Michael Giberson
A story by Purva Patel in the Houston Chronicle does a reasonably good job explaining the upcoming shift from a zonal to a nodal market design for the ERCOT market in Texas. It is a complicated matter and hard to convey to non-specialist readers.
(In fact, even some specialists appear confused about parts of the bigger picture as evidenced by the comments reported of an attorney “who represents cities in utility issues and who sits on ERCOT’s Technical Advisory Committee.” The attorney claims that while a “nodal system may make it easier to spot congestion and where new power plants are needed, it ignores the reality of how plants are built.”
How does it “ignore the reality of how plants are built”? The gist of the point seems to be that prices will rise at points in places like Houston but it is unlikely a new power plant could be built in Houston because of space limitations, public opposition, and air quality problems.
The misunderstanding may arise because of loose talk about how a more transparent and efficient pricing system will signal where new power plants are needed. This is not quite right. The more transparent and efficient pricing system will just do a better job of revealing the value of power at various locations on the grid. What consumers and producers do with that information – build new power plants, add transmission, reduce consumption, or just pay the higher prices – is up to them.)
UPDATE: The Austin American-Statesman ran a story on Texas nodal the same day. It reveals something about the differences between Houston and Austin that the Houston story focused more on the practical aspects of the change while the Austin story highlights the behind-the-scenes politics.