Articles Posted in Energy markets

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Winter Storm Uri

The fallout from the Texas Freeze in February 2021 continues. A year later, UT’s Austin Energy Institute concluded that multiple failures of power plants, gas processing plants, gas storage and distribution facilities, and gas production all contributed to the system failures. ERCOT management was fired; natural gas prices spiked to more than $400/MMBtu; politicians blamed wind and solar generation; the legislature passed legislation requiring the Public Utility Commission and the Railroad Commission to strengthen weatherization requirements for production, processing and generation facilities and has since criticized those agencies for failing to fix the problem. ERCOT drastically raised electricity prices during the storm, resulting in multiple bankruptcies. The legislature provided for securitization of about $7 billion in private losses caused by the storm, so those losses are spread over the next twenty years in customer rate increases. Expect new legislation in the upcoming session.

Mitchell v. Map Resources, 649 S.W.3d 180 (Tex. 2022)

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With the recent cold snap, we’re all remembering what we were doing last February when the lights went out.

Repercussions continue. As reported by Michell Ferman at Texas Tribune, Vistra corporation is in a dispute with Energy Transfer over its bill to Vistra for $21.6 million, for gas sold to Vistra during the freeze. Energy Transfer has threatened to cut off gas supplies to Vistra if it doesn’t pay, and Vistra has asked the Texas Railroad Commission to prevent that. Ferman writes:

During last year’s winter storm — which caused the near-total collapse of the state’s power grid, left millions without power for days and caused hundreds of deaths — Vistra spent approximately $1.5 billion for natural gas, ‘twice its planned natural gas cost to fuel its entire Texas fleet for a full year,’ the filing said. Vistra paid Energy Transfer more than $600 million during the storm, ‘which is more than 96% of all amounts invoiced by [Energy Transfer].’

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A recent report from Deloitte provides a good perspective on the prospects for wind and solar electricity.

Some takeaways:

Costs of wind and solar are now competitive with coal and gas. “Power purchase agreement (PPA) prices for wind and solar power are also competitive with other resources. The weighted average US price for the first half of 2021 from auction and PPAs for solar PV is US$31/MWh, while for onshore wind it is US$37/MWh. This compares to a weighted average wholesale electricity price of about US$34/MWh across US markets during the same period.” It now costs less to build new solar and wind plants than to continue operating existing coal-fired plants. Wind and solar costs are projected to fall by half by 2030.

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“Electric power markets in the United States are undergoing significant structural change that we believe, based on planning data we collect, will result in the installation of the ability of large-scale battery storage to contribute 10,000 megawatts to the grid between 2021 and 2023—10 times the capacity in 2019.”

EIA Report “Battery Storage in the United States: An Update on Market Trends.

How much is 10,000 megawatts? What is a megawatt?

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Abbott said the legislature’s response to the breakdown of Texas’ electric grid “fixed all the flaws.” News media reports and experts are questioning that conclusion.

A UT Austin study concludes that lawmakers did not do enough to prevent future power failures and recommended 20 additional policy changes. It is estimated that as many as 700 people died from the freeze.

At least part of the blame lies with the Legislature’s deregulation of the state’s power sector in 1995 that was supposed to save ratepayers money. According to a Wall Street Journal analysis, customers in deregulated areas have paid a surcharge of $28 billion over the last two decades, whereas customers in areas that remain regulated–including El Paso Electric, Austin Energy and CPS Energy in San Antonio–enjoy cheaper electric rates than those in deregulated areas.

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Link here to Texas Tribune article. Not a good idea. ERCOT definitely made some mistakes in the freeze, but it had no authority to require generators to winterize.  Everyone is still pointing the finger at everyone else. Another Texas Tribune article: the legislature is now considering creating a $2 billion taxpayer-funded account for those improvements.

 

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