This month, ERCOT released a staggering projection: the agency says 62 gigawatts of new demand could plug into Texas’ grid by 2030. 

It looks like a decimal point got lost somewhere. The state’s all-time demand record is 85.5 gigawatts, and it took a century to get there. ERCOT says that could jump 72% in a little more than five years.

Texas simply isn’t going to build that much gas generation — there’s no way to build even a fraction of that and even if we could, consumers couldn’t possibly afford it. But there is a way to serve all of that demand and increase reliability at the same time…

Texas energy consumers need relief, and they aren’t getting it from ERCOT. 

Over and over, the agency’s policy choices have drifted toward the expensive — policies all-but designed to run up power bills — and away from cheaper, more effective solutions that protect consumers and the grid.

This ideological recklessness inevitably ran up against the state’s Independent Market Monitor (IMM), a position created to ensure that Texans are represented and protected when ERCOT market changes are made. The battle between ERCOT and the IMM has been steadily building for months, and it will likely crescendo tomorrow at the ERCOT Board meeting. 

I don’t think either side is 100% right. It’s complicated. What’s not in question is that billions of dollars are at stake in this spat, as are key aspects of grid reliability. It all comes down to ancillary services — backup energy reserves that help determine whether the lights stay on in Texas… 

Power grid operators need flexible and dispatchable resources, especially when grids are under extreme stress or emergency conditions. The worse the conditions, the greater the need for flexible resources. 

There’s no energy resource that’s more flexible or dispatchable than batteries. They can respond in sub-seconds and fulfill a variety of grid needs. 

So why on earth is ERCOT trying to slow down battery deployment?

Last month, the ERCOT Board unanimously approved a protocol revision request (ERCOT’s version of a rule change) requiring batteries to maintain a state of charge at all times. Batteries, of course, are meant to be depleted and recharged; ERCOT’s rule would force them to always have more juice, even in dangerous conditions — times when Texans desperately need it.

“ERCOT is trying to make batteries look like and act like coal plants,” Commissioner Glotfelty wrote in a memo that injected some common sense into the discussions of ERCOT’s protocol revision request (known as NPRR 1186). 

Commissioner Glotfelty suggested to ERCOT CEO Pablo Vegas back in August that the proposal would increase costs for consumers and create reliability problems; he suggested ERCOT to go “back to the drawing board” on the proposal and to “not pass it at the next Board meeting.” ERCOT ignored that advice — the politically appointed board unanimously passed a protocol revision that somewhat eased the heavy handed regulation of batteries but would still force batteries to hoard electricity when Texans need it. 

And so, three months later, the PUC was again left to express its displeasure with a regulation that would discourage investment in a dispatchable power source that Texas desperately needs…

On the evening of September 6th, the ERCOT control room was tense.

Texans were close to the first summer rolling outages in more than a generation. Frequency had dropped precipitously, even though ERCOT thought they had enough generation online. Batteries dispatched just enough power to the grid to keep the lights on across the state.

As I wrote the day after, it’s likely ERCOT made a mistake that evening. Much more importantly, it’s likely they could avoid the same mistake next time. It’s critically important that ERCOT learn from the experience and improve their operations.

Unfortunately, that doesn’t appear to be happening.

Last week, on the day before Thanksgiving, ERCOT released its self-assessment on the incident. The agency gave itself an A+. No one should get to grade their own papers; a third party needs to review ERCOT’s actions on September 6 and make recommendations to ensure the right lessons are learned.

Today, the ERCOT Board will hold its first meeting since the end of the summer — a summer in which consumers were asked to conserve energy 11 times.

It's also the first meeting since September 6, when ERCOT was perilously close to rolling outages.

ERCOT staff prepared a summer operational and market review, ostensibly to give the board — and, presumably, Texans — a clearer picture of what happened but it obscures more than it reveals.

Much of what is wrong with ERCOT is clear in the review’s two dozen slides.

It starts with a lack of transparency. The ERCOT slides that cover the September 6 incident still don’t clearly demonstrate how the agency’s own mistakes likely compounded problems that day. The slides also completely dismiss the serious problem of thermal plant outages. And the presentation doesn’t mention at all the transformative role that the state’s growing solar resources played in keeping Texans’ air conditioners humming during the summer’s relentless dangerous heat waves…

Texas policymakers have consistently neglected demand side solutions. They talk about them but they haven’t done much of anything to reduce demand even though it’s been obvious to everyone paying attention that demand side solutions are necessary.

The latest example broke last week. ERCOT is trying to find 3,000 megawatts of “zombie power plants” to bring back from the dead. 

It’s clear that this isn’t adequate. The CEO of CPS Energy, the utility with several of the units ERCOT wants to bring back from the dead, said as much: “It’s been five years since we’ve run it. There’s no way we can bring it back in four months.”

Texans won’t have a reliable grid until leaders prioritize demand reductions at least as much as additional supply…

Did ERCOT’s actions lead to emergency conditions? And given these persistent grid problems, where do we go from here?

Things got a little tense on the Texas power grid last night. It looks like electricity could get tight again tonight and tomorrow — ERCOT has already issued another conservation call for this evening, though everyday Texans, unlike big businesses and crypto miners, won’t be paid for reducing their use.

Yesterday, ERCOT sent out its conservation call at 4:55 p.m. Then, at around 7:10 p.m., frequency — which must stay at or near 60Hz — dropped all the way below 59.8 hz in about 15 minutes. Were frequency to drop much lower and remain there, ERCOT would need to implement rolling outages to prevent the entire grid from collapsing.

It’s still unclear what caused frequency to drop this far, this fast — we’re hamstrung by ERCOT’s reluctance to share reliable, transparent information, and its insistence on blaming renewables for any issues remains a serious problem…

It was a white knuckle night in the ERCOT control room. On Thursday, August 17th, reserves on the ERCOT grid dropped below 3,000 megawatts — less than 4% of the total system demand at that point — and got close to the 2,300 megawatts that would require ERCOT to declare emergency conditions.

The same night, industrial-size batteries put 1,800 megawatts of power — more than double the previous record — onto the grid when reserves reached their lowest point. Without batteries, ERCOT probably would’ve declared an emergency that night. We were very close to the edge.

The same thing happened four times over the next week or so: storage put between 1,100 and 1,325 megawatts of power onto the grid between 7:15 - 8:30 p.m., right as reserves reached their nadir on August 20, 23, 24, 25, and 29 — all days when ERCOT issued conservation calls.

These hot summer nights show the vital role that storage should play on the grid, filling the gaps in those moments when demand threatens to overtake supply. The amount of storage on the grid has mushroomed in recent years — and much, much more is on the way.

So is ERCOT opposing its expansion in a key ancillary service market?

As the Texas Legislature enters the final sprint, big power generators are putting pressure on policymakers to approve a massive increase in their revenues — with as few consumer protections as possible. Some legislators seem compelled to go along for the ride.

The cap the generators want is effectively no cap at all: $9 billion per year. If they get their way, the Governor can take his Site Selection Magazine Governor’s Cup, put it on a bus, and send it straight to, say, Florida. 

Manufacturers and large employers have warned state leaders that this massive giveaway to generators will dramatically hurt their bottom lines. Residential and small commercial consumers can expect 30-40% bill increases if a cost cap doesn’t make it into law. The number of Texans who see their power shut-off — because they’ll no longer be able to afford their electric bills — would skyrocket…

The sky is falling. And everything is great!

Such was the message at a bizarre PUC and ERCOT press conference Wednesday. Ostensibly, the purpose was to release two reports on grid reliability. Instead, it turned into a political exercise — another effort to spin Texas’ ongoing grid problems as something somehow caused by the state’s nation-leading clean energy resources.

“The grid is more reliable than ever,” said ERCOT CEO Pablo Vegas. Also Vegas: There is a “higher risk of emergency operations” this summer compared to last. So more reliable than ever… except for last summer?

Said PUC Chair Peter Lake: “The risk of brief periods of load shed has increased.”

Got it. More reliable than ever and more risk of rolling outages. Clear as mud!

So Are There Actually Problems?

Texans continue to list grid reliability as one of their top concerns. Given these mixed messages, that won’t change any time soon — nor should it, given the increasingly obvious political and anti-competitive tilt of the PUC and ERCOT…

With only six weeks left in the 88th Regular Session, the pressure is mounting. As the countdown to Sine Die (the final day) ticks away, I'll keep you in the loop with regular updates here on Substack and on Twitter.

Here's a sneak peek at what's happening this week.

A Senate Market Design Bill Heads to the House

After the House adjourns on Wednesday, the House State Affairs Committee will dive into one of the Senate's market design bills, SB 2012. The bill aims to control the costs of the Performance Credit Mechanism (PCM); the PCM is a favorite among ERCOT generators but not many others. The bill caps the cost of performance credits at $500 million and mandates real-time co-optimization (RTC) implementation (likely by 2026) before PCM takes effect.

However, the Senate's version includes provisions that would burden renewable energy with the costs of ancillary services and performance credits, ultimately raising consumer costs. It also prevents demand response and storage from earning performance credits, making PCM more expensive and increasing reliability risks, since the state already relies heavily on natural gas. To increase reliability, policymakers need to deal with “correlated risk;” diversifying dispatchable resources to include storage and demand side resources would help. SB 2012 cuts them out.

When the Texas House State Affairs Committee heard market reform bills for the first time last week, Chairman Todd Hunter implored witnesses to focus on the Texans who too often have been lost in the conversations about Texas’ energy future: “Now the one name I never hear is the word consumer or public or the taxpayer or the ratepayer. … Look at the impact on the public, the consumer, the ratepayer and the taxpayer.”

Good.

Because Texas consumers and ratepayers will certainly be missing from this week’s energy conversation on the other side of the Capitol. The Senate is poised to approve bills this week that could send electricity costs skyrocketing — no one knows by how much. And Senators, it seems, couldn’t care less…

The Public Utility Commission of Texas clearly wants your electricity prices to be higher. They have endorsed a certainly expensive but otherwise uncertain and completely untested market design. The PUCT believes the amount will “only” be $460 million per year.

A new study from Aurora Energy Research presented at last week’s ERCOT Market Summit, called that number into doubt; they modeled the shiftily named Performance Credit Mechanism (or PCM, as in, “Pretty (much a) Capacity Market”).

Aurora estimated that the PCM would cost Texans an additional $2 - $3 billion per year — money paid entirely through electric bills for homes and businesses. That’s a net increase in costs, after subtracting out cost reductions in the energy market (the small gray bar in the slide below).

That amounts to roughly a 15% increase in energy costs.

During the cold snap that began Dec. 22, 35-40% of the coal and gas power plants in ERCOT were offline for at least some period of time, many for the entire time.

Had snow and ice accompanied the cold—as happened with Winter Storm Uri in 2021—the data shows that Texas again would have faced an unacceptably high risk of outages. Pablo Vegas, CEO of ERCOT, even sent a letter to the U.S. Secretary of Energy, asking her to “find that an electric reliability emergency exists within the State of Texas.”

Yet in prepared remarks Jan. 12 to the Public Utility Commission of Texas (PUCT), ERCOT VP Dan Woodfin described December’s scare as “a non-event.” Forecasts by the state’s electric grid operator underestimated Texas’ energy demand 23% during parts of the freeze — and yet Woodfin said ERCOT’s “under forecast had no impact on reliability.”