Transmission towers in Houston are shown. Brandon Bell/Getty Images
After a boom in wind and solar generation, regulators in the nation’s top energy-producing state are pushing ahead with a plan that would incentivize more natural gas plants on the power grid.
The new framework could remake Texas’ electricity mix for years to come, clouding the outlook for renewable energy even as federal incentives are pushing those sources onto the grid.
The plan won approval from the state Public Utility Commission last week, setting terms for how the electricity market may change. The structure — which passed the PUC unanimously almost two years after winter blackouts crippled the state — is designed to aid reliability while retaining some of Texas’ unusual electricity system.
Critics, however, warn that the PUC is pushing the state toward a market design rooted in the past instead of embracing renewable energy and accelerating efforts to cut electricity use when demand is highest. Some also say the proposal would raise power costs for customers. And powerful legislators question whether the PUC’s plan will offer the reliability its supporters promise.
State Sen. Charles Schwertner, a Republican who leads the influential state Senate Business and Commerce Committee, labeled the PUC plan “unacceptable” in a Thursday Twitter post.
In a letter to regulators last week, Schwertner said the PUC’s design represented a “substantial departure” from what legislators previously directed the commission to consider.
Texas’ main power market has relied for years on a competitive design that allows generators to reap high prices when conditions are tight, potentially creating an incentive for companies to build more power plants. However, as renewable energy production becomes cheaper and a growing population pushes up demand, that structure is colliding with efforts to make sure there’s enough electricity during periods of extreme heat and cold.
State lawmakers, Schwertner said, “did not direct the PUC to replace the state’s energy-only market with an unnecessarily complex, capacity-style design that puts the competitive market at risk without guaranteeing the delivery of new dispatchable generation.”
With the PUC’s approval of a new outlook, legislators and officials from the Electric Reliability Council of Texas (ERCOT) — the state’s main grid operator — will now debate next steps for the plan. Texas is seeking to try an unproven method to fix reliability problems plaguing numerous U.S. grid regions.
Here are answers to five key questions about Texas’ new plan for electricity.
Why is the Texas market being altered?
The market redesign has its roots in 2021’s Winter Storm Uri, where freezing temperatures led to widespread blackouts and the deaths of more than 200 people in Texas. As part of sweeping legislation after the storm, the Texas Legislature instructed ERCOT to commission a report on ways to restructure the market to avoid shortages.
Although legislation led to changes, including more oversight and weatherization of natural gas infrastructure, a winter storm near the end of 2022 highlighted the grid’s continued challenges. Below-freezing temperatures pushed ERCOT’s electricity demand to more than 73,000 megawatts — some 12,000 MW higher than ERCOT had forecast the day before and a wintertime demand total only topped by the 2021 storm.
ERCOT’s grid stayed intact in what Dan Woodfin, vice president of system operations, later called a “nonevent.” But there were dangers.
According to a report from the Federal Reserve Bank of Dallas, 10,000 MW of thermal power plant capacity — a segment that can include sources such as natural gas, coal and nuclear — and 6,000 MW of renewable generating capacity went offline during the storm in Texas’ main grid region. On top of that, production of natural gas from the ground was curtailed because of frozen equipment and at least one provider — Atmos Energy Corp. — had to cut some gas service.
“There have been significant improvements to the Texas electrical grid over the past two years,” wrote Garrett Golding, senior business economist at the Dallas Fed. However, he added, the fact that there haven’t been major blackouts since February 2021 “is a low bar to meet.”
Electricity demand across the state is rising, Golding wrote, and the grid’s power sources are not keeping up.
Grid reliability “increasingly hinges on an aging collection of coal and gas plants,” Golding wrote. Those sources, he added, “are proving less reliable at offsetting expected drops in intermittent power sources in both extreme cold and heat.”