The Electric Reliability Council of Texas or ERCOT, the electric grid that services about 90% of Texas electricity, is scheduled to add almost more wind than it has in the past five years combined and almost triple its solar capacity this year. Yes, in 2020. The grid operator’s latest figures indicate that they expect, by the end of the year to have 31,069 MW of wind and 6,035 MW of solar on the system, up from 23,860 and 2,281 MW of wind and solar at the end of 2019.
Texas has long been a leader in wind power, but is quickly catching up on solar. The ERCOT Interconnection Queue, which shows the latest list of projects that are trying to connect to the system is, in fact, dominated by solar projects. Almost 77,000 MW of solar projects are in some stage of connecting to the grid. For reference, the all-time high peak power demand in ERCOT is just shy of 75,000 MW. Not all projects in the interconnection queue will get built, but the amount of solar (76,961 MW), wind (25,886 MW), and energy storage (17,436 MW) vs. natural gas (7,042 MW) in the queue does give a snapshot of what types of projects that investors see as most worth looking at. A preliminary analysis of historical projects in the ERCOT queue indicated that roughly 70% of projects that made it to the latter stage of the queue ended up being completed – solar and wind each have roughly 13,500 MW worth of projects in that latter stage.
Perhaps even more interesting than solar’s ridiculous rise has been that of energy storage projects. The total capacity of energy storage projects is up over 400% from August 2019 and, as recently as Spring 2020, surpassed the capacity of natural gas projects in the queue to take the third spot behind solar and wind. Few projects are in the latter stage of the queue, but interest is rising fast. This trend is not unique to ERCOT, anywhere where markets are competitive, the queues look similar.
Captain Solar to the rescue
The arrival of solar in Texas is very timely as ERCOT is an energy-only market and has had a historically-low reserve margin for the past few years. This reality has caused some consternation because low reserves lead to price spikes that can be over 100 times higher than average. But, again, this is how energy-only markets work, it is a design feature of the system, not a bug.
Wind sometimes gets a bad rap because West Texas wind does tend to produce less energy during times of peak demand, but peak isn’t everything and it (all wind) still produces a lot of (20% of total) energy that keeps costs low. However, the new crop of coastal wind is a different story, strongly showing up when needed on peak. Solar shows up even stronger.
ERCOT counts on utility-scale solar to produce about 76% of its rated capacity during peak demand. Assuming that and that 70% of the approx. 13,500 MW of solar projects in the latter stage of the queue gets built, it indicates that over 7,000 MW of on-peak generation is coming soon, not to mention even more from wind and energy storage. The system is ever-evolving, but I think Texas is going to be just fine.
Show me the money
A recent report, funded by Conservative Texans for Energy Innovation & Powering Texas, and, full disclosure, authored by myself, found that renewables not only help the grid, but also help those areas where they are built.
Through an analysis of state tax documents and discussions with developers, landowners, and energy-focused lawyers the report found that, over their lifetime, the current fleet of utility-scale wind and solar projects in Texas, inclusive of all tax abatements, will generate between $4.7 billion and $5.7 billion in new tax revenue to local communities. And, if all projects with interconnection agreements are built, existing and planned utility-scale wind and solar projects will pay between $8.1 billion and $10 billion in total tax revenue over their lifetimes. Over 70% of these revenues flow to more rural counties in Texas and help provide funding stability and capital improvements in areas that typically lack much investment.
According to Oldham County Judge Don Allred, the county (population approx. 2,112) has lost 80-90% of its oil and gas revenues in the past 10 years. He notes that the sectors boom and bust cycle make it difficult to rely on them for making long-term plans. Today, about 50% of Oldham counties’ revenues come from wind.
“Wind has been a Godsend – it allows flexibility in budgeting by providing a constant source of revenues that you know will be there when you need them.” – Don Allred, Oldham County Judge.
The report also looked at the landowner payments that were made to those who own the land where renewables are located and found that the existing utility-scale solar and wind projects in Texas will pay Texas landowners between $4.8 billion and $7.3 billion over the lifetime of the projects. And, if all of the projects with signed interconnection queues are built, Texas landowners will directly receive between $8 billion and $13.1 billion over the existing and planned project lifetimes.
“…In times of drought, electric power sales continue to create rainfall-independent financial stability like the oil and gas sector provided for so many other ranchers…” – Michael Manning, Bar T-Black Angus Ranch
In short, the report found that both county leaders and landowners appreciated the financial stability that renewables bring with them. The county officials were able to plan longer-term investments and landowners were able to have a consistent, drought-resistant source of revenue that could help ride them through tough times.
Wind energy has already tied output from coal in Texas, and paired with solar and storage, the renewable portion of Texas’ electricity mix will only grow. While revenues and royalties from oil and gas are tied to global markets that are stubbornly stalled out and declining, all indications are that, especially in Texas, electricity demand is only going to grow. That growth will mean more renewables along with the grid and financial stability they bring.
via Forbes.com: Energy News https://ift.tt/3kRdWub