A MESSAGE FROM YOUR GENERAL MANAGER/CEO
Generation Resources Provide Price Stability for WCEC
So far this year, we have discussed where our power comes from and the role that the Electric Reliability Council of Texas (ERCOT) plays in keeping the electric grid reliably balanced. This month, we will look more at ERCOT’s financial role and the electric market in general.
ERCOT acts as a trading desk and clearinghouse for all generation and transmission. They match generation resources to consumer load for all the power in the ERCOT region in real-time 24 hours and day, 365 days a year. They also manage the buying and selling of those resources.
WCEC purchases our power from South Texas Electric Cooperative (STEC), but STEC doesn’t necessarily produce all of that power. STEC produces power, sells it into the ERCOT market, and then buys back the power needed for their member cooperatives. STEC continually analyzes the ERCOT market and decides between using their generation assets to produce power or simply buying the needed power from the market. This allows STEC to take advantage of market conditions when prices are low and to leverage their generating assets when prices are high.
The ability to either purchase power from the market or produce their own allows STEC to provide power at the lowest possible cost. Some utilities rely heavily or solely on the market to provide power to their consumers. STEC strives to have firm contracts in place or owned generation sources to cover the majority of their peak load. This insulates their members from market spikes such as those during Winter Storm Uri.
Winter Storm Uri was devastating to many cooperatives and municipal utilities in the ERCOT region. We are seeing reports of utilities passing on increases of up to $30 per month for the next few decades to their consumers to offset the cost of their February 2021 wholesale power bill. By having our load covered by owned resources through STEC, WCEC members have not seen this type of charge.
However, it is important to understand that we are participants in the ERCOT market and the financial impacts of Winter Storm Uri will last for years or even decades to come. As Texas legislature and regulatory agencies work to minimize the effects on Texas residents, providing truly reliable energy while keeping prices economical will continue to be a challenge.
Further complicating the future of electricity is the market- and regulatory-driven transition to generation sources with lower carbon emissions to protect our environment. Many of these sources such as wind and solar are classified as intermittent supply meaning power can only be produced when conditions are favorable. Storing electricity through batteries or other means continues to be too expensive to be feasible.
Alternatively, dispatchable supply (sources of generation that can be turned off and on when needed) depends on fuel to produce power. Examples of dispatchable sources are coal, natural gas, and nuclear plants. With dispatchable supply comes variable costs for fuel and carbon emissions. The exception is nuclear power plants which are carbon-free, but regulatory and cost-prohibitive to build.
It is hard to predict the future of electricity not just here in Texas, but across the globe. Next month, we will look at the sources of power that make up the Texas grid and how each plays a part in keeping the power flowing reliably and economically with as little impact on the environment as possible.