Daily Archives: May 20, 2011

ERCOT reliability monitor issues report on the February 2 rolling blackouts

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Michael Giberson

The Texas Reliability Entity has issued its report on the ERCOT extreme cold weather events and rolling blackouts of February 2, 2011. Texas RE is the NERC regional entity for the ERCOT power system and contracted to the Public Utility Commission of Texas to serve as ERCOT reliability monitor for the state agency. In this latter role it was asked by the PUCT to report on compliance with ERCOT reliability rules during the cold weather event. (The ERCOT independent market monitor has already issued its report on market issues surrounding the February 2 event. See link to report, related KP post.)

In brief, Texas RE finds that ERCOT and ERCOT market participants took steps to prepare for the extreme cold, but the preparations were  not always adequate. For the most part it appears that parties complied with ERCOT protocols. In some cases, rules may have been violated and Texas RE is continuing to investigate. Texas RE notes it is working with NERC on further analyses of the events surrounding the rolling blackouts.

The report indicates that market participants were quick to learn from the failures of February 2. From the report at page 11:

Similar weather conditions occurred in the ERCOT Region on February 9-10; however, freezing equipment issues did not have the same impact as on February 2. ERCOT and many generation facilities implemented lessons learned from the February 2 event and prevented similar issues during the cold weather that followed on February 9-10. These lessons learned include improving winterization of the power plant equipment, starting combustion turbines further ahead in advance of severe temperatures to keep lube oil warm, and exercising moving equipment to ensure that the units will be available.

As previously noted here, powerful economic forces are already at work that will help avoid a repeat of February 2′s system emergency. Generator companies that did not deliver to the market the power they had committed day ahead suffered significant financial consequences (and similarly for retailers that had not contracted sufficient power in the day-ahead market to cover their customer loads, so ended up topping off at the extreme real-time market rate).

Here is the conclusion of the Texas RE report:

Texas RE’s investigation has revealed that, for the most part, ERCOT’s and Market Participants’ conduct during the Energy Emergency Alert that occurred on February 2, 2011, was consistent with requirements set out in the Protocols and Operating Guides. Loss of scheduled generation due to freezing pipes, valves, and instrumentation, and to a lesser extent issues associated with natural gas supplies, caused a shortage of generation reserves which ultimately required ERCOT to direct firm load shed in order to restore system reliability. Although ERCOT and Market Participants took steps to prepare for the expected cold weather, the actions taken proved to be inadequate or ineffective for the prolonged freezing weather which occurred February 1-4, 2011. However, ERCOT and many generation operators implemented lessons learned from the February 2 event and prevented similar issues during the cold weather that followed on February 9-10.

During the February 2 EEA Event, ERCOT Market Participants committed potential violations of the ERCOT Protocols and Operating Guides in connection with failures to meet Ancillary Services obligations, failures to meet Emergency Interruptible Load Service obligations, failures to execute manual load shed in accordance with requirements, and possibly with the performance of Black Start units. Texas RE will conduct additional investigations as necessary to determine the full extent and implications of non-compliance with the Protocols and Operating Guides, and will forward information to the PUCT for further action, as appropriate. Issues of possible noncompliance with NERC standards are being examined as part of Texas RE’s analysis in its capacity as the NERC Regional Entity for the Texas Region.

Bonneville Power Administration says no to negative prices again

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Michael Giberson

The Bonneville Power Administration (BPA) Administrator has adopted interim Environmental Redispatch and Negative Pricing Policies to deal with potential overgeneration conditions on the BPA power system. In brief, BPA plans to employ “Environmental Dispatch” rules for operating the power system in a manner conducive to BPA meeting various legal and regulatory constraints; the BPA Negative Pricing Policy is “we won’t allow it.”

Excepts from pages 10-12 of “BPA’s Interim Environmental Redispatch and Negative Pricing Policies: Administrator’s Final Record of Decision,” May 2011, below. I haven’t yet read the 68-page long section “Negative Pricing Policy,” but am adding it to my summer reading plans.

Related:

From the BPA report:

The events of early June 2010 illustrate how the increase in wind generation has influenced the ability to manage high flows on the Columbia River. … In early June, however, a strong Pacific jet stream brought storm systems with heavy precipitation and runoff. Snake River streamflows nearly tripled, and Columbia River streamflows nearly doubled. The resulting flows exceeded those needed to meet flow and spill objectives for fish passage. Federal water management staff focus shifted to developing strategies and modifying operations to reduce excess spill and minimize excessive TDG production to the extent practicable.…

During this time, most Northwest thermal generation shut down or reduced to minimum operating levels. These generation owners obtained low-cost or free Federal hydropower to replace thermal generation. Thermal generation normally finds it economical to displace their fuel with lower-cost hydropower since they can store or conserve their fuel while they receive hydropower.

However, due to differing economic considerations, the roughly 3,000 megawatts of wind power projects located in BPA’s Balancing Authority Area did not respond to the availability of free Federal hydropower. Wind power projects cannot store their fuel and are generally eligible to receive Federal Production Tax Credits (PTC) and/or state Renewable Energy Credits (REC). Wind power output ranged from zero to nearly full output, depending on wind conditions….

Unlike thermal operators, wind operators have an economic incentive to operate as much as possible, regardless of system conditions. The PTC is currently $21 per megawatt-hour (“MWh”) and state RECs are generally in the $8 to $20 per MWh range, so this incentive is significant. While all wind power projects are eligible to receive RECs for production, most new wind power projects have opted not to take the PTC and instead opted for the Investment Tax Credit (“ITC”) or other grants that provide up-front financial benefits tied to the cost of the project and not actual production. Wind power projects that opt for the ITC or other grants receive the full financial benefit of these incentives regardless of project output (pp. 11-12).

BPA believes that its statutory responsibilities and the objectives of the Northwest Power Act would be frustrated if BPA were required to pay negative prices in order to ensure compliance with BPA’s environmental responsibilities.

… While one purpose of the Northwest Power Act is to encourage the development of renewable power in the Pacific Northwest through BPA’s acquisition authority, that is one purpose among many that BPA must meet, including assuring the Northwest has an economical power supply, providing environmental quality, continuing to repay the U.S. Treasury on a current basis, and protecting, mitigating and enhancing fish and wildlife of the Columbia River and its tributaries. …

[P]aying negative prices to displace renewable generation to ensure BPA’s environmental responsibilities are met is neither socially optimal nor consistent with traditional principles of cost causation. BPA’s statutory preference customers would end up paying the costs of displacing renewable generation that is currently almost entirely serving the loads of utilities outside of the BPA Balancing Authority Area. The costs of Federal and state production incentives should be borne by a broad group of taxpayers and ratepayers receiving the wind power, not concentrated on smaller subsets of consumers with limited economic interest or benefits from the renewable generation.

Note that about 750 MW of wind capacity has been added to the BPA Balancing Authority Area since June 2010, to a current total of 3522 MW, and “as much as 3,000 MW of additional wind generation expected to come on line in the next few years” according to the report.