Thread by @douglewinenergy

Texas' electric market is undergoing a redesign. The implications for everyone in ERCOT w/ an electric bill are huge. I'll translate the jargon in the PUC memo filed this week, summarize key points & describe market participants' reactions. 1/🧵 #txlege #energytwitter

As always, if I got something wrong or if I've misrepresented something (esp. if you're reading this & I've mis-characterized your position), please DM me & I'll correct it. I'm learning & appreciate the constructive criticisms. PUC memo is here:
interchange.puc.texas.gov/Documents/5237…
#txlege

The memo is from staff but is quite obviously reflective of Chairman Lake's position. The first thing in it is Operating Reserve Demand Curve (ORDC). This was created after the 2011 winter outages (and near misses that summer). It adds $ for generators in scarcity conditions.

The theory behind ORDC is to incent generators to be ready for scarcity. It also incents renewable generators to add storage to be able to earn those higher prices. Lots of commenters suggested the PUC "flatten" the ORDC, that is, provide payments further away from outages (cont)

You can see this flattening here. For simplicity's sake, focus on 2 lines: the blue "current" line & the proposed yellow line. In the current system, prices are higher closer to outages, lower further out. The proposed inverts that: lower payments near outage, higher further away

The current very high payments close to outages & relative lack of adders when we're only 4-5GW away from outages, add up to what Chair Lake calls a "crisis based business model." I think this move makes sense but it will add cost & careful transparent analysis is needed.

@TheBrattleGroup suggested recently that the lowering of the High CAP (the $9000MWh cap) to $5000MWh (which has already been done) would balance out ORDC increases. But they didn't show their work so it's hard to feel confident in that assertion.
#energytwitter

#DemandResponse: Love that this section is here, but there are problems, namely #energyefficiency is a bullet here but really EE & DR are complementary but diff things. As shown in the simplifed graphic below, EE produces consistent savings, incl. at peak. DR only when called.

One way to think about this is #energyefficiency is like nuclear plants: always on producing off peak AND on peak.

#demandresponse is like a peaker plant: only operates in times of scarcity in response to a call, highly dispatchable.

#energytwitter

The PUC blueprint calls for "higher performance" and there's nothing wrong with that but the state's #energyefficiency programs save Texans $4 for every $1 spent. The problem isn't low performance it's anemic goals (cont)
#energytwitter
texasefficiency.com/images/documen…

Higher performance is always a good goal but we also need to increase #energyefficiency. Texas is the lowest of all ~30 states with a goal. We are wasting energy and money. The green bar is the average state. The red is Texas. We're 80+% below average.

This was one of the biggest problems in February and FERC and NERC made both energy efficiency and demand response *separate* recommendations in their report. See Recommendations 18 and 19.

It's time to increase Texas' #energyefficiency goals ferc.gov/media/february…

Don't want to give into negativity bias though. The #demandresponse section does have virtual power plants in it, directing ERCOT to "identify current barriers for VPP participation" in the market. This is a big step and the PUC deserves credit. #txenergy
greentechmedia.com/articles/read/…

There is also a piece about "changing demand response pricing from zonal to locational marginal pricing." Not sure what exactly PUC means by this bc the memo language is vague but in ERCOT generation settles at nodes (LMP) and loads settle at one of four zones (cont.)

This is done for fairness. The theory is people shouldn't have to pay more for power just bc of where they live. However, some customers (usually large ones) will want nodal pricing which provides an economic signal to reduce in times of scarcity. It's intriguing but need details

Next section is Emergency Response Service. The immediate action item is to codify the move made on a temp basis a few weeks to deploy ERS earlier, before conservation calls. Not saying it's a bad idea but it will likely will raise the cost of procuring ERS... (cont)

If you are a large energy user and you sign up to shut off power, you will require one price to be called after conservation calls and when the grid is near outages and a totally different thing to be turned off before conservation calls when we're 3GW away from outages.

ERS is a very important tool and consists mostly of #demandresponse from large energy users. They overperformed during the winter storm. Generators can also participate, they underperformed. See this thread for more.

https://twitter.com/douglewinenergy/status/1383911185251127300?s=20

Lots more to cover in the PUC memo but I'll pause for now. I'll get into the next issues in the memo in soon on the same thread & I'll share links/summarize some of the 50+ stakeholders who filed comments today on this PUC memo. You can see them here:
interchange.puc.texas.gov/search/filings…