On the Brink of Blackouts, Texas Makes Case for Power Plant Boom

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James McGhee

CEO Energy Procurement Services

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Aug 16, 2019 5:58 pm GMT
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I’m a big proponent of fixed-rate electric service plans. But with the current market conditions in Texas, I’m a down-right activist against indexed pricing! With ERCOT experiencing record demand this week, there’s a push for new power plans to enter the industry to help ensure there is adequate supply.

With supply barely meeting demand, it goes without saying that now, more than ever, is not the time to be at the mercy of real-time pricing. Prices this week have already busted the $9,000 cap, horrifying consumers with rates reaching $9/kWh. No one wants to have to explain, let alone pay, that electric bill! Don’t leave your clients or yourself exposed to that level of risk. At least not until we see some new generators alleviate the grid.

On the Brink of Blackouts, Texas Makes Case for Power Plant Boom

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Matt Chester on Aug 16, 2019 12:07 pm GMT

Thanks for sharing James. I'm curious what you think about the sentiment that these high prices are a feature, not a bug, of the Texas system and that pricing based on energy and not capacity is (when spread out and looked at in the big picture) still the more efficient option: https://www.axios.com/summer-price-spikes-are-a-feature-of-texas-power-market-not-a-bug-29638cbc-524c-4ff0-8604-9414a22fe89b.html

James McGhee on Aug 16, 2019 1:01 pm GMT

I believe these price spikes are a necessary evil. Texas relies heavily on wind, which is hard to quantify in a forecast. We really need an almost instantaneous demand and generation response to bridge those gaps in the forecasts, and nothing seems to drive the necessary actions like money! I think the current system boosts the response time very efficiently and helps keep the reserves at a relatively satisfactory level. Although, they are cutting close!

Bob Meinetz on Aug 18, 2019 5:24 am GMT

"With ERCOT experiencing record demand this week, there’s a push for new power plans to enter the industry to help ensure there is adequate supply."

James, I think you misread the title of the article. It is not recommending new power plans: more real-time pricing, more indexed pricing, more TOU pricing, more demand-response; more wind turbines, or more solar farms. Just the opposite:

"(Bloomberg) -- It may be time to start building power plants in Texas again."

What Texans can take away from this experience is something we, as a nation, already learned nearly one hundred years ago: free-market electricity - distributed, unregulated generation - is a disaster. Together with Californians, it's a lesson they'll have to learn again the hard way.

It may take a while. Maybe, we'll have to try Distributed Water Resources (DWR), where anyone can dump their collected rainwater into the public water supply and be paid for it. Great idea, huh? What could possibly go wrong?

James McGhee on Aug 19, 2019 9:30 pm GMT

Hey Bob. With the relatively recent closing of 3 coal-burning plants, I believe the concern, or at least the inference of the article, is that demand is teetering on surpassing capacity. The call is for new players to step in to reduce the likelihood of blackouts. No comment on the water sourcing issue!

Bob Meinetz on Aug 21, 2019 3:29 pm GMT

Understood James. This is a textbook example of why deregulation of electricity was a bad idea from the start.

Now is too late to start addressing reliable resource adequacy. Batteries are too expensive, by orders of magnitude. New gas plants would only lock in carbon emissions for decades into the future. Renewables activists will claim we need more wind, which will only make the problem worse.

From a review of Michael Moore's new documentary, Planet of the Humans:

"He [producer Jeff Gibbs] and Moore said they were shocked to find how inextricably entangled alternative energy is with coal and natural gas, since they say everything from wind turbines to electric car charging stations are tethered to the grid, and even how two of the Koch brothers — Charles and David — are tied to solar panel production through their glass production business."

New Michael-Moore Backed Doc Tackles Alternative Energy

Richard Brooks on Aug 16, 2019 5:53 pm GMT

It will be interesting to see what approach ERCOT chooses to secure additional capacity. Will they implement a Capacity Market Auction like some existing wholesale markets - which are failing across the nation OR will they issue RFP's like some States have, OR will they revert to a "cost of service" model like the old days, OR would they consider the approach that electricity consumers favor, a market based capacity exchange that values all types of capacity, based on the services provided by the resource OR do they have something totally innovative in mind.

(Bloomberg) -- It may be time to start building power plants in Texas again.

Interesting times ahead in Texas. Will certainly be watching this one.

James McGhee on Aug 19, 2019 12:08 am GMT

Indeed sir! Enjoy watching vicariously as my fellow Texans and I provide eye witness reports!

Richard Brooks on Aug 19, 2019 7:38 pm GMT

I look forward to your insights as you progress. Thanks.

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Hi Bob,

Thanks for sharing!

It is very big deal when it comes to hydrogen because hydrogen is the one and only to allow all of us to break-free out of this entrapment for humans.

Gary, I know the Circular Economy sounds like a new exciting concept.

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