Environmentalist Jim Marston shares the concerns of many of his green colleagues who fear the debate over the reliability of the state’s electricity supply will conclude by extending the life of old, polluting coal plants.
Those 40- and 50-year-old plants are like the clunkers sitting in many people’s driveways. They might not be much to look at. You may not want to sit behind them in traffic. But they were paid for long ago.
Since the summer of 2011, there has been a long, ponderous debate about how the Public Utility Commission can best ensure that there is enough electricity to power the state’s economy.
The Electric Reliability Council of Texas, which manages the state’s primary electricity grid, even ordered some of the coal plants out of mothballs to buy us some time as the utility commission tries to resolve the supply-and-demand dilemma.
ERCOT is the lone “energy only” wholesale market for electricity in the country. We pay power plants only when they generate electricity, and we rely on the private sector to build the generation we need.
In recent years, the supply of new power plants has slowed because of tight credit and low wholesale prices for electricity. In eight of the past 10 years, wholesale prices weren’t high enough for a new power plant to make a profit.
Thus, a group of power providers are lobbying for us to make extra payments, commonly called a capacity market, year-round to entice investors to build more generation.
The utility commission — not the private sector — would decide how much “capacity” should be built. Then anyone could bid to provide that extra capacity — whether it’s an old plant, a new power provider or a demand-response program that pays customers to curtail their electricity usage during periods of peak demand.
Many environmentalists, however, fear the “capacity payments” would be a reverse “cash-for-clunkers” government program.
Instead of taking the clunkers off the street, the environmentalists argue that the payments would only encourage the owners of old coal plants to tune up their clunkers for another ride around the block. After all, those plants have the advantage of being built at 1960s and 1970s prices.
That has some electricity customers clinging to the current energy-only market — and its reliability questions.
Manufacturers, in particular, oppose a capacity market.
And a lone electricity generator, GDF Suez, is advocating tweaking the energy-only market with payments focused during times of peak demand as opposed to the capacity market.
Marston, a vice president with the Environmental Defense Fund, is advocating a third way — a “capabilities” market, an idea he borrowed from a group of former regulators. Other environmentalists, such as Tom “Smitty” Smith with Public Citizen, have signed on as well.
Under that approach, Marston said, ratepayers would only pay for new plants that fit the needs of the ERCOT market.
In other words, fast-starting technologies that could be deployed on hot summer afternoons when air conditioning is testing the limits of the power supply. That would mean ratepayers would be subsidizing demand-response programs, renewable energy with storage capabilities and natural gas.
Coal would be the odd man out.
There are some in the industry who argue the wholesale market should be technology neutral and that a capacity market at least would encourage demand response, a form of conservation.
Marston argues that a “capabilities market” would address ERCOT’s problem — the 2 percent of the year when power demands threaten to exceed supply — without saddling customers with excessive costs.
“It’s crazy to build a bunch of power plants for the peak of the peak demand,” Marston said.
Something tells me a majority of the owners of power plants, particularly those with coal plants, won’t see it that way. And so far generators — more than environmentalists — are driving the debate at the utility commission.
After all, they provide the power.