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Winds of Change in Texas

Rising gas prices spark a rush to wind farms, straining grid capacity and raising larger issues about market design.
Fortnightly Magazine - April 1 2003
  1. Market Oversight Division, p. 12, filed Sept. 6, 2002. (Memo was filed also and made part of record in FERC's investigation of wholesale standard market design, see FERC Docket No. RM01-12-000, filed Nov. 15, 2002).
    According to ERCOT, West Texas has about 1,700 MW of exportable generation and a transmission transfer capability of only 1,100 to 1,300 MW. The potential for exportable generation in the area can grow to 3,700 to 5,200 MW and the transfer capacity can increase to 1,800 to 2,300 MW.
  2. See Project No. 25819, Transmission Constraints Affecting West Texas Wind Power Generators.
  3. See Rulemaking Proceeding on Wholesale Market Design Issues in ERCOT, Tex. PUC Project No. 26376, memorandum of Eric S. Schubert, Market Oversight Division, p. 12, filed Sept. 6, 2002. (Memo was filed also and made part of record in FERC's investigation of wholesale standard market design, see FERC Docket No. RM01-12-000, filed Nov. 15, 2002).
  4. For more on OOME, go to http://interchange.puc.state.tx.us/WebApp/Interchange/Documents/26376_19_364690.PDF pp. 3-4.
  5. See: http://interchange.puc.state.tx.us/WebApp/Interchange/Documents/26376_19_364690.PDFwww.puc.state.tx.us , pp. 17-18 (for MOD's proposal see Project No. number 26376, filing no. 4, dated 08/23/02.)
  6. http://interchange.puc.state.tx.us/WebApp/Interchange/Documents/26376_19_364690.PDF pp.17-18.
  7. See www.puc.state.tx.us, Project No. 26376, LCRA's Response to MOD's Jan. 21, 2003 questions, filing no. 90 or http://www.puc.state.tx.us/interchange/index.cfm.
  8. Defined as an upgrade to a computer network or other electronic system that requires a massive hardware investment. (See "Manufacturers of profitable PBX systems, notorious for requiring forklift upgrades and heavy maintenance fees, need a new five-year plan: Call it survival," Ken Phillips, "Sphericall 1.0 Dissolves PBXes Into the LAN/WAN," PC Week, May 5, 1997).

Nodal When You Need It: A Middle Way for Market Design

How the Texas PUC would remake ERCOT's market design, but not with a PJM-style regime.

The Problem:

  • Zonal Methods Fail. Zonal prices do not reflect the price differentials of local congested areas within a zone. The location of line congestion will change over time as supply and demand conditions change. (Loads acting as a resource will have an increasing presence in ERCOT over time.) In addition, the current market design fails to send locational price signals. An immediate consequence of this failure is that almost 1,000 MW of wind power has been built or announced locating behind a 400-MW transmission constraint in the Rio Pecos area in West Texas. These poor siting decisions will lead to tens of millions of dollars of uplifted energy charges.
  • New Zones Not Practical. Rezoning in ERCOT is done once a year through the ERCOT stakeholder process. Rezoning is more an art than science that is subject to non-market influences. A facet of the current zonal model not discussed in ecoomic theory is the inertia to maintain existing zones. During the summer of 2002 stakeholders expressed a strong desire to maintain current zonal boundaries because it would simplify their commercial contracts.
  • ERCOT Pays the Bill. Inefficiencies in the pricing of local grid congestion costs have made the current zonal model in ERCOT unsustainable. ERCOT has already spent $90 million relieving local congestion in the first year of the ERCOT market.

Alternative Solutions:

  • Restrict Hookups. Some stakeholders have suggested an administrative solution