On Monday, January 6, the system operator of the Texas electric grid, the Electric Reliability Council of Texas (ERCOT), announced an Energy Emergency Alert and took steps to protect the grid. By 9:50 a.m., ERCOT was able to cancel the Alert because of improving generating conditions. On Tuesday morning ERCOT then set a new winter electricity demand peak. The wind lobbyists were quick to claim that “wind energy provided massive quantities of extremely valuable electricity when grid operators needed it most.” But is this true? It all depends on whether you consider wind operating at 17 percent of its total capacity a massive or a middling quantity of electricity.
When the cold weather hit earlier this week, ERCOT had almost 10,000 megawatts of capacity down for ‘the season’ or for planned maintenance, with another 3,700 megawatts unexpectedly down, half of which were due to weather, for a total of 13,700 megawatts unavailable to the grid. That is more than the entire state of Texas’s 12,214 megawatts of wind capacity. This may look like redundancy in generating capacity, and in fact, it is. This redundancy is critical in making sure that the grid can handle unexpected outages.
But, wind generation cannot be counted on to serve energy upon demand because the wind resource is not dependable. For this reason, ERCOT counts only 8.7 percent of its wind capacity towards its reserve level, which was less than 2,300 megawatts on Monday morning. Wind tends to blow in the late evening and early morning hours. At 7 a.m. on Monday morning, during ERCOT’s Energy Emergency Alert, it turns out that the wind was indeed blowing in some parts of Texas. But even though early morning is generally a good time for wind generation, on Monday morning only 17 percent of ERCOT’s wind capacity (1,782 megawatts of the approximately 10,400 megawatts of wind capacity) were operating at that time. According to Fuel Fix, this means that “on Monday [wind] only contributed about 3.2 percent of electricity used during peak demand. It is obviously a judgment call whether 17 percent of capacity and 3.2 percent of total generation is indeed “massive quantities” of wind or merely middling amounts.
Unfortunately, that generation in the morning does not compensate for the redundancy needed in electrical capacity due to the intermittent nature of wind, and no level of federal subsidies can make wind a dispatchable resource. (Dispatchable power is electricity that is there when needed, while non-dispatchable power, including wind, is intermittent and therefore not reliable to be there when needed.) If the same near-emergency event happened at 5 p.m. on Monday, when wind production had fallen to just 686 megawatts, wind was only producing at seven percent of ERCOT’s wind capacity.
Wind power receives a Federal production tax credit of $23 per megawatt hour for every megawatt hour produced for the first 10 years of the unit’s production. This is on top of wholesale prices that the units receive for producing power that normally averages in the $30 to $40 per megawatt hour range, but spiked to the cap of $5,000 per megawatt hour for one hour on Monday morning in Texas. Assuming that all wind generation in ERCOT operating on Monday received the production tax credit, wind operating companies in ERCOT received an additional $1.5 million from the American taxpayer. Further, Texas wind operators are subsidized by tax payers in other states as a recent IER study found, where Texas received $394 million more in wind subsidies in 2012 than its share of the federal wind subsidy-related tax burden. For the specifics on that study, click here.
ERCOT Issues Energy Emergency Alert
On January 6, 2014, ERCOT announced an Energy Emergency Alert, asking the public to conserve energy by:
Keeping thermostats as low as is comfortable, preferably no higher than 68 degrees.
Turning off and unplugging non-essential lights and appliances.
Avoiding running large appliances such as washers, dryers and electric ovens during peak energy demand hours (6-9 a.m. and 4-8 p.m.).
Closing shades and blinds at night to reduce the amount of heat lost through windows.
Asking businesses to minimize the use of electric lighting and electricity-consuming equipment as much as possible.
Asking large consumers of electricity to consider shutting down or reducing non-essential production processes.
The grid operator wanted to avoid rolling outages, which are controlled interruptions of electrical service usually lasting up to 45 minutes that are initiated by utilities when supplies of reserve power are exhausted. If there is insufficient capacity available, rolling outages provide a safety valve to ensure that generators do not overload, necessitating their shutting down to avoid damage, which could result in a region-wide blackout.
ERCOT seems to have been caught off guard due to the unexpected cold weather hitting Texas when it allowed almost 10,000 megawatts to be shut down for planned maintenance or shut down for ‘the season’. While this may be normal operating procedure for ERCOT, the system operator was in a further predicament when an additional 3,700 megawatts had to shut down, about half due to weather. Texas is not normally a winter peaking state, but it did have a similar problem in February 2011, when 20 plants shut down due to cold weather and ERCOT needed to institute rolling outages.
In ERCOT’s defense, weatherization plans are required to keep plants running in the winter and random site visits are made to generators to ensure that they are implementing their weatherization plans. Power plants are weatherized by protecting the sensitive pipes and instruments around the plant from extreme weather conditions.
Wind is not immune from outages caused by cold weather. Wind turbines in the United Kingdom are known to freeze in the winter, suspending their generation and requiring the turbines to be heated, creating a demand for additional energy. And besides freezing temperatures, Britain has experienced very high winds that have caused the turbines to be turned off to prevent damage. The country has turned to wind to replace coal-fired capacity that it is shuttering, which is also happening in Texas due to regulations from the Environmental Protection Agency (EPA). Almost 1,200 megawatts of coal-fired capacity in Texas were shut down in 2012 and another 528 megawatts are planned to be shut down next year due to EPA’s Mercury and Air Toxics Rule (colloquially called Utility MACT) and the Cross State Air Pollution Rule (CSAPR).
Utility planning has become more complex with the proliferation of intermittent generating technologies, such as wind, and with the return of a cold weather cycle that has not been seen for several decades. Added to that are onerous regulations from the EPA that are prematurely shuttering coal-fired power plants. Increasingly unreliability of our electrical system due to government policies designed to punish traditional sources of electrical generation may lead to conditions Americans are not used to seeing, such as brownouts and blackouts. While ERCOT was fortunate to have enough power on January 6th, intermittent sources like wind cannot be relied on to provide real, on-demand capacity. Further, it is costing taxpayers throughout the country for the subsidies it receives and utility customers for the redundancy needed to ensure reliability. ERCOT’s wind gamble is not a success story but a reminder that the grid needs real capacity to reliably avoid these situations.
IER Policy Associate Travis Fisher authored this post.
The Institute for Energy Research (IER) is a not-for-profit organization that conducts intensive research and analysis on the functions, operations, and government regulation of global energy markets. IER maintains that freely-functioning energy markets provide the most efficient and effective solutions to today’s global energy and environmental challenges and, as such, are critical to the well-being of individuals and society.
 The PTC subsidy expired at the end of 2013, but units that have started construction in 2013 can still garner the credit once producing power as can units previously built that have not received the PTC for the full 10 years.
 The cap is $4,500, but additional transmission costs accounted for the additional $500.
 Over the years, additional types of subsidies have been offered by the Federal government. Rather than the production tax credit, wind producers could opt for an investment tax credit of 30 percent or receive a rebate of 30 percent of the investment for units built in certain years when those options were available. The calculation here assumes that all wind operators opted for the production tax credit.