Texas’ ‘dynamic’ grid poses challenges

Alittle more than a year after a paralyzing winter freeze, the Texas power market just experienced the stress of extreme heat. Last week, power prices in Houston briefly jumped above $5,000 per megawatt-hour as high temperatures coincided with a number of generators being o±ine for maintenance.

Yet a few days earlier, power prices in west Texas had been negative $883 dollars per megawatt-hour, because at the time wind generation was abundant and demand was low.

“Dynamic” is one way to describe the price swings within the Electric Reliability Council of Texas, the grid that provides the majority of the state’s power. “Jarring” or “terrifying” might be other words for it, particularly for those buying power in the spot market.

Natural gas prices have increased fourfold since 2020 and are back to the same level they were at in 2008. The gas prices of 2005 to 2008 forced grid operators, regulators and long-term planners in Texas and elsewhere to carefully consider the future power mixes in their markets.

The state’s coal fleet has shrunk; its nuclear fleet has not grown; the number of bigger combined-cycle gas power plants has expanded, while smaller open-cycle and reciprocating-engine gas plants have dwindled significantly.

Then there are renewables. Over the past decade, installed wind capacity in Texas has nearly tripled. Solar capacity has expanded more than 260 times and battery capacity has increased by a factor of almost 800. All of these technologies are expected to keep growing, too, just in the next two years.

I am not an energy modeler, so I won’t pretend to construct a long-term forecast for the next decade. I can, however, highlight some possibilities for the future of the Texas grid.

One possibility: Higher prices are here to stay. That includes natural gas prices, which would encourage fuel-switching at the grid level between gas- and coalfired power and would likely discourage the construction of new gas-fired power plants.

Another possibility is infrastructure arrives in force. The bipartisan law passed in November has tens of billions of dollars for transmission, which would encourage the building of more wind and solar in resource-rich areas and send more power to demand centers.

Yet another possibility is the nature of electricity demand in Texas changes significantly, with consumers opting out of the grid where they can. Buyers of electricity both big and small may decide that the best defense against an uncertain future for the state’s electricity sector is to take control of it for themselves.

At the same time, power demand could grow significantly thanks to electric vehicle charging, more use of air conditioning and cryptocurrency mining.

The final possibility is the most intriguing: We don’t really know what the prime movers of supply and demand in the 2030s will be. Even the most thoughtful analysis of the 2021 Texas power system from 15 years earlier would not have imagined solar prices where they are today and the prevalence of batteries.

For those planning the future, the call to action is two-fold. First, be extremely focused on economics and projections of those things you can know about today. Second, be as imaginative as you can in considering future supply and demand. The future will lie somewhere in between.