Texas electric grid did just fine without coal-fired power plants
The Texas electricity market proved once again why it’s a leading innovator, and power customers around the world should pay attention.
Six months ago, critics predicted that Texans would suffer soaring electricity prices and rolling blackouts in what they predicted would be cruel summer. Generators had shut down expensive coal-fired power plants, raising questions about whether supply could meet demand.
The grid operated by the Electric Reliability Council of Texas relied too much on wind energy, the pundits said. Making matters worse, ERCOT only paid generators for the electricity it bought, providing few incentives to keep spare capacity.
Texans simply pay too little for electricity, these critics said, due to federal tax incentives that encourage wind farms. The Texas grid was a house of cards that would come tumbling down if the Summer of 2018 was hotter than average, they warned.
The Summer of 2018 was indeed one of the hottest on record. ERCOT, which meets 90 percent of the state’s electricity needs, set a new record for demand at 73.2 gigawatts. But the lights stayed on, and prices remained reasonable.
Texas’s lightly-regulated market, heavily reliant on renewable energy, worked as planned. The sky did not fall.
ERCOT is unique and widely admired by the global electric power industry. In 1998, Texas lawmakers did away with the traditional model of the government setting electricity rates and guaranteeing generators a profit margin. Lawmakers decided to make generators compete to see who could offer the lowest-priced electricity.
ERCOT is responsible for operating the market and overseeing distribution. When demand goes up and spare capacity shrinks, ERCOT pays higher prices to encourage more generation. Wholesale electricity in Texas averaged $28.25 a megawatt hour in 2017—among the lowest in the nation—but can legally go as high as $9,000.