ERCOT Texas wind fleet could hit 28.5GW by end of 2019

ERCOT, the main electric grid operator in Texas, could have as much as 28.5GW of nameplate wind energy generation installed within its service territory at the end of 2019, almost an 11GW increase from 17.6GW in place on 1 January this year.

ERCOT, which serves about 90% of the state’s electric load, already has more wind energy generation capacity than the next two leading states combined – Iowa (6.91GW) and Oklahoma (6.64GW) – and all but five countries after China, US, Germany, India and Spain.

How much proposed additional generation will get built in the nation’s largest state electricity market over the next 33 months will depend on various factors, analysts say. These include federal environmental mandates, fossil fuel prices, power demand growth, project financing costs, state regulatory developments and transmission capacity availability..

On 1 January, ERCOT data shows wind developers had signed interconnection agreements (IA) for transmission service to add 7.12GW of future generation capacity, posting financial security for 5.24GW of that total with transmission providers. This increases to 10.5GW (5.85GW with financial security) in 2018 and 10.93GW (6.139GW with financial security) in 2019.

The collateral offsets the risk to owners of power lines that developers could abandon or indefinitely freeze their projects. Projects that post financial security are more likely to come online, Donna Nelson, chair of the Public Utility Commission of Texas (PUCT), told the recent ERCOT Market Summit 2017 conference here.

PUCT has determined all transmission development to be a “social good.” In ERCOT, transmission providers are required to build interconnecting facilities and then apply for rates of recovery to recoup costs from electric consumers.

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Wind has steadily increased its market share of total electric load in ERCOT: 7.8% (2010), 8.5% (2011), 9.2% (2012), 9.9% (2013), 10.6% (2014), 11.7% (2015) and 15.1% last year. Wind now trails only natural gas 43.7% (2016) and coal (28.8%), having surpassed nuclear (12%).

Market share gains have accelerated since 2013 when Texas completed its $6.9bn Competitive Renewable Energy Zone (CREZ) initiative, which added almost 5,800km of high-voltage long-haul, high-voltage transmission lines. They tapped distant resource-rich regions such as the northern Panhandle and adjacent South Plains, and can transport up to 18.5GW of wind power to major load centres such as Austin, Dallas and Houston within ERCOT.

Addressing wind-related transmission constraints, CREZ projects also sharply reduced generation curtailments due to limited carrying capacity between production areas in the west and power demand centres to the east. During these situations, ERCOT curtailed wind power output to keep the transmission network operating within its physical limits.

The amounts of wind-related negative real-time wholesale electricity prices have all but disappeared in ERCOT’s West Hub, as the CREZ lines largely smoothed out regional supply and demand imbalances during periods of substantial generation. Negative prices occur when generators are willing to pay for the opportunity to continue generating electricity.

Wind farms can sometimes offer power into the ERCOT bulk electricity market at prices lower than other generators because they have low operating costs and no fuel expense. When wind farms operate, the revenue stream from the federal production tax credit ((23/MWh, inflation-adjusted) during their first decade of operation, can also give them the ability to undercut their coal- and natural gas-fired rivals.

This is a sore point with fossil fuel plant owners as all generators are paid in ERCOT only when they sell power, not add capacity, and they contend that returns are becoming insufficient to justify expansion to keep up with demand growth that exceeds the national average. Wholesale power prices in 2016 were at their lowest level since ERCOT launched its competitive retail electric market 15 years ago.

Wind industry officials note that gas-fired power plants set the electricity price in nearly all hours in ERCOT, and that low bulk electricity prices in ERCOT strongly correlate with natural gas prices that have been depressed in the last several years.

Wind also suffers from intermittency and is often unavailable in meaningful amounts during peak demand in summer – the exceptions are facilities located along the Gulf of Mexico coast and in the Panhandle. Most installations are in West Texas. This limits the industry’s ability to take advantage of higher peak demand electricity prices.

Still, that will gradually change as more installations are built in the blustery Panhandle, South Plains and areas of South Texas away from the coast but still able to capture at least some benefits from sea breezes. These areas more closely mirror peak load. ERCOT officials anticipate the sector will continue to post records for generation and load served.

Wind farms set a record in late morning last Christmas by generating more than 16GW of power within ERCOT, while earlier serving 48.3% of total load at a point in the early morning hours of 23 March last year.

As CREZ lines are becoming filled out with wind and energy from other sources in some locations such as the Panhandle, ERCOT and PUCT are looking at new, albeit much smaller projects proposed by transmission developers. If bottlenecks do develop, that could hinder wind industry growth later this decade.