewDessler/status/1461761483239571464?s=20

And now ERCOT has pulled the SARA. Good lord.

https://twitter.com/AndrewDessler/status/1461780359360700422?s=20

Now @TheBrattleGroup's Sam Newell back up and comes out swinging. Says DECs proposal "does not help the resource adequacy problem not one little bit."

Says primary concern is do you have enough supply to meet demand?

Interesting debate between Cmsr McAdams and Sam Newell. Newell says if you got 2GW from DECs, 2 GWs would retire.

McAdams asks how can we possibly get more dispatchable generation w/ all the federal subsidies for renewables

Newell: if you don't think you can get investment from the energy only model, you've got bigger problems.

McAdams: this shouldn't be a relgious debate.

I'm not sure how they resolve these deep philosophical, quasi religious differences. Lotsa daylight between decisionmakers.

McAdams' problems with renewables subsidies ignore the century long subsidies for oil and gas industry which continue unabated right through to the present day.

eesi.org/papers/view/fa…

Cmsr McAdams asks what if the Biden Administration EPA promulgates rules that crack down on power plant emissions?

This is rarely ever brought up and it's important. There will be new rules before long and many of Texas' oldest & dirtiest plants will be out of the money

I'm not going to be able to tweet this part of the meeting but Cmsr Cobos' memo is an important contribution. She describes it as an insurance product for high impact low probability events. Becoming higher probability says Chair Lake.

Yup.

Her memo lays out a smart, phased approach that as she puts it "conserves the integrity fo the market" while adding needing flexibility and "insurance"

Still missing enough focus on demand side though she gives a nod to #energyefficiency.

interchange.puc.texas.gov/Documents/5237…