Houston — Billions of dollars will be spent to ensure the Electric Reliability Council of Texas mid-February winter storm grid failure does not recur, but major market structure changes are unlikely, top power company executives said during the Gulf Coast Power Association's virtual Spring Conference.
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"There are thousands of disputes and lawsuits that will take months to go down," said Brandon Schwertner, CEO of Arlington, Texas-based Priority Power Management, an energy management service and consultancy.
Delivering a keynote address April 29 on "Energy Transition: Impacts to ERCOT," Schwertner said customers frequently ask what Texas lawmakers will do in response to the storm, in which all types of generation -- renewables and fossil fuels -- tripped offline for various reasons.
"Are they going to re-regulate? They're not," Schwertner said. "Are they going to start a capacity market? They're not. We'll fix the market another way. There's a lot of tweaking that needs to be done. ... It's going to cost money -- and it's going to be significant -- to make sure that it doesn't happen again. It doesn't matter who is to blame, and the customers are going to pay for that."
However, as the Texas Legislature considers various proposals to prevent a recurrence of the February energy emergency, forward market activity has dwindled, Schwertner said.
"Net net, liquidity is going to be low, trading volumes are going to be lower ... until we know the new playing field," Schwertner said.
Once the uncertainty dissipates, "liquidity should improve to better than it was before the storm," Schwertner said.
As the reliability issues are resolved, Schwertner said, "We're going to have a trend in which prices are going to get higher."
Sustainability, reliability, affordability
Electricity customers want clean, reliable and affordable electricity, Lisa Barton, American Electric Power vice president and chief operating officer, said during a panel discussion titled, "A View from the Utility C-Suite."
"We need to make sure we are cognizant of their goals and we are integrating those in our solutions," Barton said.
To which Entergy Texas President and CEO Sallie Rainer responded, "Sustainability without affordability and reliability is not workable."
AEP has utilities in several independent system operator footprints, including Southwest Power Pool and ERCOT. The contrast in February was stark, Barton said, as SPP was able to cope with the storm with fewer rotating outages for shorter periods, while millions of ERCOT power customers lost power for days.
Barton said the transportation and distribution utilities "need more tools in our toolbox," suggesting that more granular load control may be needed. "Can we control people's electric water heaters? I think we can make significant progress."
Solar market effects
Asked why ERCOT power forward curves are backwardated, with prices further into the future lower than nearer-term prices, Schwertner said traders expect a massive influx of solar power over the next few years, which would tend to diminish scarcity pricing during heavy loads driven by summer air conditioning.
On Thursday, ERCOT North Hub August 2023 on-peak forwards settled at less than $75/MWh, down 14% from the August 2021 package and down by 59% from the average day-ahead on-peak LMPs in August 2019, according to S&P Global Platts data.
ERCOT's most recent Capacity Changes by Fuel Type report, issued April 6, indicates that by the end of 2023, it may have about 19 GW of solar capacity, if adding capacity with interconnection agreements and financial security posted to the totals of installed and synchronized capacity. That contrasts with today's 4.1 GW of installed capacity.
"C-Suite" panelist Allen Nye, CEO of Oncor, Texas' largest transmission and distribution utility, said, "We've seen a spike in generation interconnection requests; we'll see how much of that capacity actually makes [power]."
"Our wires are agnostic," Nye said. "Our wires carry green electrons, and they carry coal electrons."
Federal tax subsidies for solar power and continued decreasing costs for solar power are likely to result in continued solar power growth, Schwertner said, which is "good for buyers."
"Almost everyone we talk to -- CEOs, hedge fund managers, everyone -- is mandating sustainability goals down to two or three steps through the supply chain," Schwertner said. "The world is going to look a lot different five years from now from what it is today."