In a 5 to 0 vote, the PUC agreed to maneuver ahead with the Performance Credit Mechanism (PCM) plan however stipulated they’d look forward to enter from the Texas Legislature, which is in session till May 29.
The complete Electricity Reliability Council of Texas (ERCOT) redesign undertaking has been geared towards one foremost goal: guaranteeing the event of extra thermal technology available in the market. The PCM goals to perform this by awarding monetary credit to mills for producing throughout instances of excessive demand or tight grid circumstances. An analogous choice — the Forward Reliability Market plan — would offer these incentives based mostly on forecasts, not precise efficiency.
According to the report by the PUC’s marketing consultant, the PCM is estimated to price $5.67 billion per 12 months with an estimated addition of 5,630 megawatts of pure gasoline technology growth over time. In distinction, sustaining the established order system was estimated to price $22.3 billion per 12 months shifting ahead, largely from premium-priced technology throughout shortage pricing durations.
Electricity costs throughout Texas have been noticeably higher because the 2021 occasion for numerous causes, together with the extra warning with which the state at the moment operates — bringing on ancillary providers and reserve technology on-line sooner, and for longer, than earlier than.
Under the evaluation, the PCM system carries with it a lack of load occasion expectation of 0.1 days per 12 months; the established order has a 1.25-day estimate.
The PUC additionally agreed to contemplate extra intensely a attainable “reliability commonplace” — the standards by which dependable efficiency is gauged and mills are financially rewarded.
“We heard Texans loud and clear; they demand a dependable grid. Landmark reforms have confirmed efficient in enhancing the reliability of the grid we now have right now by offering electrical energy throughout document warmth and arctic blasts over the previous 12 months,” stated PUC Chairman Peter Lake in an announcement following the vote. “Today, we take one other historic step towards constructing the grid of the longer term by adopting a brand new reliability service — the Performance Credit Mechanism.”
“The PCM is a good-faith effort at some type of a hybrid system [between the energy-only market and a capacity market],” PUC Commissioner Will McAdams stated in the course of the assembly.
It comes a few week after Gov. Greg Abbott weighed in on the long-running redesign debate, backing the PCM and urging the PUC to maneuver ahead with the plan. In his letter, Abbott was happy that the PCM would offer sufficient monetary incentive to goad corporations into investing capital towards establishing extra thermal technology sources.
But that posture conflicts with that of the Legislature. Last month, House and Senate committees harangued PUC Chairman Peter Lake for shifting on the redesign with out getting extra enter from them.
Lake then agreed to attend for the physique to weigh in in the course of the 88th Legislative Session.
The remaining bullet level in Lake’s agenda on the PCM reads, “The Commission directs PUCT employees and ERCOT to delay implementation of the PCM till such time because the 88th Legislature has had a possibility to render judgment on the deserves of the PCM and/or set up an alternate resolution.”
But the choice drew the ire of some within the Legislature. Sen. Charles Schwertner (R-Georgetown) launched a letter to the PUC lambasting the PCM.
“As the writer of Senate Bill (SB) 3, the [PCM] adopted by the [PUC] at right now’s open assembly represents a considerable departure from the legislative intent of SB 3, particularly Section 18, which pertains to the event and procurement of a brand new ancillary or reliability service to incentivize new dispatchable technology,” Schwertner wrote.
“To be clear: SB 3 didn’t direct the PUC to interchange the state’s energy-only market with an unnecessarily complicated, capacity-style design that places the aggressive market in danger with out guaranteeing the supply of latest dispatchable technology.”
SB 3 was the Legislature’s broad response to the February 2021 blackouts in the course of the 87th legislative session. That invoice punted analysis of the redesign to the PUC; one part reads, “The fee shall … consider whether or not further providers are wanted for reliability within the ERCOT energy area whereas offering ample incentives for dispatchable technology.”
“Dispatchable technology” is outlined as mills whose output isn’t “managed primarily by forces exterior of human management” — thus excluding wind and photo voltaic technology, that are dependent on climate circumstances to provide electrical energy.
Schwertner contends that the PCM doesn’t meet the Legislature’s directive to the PUC that redesign ensures the event of dispatchable energy.
Back in November, Lt. Gov. Dan Patrick named including extra dispatchable technology to the ERCOT grid as a high priority for the Legislature and stated that utilizing a portion of the record surplus to subsidize that growth is an choice that needs to be thought-about.
Industry members — the Texas Oil and Gas Association (TXOGA) and the Texas Association of Manufacturers — each registered misgivings in regards to the PUC’s motion.
“[C]oncerns stay concerning shifting threat away from mills and towards customers because the Performance Credit Mechanism (PCM) mannequin is crafted and continues to evolve,” TXOGA President Todd Staples acknowledged. “The PCM modeled by E3 mirrored a value of $5.7 billion yearly and centered on availability slightly than efficiency. The dialog right now mentioned pay for precise efficiency which is encouraging however not sufficiently outlined and has but to be modeled to know the total price to customers.”
Staples then referred to as for a state-sanctioned fund to problem loans to builders who put money into new dispatchable technology; an extension of property tax abatements to energy technology initiatives; and the creation of a brand new reliability service.
TAM President Tony Bennett stated, “TAM is anxious with right now’s motion by the PUC to approve a novel proposal that’s not effectively understood, and has not been modeled, however seems to be designed to make sure a sure revenue stage for current technology.”
Bennett additionally echoed assist for the three issues Staples talked about.
State Rep. Jared Patterson (R-Frisco), who works within the power business for his day job, additional criticized the PUC’s determination.
“I’ve very severe considerations in regards to the PCM mannequin adopted on the PUC right now,” he wrote on Twitter. “One of the largest objects we sort out this session have to be securing the long run competitiveness and affordability of the grid. The PCM falls brief on each.”
“Before tackling any sort of market construction change, the [Texas Legislature] ought to overview the entire administrative actions taken by the PUC over the previous decade, together with shifts within the [Operating Reserve Demand Curve] and the newer adjustments to the value cap and ancillary market. Next, we should always have a sturdy dialogue in regards to the precise drawback on the grid, the shortage of dispatchable technology sources in lieu of intermittent assets.”
The Operating Reserve Demand Curve provides one other hurdle to this redesign; it’s the price adder answerable for premium electrical energy pricing throughout instances of tight grid circumstances. That comes on high of the present influx of renewable technology onto the ERCOT market on the expense of dispatchable growth enabled by tax credit and breaks, particularly from the federal authorities within the type of the Production Tax Credit. That credit score is awarded to renewable mills per kilowatt-hour produced and was simply prolonged one other decade by Congress.
Critics like Patterson say this has triggered a distortion of the ERCOT energy-only market and warped it past what it as soon as was: paying mills for electrical energy truly produced alongside a supply-demand curve in fixed equilibrium.
But in the end, a lot of the controversy on market redesign toes the fault line between the ERCOT market as initially constituted and capability market traits which were added to the combo.