AUSTIN, Texas — Gov. Gregg Abbott may have directed the Public Utility Commission of Texas to immediately take measures to improve the power grid, but after a Tuesday morning hearing with the Texas Senate's Business and Commerce Committee it was clear that improving the grid would take months.
PUC Chairman Peter Lake told lawmakers the Texas electricity market would need to be fundamentally changed in order to be more reliable.
"We are not tweaking on the edges, or making marginal changes, we are taking a blank-slate approach for a full redesign of this market to drive reliability full stop," Lake told the committee.
The governor asked the PUC to streamline incentives for "reliable sources of power, like natural gas, coal, and nuclear power." Natural gas plants are, in fact, the main power source the state turns to when it needs more power on the grid.
The problem for these "thermal power" providers, however, is that they can often only make a profit when the grid needs them to come to the rescue. In other times, the price of electricity is so low that some generators can't afford to run without losing money.
Lake explained several things the commission learned after meeting with three panels of industry experts just two weeks ago.
"So far the key take away for me is that the market needs to move away from a crisis-based business model," Lake said. "That's not a negative comment on the generating community. That's the way the markets designed. There is only a financial reward the closer you get to crisis which is obviously not good for our consumers."
In the Texas power market, many natural gas power plants only see a big payday when the price of electricity spikes due to scarcity. Thanks to wind and solar power, the price is normally inexpensive. At the same time, aging natural gas plants can't make enough revenue by providing a steady source of power. Lake said with the way market prices work currently work, reliability isn't rewarded.
"We have a market-design problem if price signals are saying, 'You don't need more reliable power generation,'" Lake said.
The governor and lieutenant governor have both called for more reliable generation to be built in Texas. Lake said generators have told him they aren't interested in building reliable power sources if they don't get a reliable paycheck.
"They said, first of all, 'Right now there is nothing, no reason we would build new generation in the state. But if we did, the only reason we would build that generation is for a peaking unit.' That's only for when we are at the edge," Lake said. "That unit would only be expected to run 10 to 20 hours throughout the year.
Of course, "the edge" simply refers to a situation where the grid is in danger of not meeting the power needs of the state. It's not a position Texas wants to be in.
Sen. Lois W. Kolkhorst said the grid suffered for misaligned market incentives. She said companies should not be making their money with the market reaching a crisis point, but should make money by being reliable.
"Yes or no, that is the market redesign that we are potentially looking at by saying we are going to pay more for reliability," Kolkhorst asked Lake.
"Correct," Lake said.
Lake said the PUC would be talking to more market stakeholders over the next two months and would have a plan for an overhaul by the end of the year.
"It is unfortunately not something that can be done quickly, and is something we absolutely need to get right," Lake said.