Rolling Blackouts in Texas

Those living in Austin last winter would remember the rolling blackouts in early February. The Electric Reliability Council of Texas (ERCOT), the grid operator for 85% of the electric load in Texas, imposed rolling blackouts throughout the state due to weather induced loss of generation capacity. According to [1], nearly 8% of the state’s total installed generating capacity was forced offline due to extreme weather.  The loss of power generation reduced the margin of available reserve capacity to a point where controlled outages were required in order to mitigate risk of a larger region-wide failure.

A year later, it seems that the issue of insufficient reserve margin has not yet been resolved.  “ERCOT CEO Tripp Doggett recently said reserve power in Texas would be maxed out in 2013” [3].  According to [4], “the state’s electric power reserve margin will fall to 12.11 percent next summer, well below the ERCOT’s minimum target of 13.75 percent.”  In addition to extreme weather, this problem can in large part be attributed to two related factors.

First, recent EPA regulations requiring cleaner emissions from power plants have caused operations at some coal-fired units to be suspended and in other cases, delayed construction of new coal-fired generation.  Had these emission regulations been in effect in 2011, Doggett said the state would have seen rolling outages during the August heat wave [4].  This highlights the second issue of how it can be difficult to create incentives for generation companies to build new units in a deregulated market.

One proposed solution has been to increase the price cap on the wholesale price of electricity.  Current regulations cap this price at $3000/MWh (the average is around $40/MWh) [5].  During peak load periods, like those experienced this past summer and last winter, wholesale electricity prices can spike to reflect the demand nearing system capacity.  Raising this cap would incentivize generating companies build more plants to cope with the scarcity of supply.  Some analysts, however, argue that raising the price cap or even removing it altogether would allow companies to manipulate the system. For example, in the highly publicized bankruptcy, “Enron had artificially driven up the price of electricity in California by taking some of its power plants there offline” [5].

Interestingly, although wind generation capacity in Texas has greatly increased in recent years, the intermittency of wind still causes uncertainty whether resources can be deployed during peak operating conditions.  In a recent blackout in the San Diego area affecting 6 million residents, wind generators were unable to supply much power during the cascading outage because winds were only blowing around 8 mph at the time [6].

These experiences raise difficult questions of how to incentivize the construction of new generation while maintaining sufficient regulation of the industry.  Furthermore, how much should be invested in intermittent renewable sources versus traditional base load generation, such as coal and nuclear?  How much can new investments in a smarter grid help to reduce the peak load? The examples highlight why one technology will not solve our future energy needs.  A portfolio of generating technologies must be employed in order to balance the advantages and disadvantages of each.

References

[1]    http://www.reuters.com/article/2011/02/02/us-ercot-rollingblackots-idUKTRE7116ZH20110202

[2]    http://www.statesman.com/blogs/content/shared-gen/blogs/austin/weather/entries/2011/02/02/statewide_power.html

[3]    http://dfw.cbslocal.com/2012/02/09/texas-power-plants-not-generating-enough-electricity/

[4]    http://www.reuters.com/article/2011/12/02/utilities-ercot-idUSN1E7B011Y20111202

[5]    http://stateimpact.npr.org/texas/2011/12/14/regulating-the-price-of-power-in-texass-deregulated-market/

[6]    http://www.economist.com/blogs/babbage/2011/09/reliability-grid