It can be challenging to follow Texas' ongoing debate over whether the state has enough electricity capacity to meet peak demand and what should be done about it. There are odd terms thrown about and totally conflicting claims about whether the state should move to a "capacity market" -- paying generators upfront to make enough supply (capacity) available to meet those relatively few hours of peak demand a few days each summer in Texas.
Texas' deregulated energy market now only pays generators when they sell their power, which has that certain ring of free-market fairness to it. So why change?
Here's a report out of Europe than might help explain part of the problem: The more renewable energy put on the power grid, it says, the greater the need for capacity payments.(And Texas leads the nation in wind power, with 11,255 megawatts connected to the state's biggest power grid, the Electric Reliability Council of Texas. That's about 15 percent of ERCOT's available capacity, according to its latest report, and last year wind provided 9.9 percent of total electricity used in ERCOT.)
The European Union, meanwhile, expects to hit 35 percent renewables by 2020 - not that far away - so they've been forced to face this issue earlier than us.
"In a renewables system, capacity will be scarce and energy potentially abundant," said Andreas Regnell, head of strategy and sustainability at Swedish utility Vattenfall, said at a Feb. 6 conference in Belgium, according to the report by Platt's, which does a lot of specialized reporting on energy topics. What does Regnell's statement mean? Basically, that when renewables are humming along - the wind is blowing and the sun is shining on solar panels - there's plenty of juice. And it's practically "free," since the expense of renewables is nearly all in the initial (likely subsidized) construction of the wind farms and solar installations. It displaces other electricity sources, who have to hope to cover their costs even as they run less.
The Platt's report continues: "That makes capacity remuneration mechanisms 'unavoidable' in countries with large shares of renewables with zero marginal costs, such as Germany, said Paul Giesbertz, head of infrastructure and market policies at Statkraft Markets, the German-based arm of Norwegian utility Statkraft."
All that's left, in this view, is designing the best way of doing that. You can read about what alternatives the Europeans are trying for yourself with the Platt's article, here. We don't know what the right answer is, but the article presents the issue in a way we just haven't seen previously.
-- Jim Fuquay