We can have reasonable debates about how Texas should fix its power grid to supply enough energy for the future.
But the proposal from ERCOT’s independent market monitor that we should simply place our faith in the mighty invisible hand of the deregulated energy market isn’t a place to start.
As economic theories go, we will give this one credit. Telling people who froze in the dark in February 2021 not to worry because these things take care of themselves is bold. It’s also bad policy.
ERCOT, or the Electric Reliability Council of Texas, is a nonprofit that operates much of the state’s electricity market. It employs a firm called Potomac Economics to act as a monitor to ensure that the market is both competitive and efficient.
Late last year, the Public Utility Commission, the state agency ERCOT answers to, issued a detailed report calling for important reforms to the energy market to promote capital investment in dispatchable power that can be stored and turned on and off as needed.
Texas’ renewable energy supply is growing at a rapid pace, and that cheap, clean energy is something we desperately need. But the arrival of so much wind power has disincentivized investment in dispatchable power, which we need when the wind doesn’t blow and the sun doesn’t shine. The PUC has proposed requiring energy producers to meet a reliability standard. Those that meet the standard can sell state-issued credits, which can create capital for investment in reliable, dispatchable energy.
Potomac Economics is discouraging that approach and instead calling on the Legislature to just leave the market alone with the promise it will take care of itself.
PUC chairman Peter Lake rightly called that “purely economic theory” disconnected from the reality of actually running a grid.
“We know we’ve got a problem. We know we are going to run out of runway sooner than later,” Lake said, referring to the fact that Texas doesn’t have the energy-generating capacity we need to meet our growth.
While Potomac has recommended we do nothing, Lt. Gov. Dan Patrick is leading an effort to just nakedly rig the energy market in favor of oil and gas producers. The PUC’s plan is sort of stuck in the middle between Potomac’s laissez-faire dream and Patrick’s market manipulation.
What’s at stake is a functioning and fair energy market for the state. We just can’t afford to get this wrong.
Patrick would cripple the renewable energy industry that provides abundant clean power. Potomac would have us just wait and hope. We can’t do either of those things. Legislators instead need to think this through with an eye toward gently incentivizing dispatchable investment while nurturing the wind and solar industries.
As Lake said, “We can’t risk one of the world’s largest economies on hoping business as usual gets the job done.”
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Do-nothing plan for Texas grid could leave us in the dark
