ERCOT, Caught in Political Crossfire, Releases Reliability ‘Roadmap’

The Electric Reliability Council of Texas (ERCOT) has unveiled a roadmap outlining crucial improvements designed to enhance grid reliability, taking into account recent legislation, regulatory mandates, and a recent push by the state’s governor for market incentives that will help the grid bulk up on “adequate and reliable” resources, like natural gas, coal, and nuclear power.

ERCOT’s July 13–issued 60-point roadmap is rooted in two sweeping bills the governor enacted in June that require, among a slew of reforms, an overhaul of the electricity market’s organizational oversight and weatherization mandates for power generators.

But in his opening letter, Brad Jones, ERCOT’s former chief operating officer who the organization’s board appointed this April as interim president and CEO after it terminated Bill Magness in the wake of the February freeze event, noted ERCOT is also “working with” the Texas Public Utility Commission (PUC) to implement “immediate” directives issued by Gov. Greg Abbott in a July 6 letter. “We also gathered ideas from many Texans including customers, city leaders, state leaders, current and former regulators, environmental advocates and market participants to help us identify important improvements,” Jones wrote.

ERCOT unveiled its “roadmap” as the independent organization tasked with establishing requirements to meet the reliability of the power region prepares to release its final post-event analysis from the February blackouts in August. Since the February event, ERCOT has requested energy conservation on two other occasions, citing tight conditions: in April, when 32 GW of generation was in outages, and in June, when 11 GW was reportedly in forced outages.

Details are still trickling in about the Arctic event, during which the Texas grid operator initiated three days of widespread load shedding as it veered precipitously toward system collapse. In a comprehensive report released by the University of Texas at Austin this week, researchers underscored the failure of the electricity and natural gas systems before and during Winter Storm Uri had “no single cause.” 

The researchers pointed to generation failures—of all types; an underestimation of demand; the severity of the storm; rapidly deteriorating grid conditions; natural gas system failures; and limited natural gas storage. “The ERCOT system operator managed to avoid a catastrophic failure of the electric grid despite the loss of almost half of its generation capacity, including some black start units that would have been needed to jump-start the grid had it gone into a complete collapse,” they concluded.

Even so, the event caused “unprecedented impacts,” including tremendous financial disparities. “Natural gas providers that were able to produce and transport gas reported windfall profits. Many financial sector firms that operate in the ERCOT energy market also reported large profits,” they said. “The financial losers included power generators whose equipment failed, generators dependent upon natural gas that were unable to obtain the fuel or were unhedged to high natural gas prices, and load serving-entities (retail electric providers, municipal utility systems, and rural electric cooperatives) who were inadequately hedged.”

Abbott’s Directives Heavy on Blame, Lack Specifics

However, in his letter to the PUC, Abbott demanded that state regulators immediately “streamline incentives within the ERCOT market to foster the development and maintenance of adequate and reliable sources of power, like natural gas, coal, and nuclear power.” While he did not detail a pathway for incentives in the competitive market, Abbott said the incentives “must be directed toward the types of electric generators we need for reliability purposes.”

The governor also pushed for the PUC to allocate reliability costs to generation resources “that cannot guarantee their own availability”—such as wind or solar power—echoing an action rejected by lawmakers in May as they drafted Senate Bill 3 (SB 3). As enacted, the law is instead narrowly tailored to reliability requirements during extreme events. Specifically, it requires ERCOT to develop appropriate qualification and performance requirements for providing services during an extreme event, as well as penalties for service failure.

Abbott, however, suggested that market rules should broadly “ensure that all power generators can provide a minimum amount of power at any given time.” He added: “When they fail to do so, those generators should shoulder the costs of that failure. Failing to do so creates an uneven playing field between non-renewable and renewable energy generators and creates uncertainty of available generation in ERCOT.”

Abbott also demanded that ERCOT “establish a maintenance schedule” for non-renewable generators “to ensure that there is always an adequate supply of power on the grid.” And finally, he told the PUC to order ERCOT to “accelerate the development of transmission projects that increase connectivity between existing or new dispatchable generation plants and areas of need.”

Responding to the governor’s letter but without stepping into the politicization of grid resources, ERCOT’s Jones said the grid operator has so far “taken a more proactive, aggressive approach to ensure adequate generation supply is ready to meet customer demand.” That includes increasing the amount of generation “that is running at any given time.” ERCOT has also purchased “significantly more reserves compared to this time a year ago,” he said.

ERCOT’s Significant Achievements to Date

ERCOT’s 60-point roadmap, meanwhile, highlights several other initiatives it has completed to ensure reliability. These include:

• Proposing a new market rule requiring generators to report all forced outages and automatically release outage information if there is a grid event.
• Improving situational awareness by proposing a new market rule for generators to provide operational updates more frequently.
• Adopting a more aggressive approach to operating the grid. “This will impact outage approval, commitment of resources, conservation alerts, and the communication of system risks as well as wholesale prices. ERCOT will work with the PUC to account for reliability impacts and make necessary adjustments to ensure proper price formation,” the grid operator said.

Along with revising market processes “to continuously run planning assessments needed to bring resources back online in anticipation of tight grid conditions,” ERCOT said it has also improved its assessment and communication of “extreme low-probability, high-impact weather scenarios, including temperatures, durations, precipitation, humidity, and wind.” It plans to update those methodologies in its region-wide Seasonal Assessment of Resource Adequacy (SARA) report. So far, it has also added short-term solar forecasts into existing models, and it has launched an initiative to “identify when ERCOT forecasts have high variability” so it can consider whether additional reserves need to be procured during the hard-to-predict periods.

ERCOT is also spearheading market protocol reforms so that firm load shed is accounted for in market scarcity pricing signals. “This will align pricing with operational conditions,” it said. It has also revised market protocols to limit ancillary services prices to the system-wide offer cap. That effort makes the market “more predictable and stable for market participants, creating a better market for customers,” it said.

A Long To-Do List

But much more remains to be completed, especially to improve fuel security gaps, ERCOT noted. For now, it is still evaluating market incentives to improve fuel security, and it said it plans to consider onsite fuel supply, “including contracts with remote secured supplies.”

Pivotally, it will also assess and develop a plan to improve the accuracy of generation reporting to ERCOT. That effort may “determine whether resource adequacy trips resulted from low frequency require changes to market operations.” Weatherization efforts by generators, as mandated by the recent legislation, will also be an oversight priority. ERCOT plans to “review weatherization and emergency operation plans for generation resources.” It will then provide “information, technical expertise and analysis to the PUC in support of rulemaking and implementation.”

As significantly, it plans to promote and “endorse PUC actions” to begin work on Black Start Plan improvements. “While all the work of this plan is designed to prevent the need for a Black Start process, it is incumbent on responsible grid managers to invest appropriately to minimize the length of the process if it is ever needed,” ERCOT said. “This will protect Texans and the Texas economy in the case of the one-in-a-million event.”

Finally, ERCOT’s long to-do list also specifically caters to the governor’s demands. It said, for example, that it will “review reliability of current and projected resource mix and evaluate market changes to incentivize sufficient dispatchable resources.” Under another point, it added that it also plans to specifically “evaluate requiring inverter-based resources—such as wind and solar generators—to provide additional reliability attributes such as grid-forming capability.” It also plans to conduct a study “to gauge the impact of varying levels of wind and solar penetration, including the impact of energy storage and dispatchable energy, as well as revenue adequacy for each of these levels.” And, it will “assess the potential costs and benefits of increased transmission both internal and external to ERCOT and increase coordination with other power regions.”

ERCOT plans to update its roadmap “regularly” through the end of the year. “Change is required for ERCOT to continue to reliably serve the millions of customers and businesses that depend on us,” said Jones.

—Sonal Patel is a POWER senior associate editor (@sonalcpatel, @POWERmagazine)