The Electric Reliability Council of Texas, also known as ERCOT, currently serves about 24 million customers in Texas and represents about 90 percent of the state's electric load. The council has developed into a unique power market, with its low power prices, reduction of baseload plants, and energy-only construct. As the market continues to increase its load, it provides many new challenges and opportunities for the renewable sector.
At Infocast's Projects & Money Summit in New Orleans, Stratton Report had the privilege to sit in on the "ERCOT – A Market of Opportunity" panel. Deanne Barrow, an Associate at Norton Rose Fulbright, acted as the moderator. The esteemed speakers at the panel were Karl Dahlstrom, partner at Halyard Energy, Robert Helton, Senior Director of Regulatory Affairs at Dynegy Inc, and Kevin R. Smith, president of Tenaska Power Services Co.
The ERCOT experts discussed trends and developments likely to shape the market dynamics in the coming years. Read their insights below:
The operating reserve demand curve could impact revenues
"When you have 4 or 5 GW of wind on the system as they peak, it's nearly impossible to get any kind of scarcity pricing. That's where the problem lies. How are we going to rectify that?" said Robert Helton, Senior Director of Regulatory Affairs at Dynegy Inc.
"What happens in the summer with a 9 percent reserve margin, which is about where we're going to be, and scarcity doesn't hit the way that we'd expect and revenues aren't where they should be? That's a real problem. Don't know if that will happen or not, we'll just have to wait and see. That's why you'll see several of us on the gen side and some on the load advocating for changes to the operating reserve demand curve in order to add additional revenues," said Helton.
Load-serving entities could one day have capacity obligations
"In terms of the capacity market, while that will be quite political, what I hope we ultimately see is a capacity obligation on load-serving entities. That is something that doesn't exist today," said Kevin R. Smith, president of Tenaska Power Services Co. "If load-serving entities had a target then that would be a step in the right direction."
Moderator Deanne Barrow, Associate at Norton Rose Fulbright, discussing new topics with panelists.
Battery storage opportunities in ERCOT
"Our company believes in flexible generation to tell us what the intermittent nature of the renewables is. We believe battery storage will have a strong place in ERCOT. It is just not there today, so we are developing ways to get ahead of the curve and are closely watching the price of energy storage for now," said Karl Dahlstrom, partner at Halyard Energy. "We believe that it will one day make sense to include natural gas peakers with battery storage."
Solar power opportunities in ERCOT
"As far as utility-scale solar, I mean large solar sites, the opportunity is in West Texas," said Smith. "The challenge with that is the transmission. You go West, you have lots of land, it's cheap, you have better arrangements, that's the best place to sign, but there's no load, and because there's no load, there's no transmission, so that makes those sites a real challenge."
"What we're seeing is solar being connected on the distribution level, less than 50 MW, and one of the benefits is that it avoids congestion. But if you build out in West Texas, end of the line, you're going to risking transmission congestion, just like they saw with wind. We're also seeing generation less than 10 MW being interconnected at the distribution level and that has some unique benefits associated with that," he added.
Kevin R. Smith, president of Tenaska Power Services Co. sharing his insights during the ERCOT panel.
Fewer short-term opportunities for corporate PPAs
"I think it's going to take significant scarcity price events for low serving entities to want to commit to any long-term power purchase agreements in the future. In the short term, I don't see a lot of opportunities for PPAs. We'll see if that changes," said Dalstrom. Overall, the panel was very well structured and touched upon many key trends.
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