Energy Challenges in Texas- Can Demand Response Program Rescue the Lone Star State?
The U.S. economy has had little to celebrate since the 2008 financial meltdown and the recession that followed. One bright spot in the gloomy picture, however, is Texas. The rest of the nation could turn to the Lone Star State as a model for dynamic growth, as a close look at employment data shows.
Vital to the economic health of Texas is that people are moving to its cities in droves. Eight of the 15 fastest-growing large U.S. cities and towns for the year ending July 1, 2012 were in Texas, according to population estimates released by the U.S. Census Bureau. A trend reflecting a growing population and expanding economy—the total energy consumption in Texas has risen by an average of 2.2% annually since 1960.
Texas produces and consumes more electricity than any other State, and leads the Nation in wind-powered generation capacity, surpassing California. Despite large net interstate electricity imports, the Texas Interconnect power grid is largely isolated from the integrated power systems serving the eastern and western United States, and most areas of Texas have little ability to export or import electricity to and from other States.
De-Regulation of Electricity in Texas
Electricity deregulation in Texas was the result of Texas Senate Bill 7 on January 1, 2002. As a result, most Texas power customers can choose their electricity service from a variety of “Retail Electric Providers” (REPs). Electric Reliability Council of Texas (ERCOT)-an independent system operator for the region manages the flow of electric power to 23 million Texas customers —representing 85% of the state’s electric load. ERCOT is a membership-based 501(c) (4) nonprofit corporation and is subject to oversight by the Public Utility Commission of Texas and the Texas Legislature.
While retail choice has delivered tremendous benefits to consumers, it has created competitive pressures that have kept electricity prices for consumers low while getting the most advanced services. For example, Texans can opt for 100% renewable electricity from Green Mountain Energy. However, the increasing population and economic growth in Texas continues to increase electricity demand. So while Texans have had access to cheap and competitively served electricity for almost a dozen years, the current free market structure is no longer sustainable.
Residential and small commercial customers make up 75% of summer peak demand primarily due to air conditioner load. Texas per capita residential use of electricity is significantly higher than the national average due to the high demand for air-conditioning during hot summer months. Even though ERCOT made it through the heat wave, which was about 1,100 megawatts lower than its all-time peak, changes are likely coming to the energy-only market, it has already raised its market cap to $5,000 per megawatt-hour in 2013, and that will rise again to top out at $9,000 per megawatt-hour in 2015. Most other areas of the country have a far lower market cap, $1,000 to $2,500.
What should Texas do?
While Texas is moving in the right direction with its expansive wind industry and smart grid development like the Austin’s neighborhood smart grid test-bed, Operative Reserve Demand Curve (ORDC) or demand response should be a first line of defense. Various retailers and utilities such as Austin Energy, Reliant, Green Mountain Energy and TXU are experimenting with residential demand response.
Demand Response Program—Case Study of University of Texas at Arlington
In broad terms, demand response programs give us the ability to voluntarily trim our electricity usage at specific times of the day (such as peak hours) during high electricity prices, or during emergencies (such as preventing a blackout). Such programs are becoming an integral component of the evolving smart grid infrastructure. It provides the ERCOT market with valuable reliability by preserve system reliability, enhancing competition, mitigating price spikes, and encouraging the demand side of the market to respond better to wholesale price signals. Such voluntary incentive programs help reduce excessive strain on the energy grid during times of peak demand, which helps to prevent rolling brownouts. Large companies are taking advantage of demand response programs because they offer an additional revenue stream and cost savings by managing electricity more strategically. University of Texas at Arlington participates in three such programs:
- An emergency interruptible load service program,
- A commercial load management program, and
- A peak shaving program that provides incentives to program participants that are willing to reduce their usage for 15-minute intervals between 3:30 p.m. and 5:15 p.m. during June-September, summer peak demand period.
The UT Arlington campus spans 420 acres and includes more than 100 buildings. The University has added 1.2 million square feet of learning environment over the past five years through the construction or renovation of more than a dozen buildings. Based on a five-year term, the expected net cash flow for a two-megawatt reduction commitment is expected to be $153,000 per year.
Everything is bigger in Texas—So is the challenge!
The electric grid in Texas has fared well so far this summer. ERCOT was able to meet its highest peak yet for 2013 (which was about 1,100 megawatts lower than its all-time peak) when the region topped out at 67,180 megawatts on August 7, 2013. Large commercial and industrial customers may want to increase their participation in such demand response programs to hedge against being exposed to the potential high prices during the hottest days of summer.
As the saying goes, “Everything is bigger in Texas.” While it may sound clichéd, it is right on the money when it comes to describing the Lone Star State’s energy challenges in the coming years.
Leave your comment below, or reply to others.
Please note that this comment section is for thoughtful, on-topic discussions. Admin approval is required for all comments. Your comment may be edited if it contains grammatical errors. Low effort, self-promotional, or impolite comments will be deleted.
Read more from MeetingoftheMinds.org
Spotlighting innovations in urban sustainability and connected technology
Accenture analysts recently released a report calling for cities to take the lead in creating coordinated, “orchestrated” mobility ecosystems. Limiting shared services to routes that connect people with mass transit would be one way to deploy human-driven services now and to prepare for driverless service in the future. Services and schedules can be linked at the backend, and operators can, for example, automatically send more shared vehicles to a train station when the train has more passengers than usual, or tell the shared vehicles to wait for a train that is running late.
Managing urban congestion and mobility comes down to the matter of managing space. Cities are characterized by defined and restricted residential, commercial, and transportation spaces. Private autos are the most inefficient use of transportation space, and mass transit represents the most efficient use of transportation space. Getting more people out of private cars, and into shared feeder routes to and from mass transit modes is the most promising way to reduce auto traffic. Computer models show that it can be done, and we don’t need autonomous vehicles to realize the benefits of shared mobility.
The role of government, and the planning community, is perhaps to facilitate these kinds of partnerships and make it easier for serendipity to occur. While many cities mandate a portion of the development budget toward art, this will not necessarily result in an ongoing benefit to the arts community as in most cases the budget is used for public art projects versus creating opportunities for cultural programming.
Rather than relying solely on this mandate, planners might want to consider educating developers with examples and case studies about the myriad ways that artists can participate in the development process. Likewise, outreach and education for the arts community about what role they can play in projects may stimulate a dialogue that can yield great results. In this sense, the planning community can be an invaluable translator in helping all parties to discover a richer, more inspiring, common language.
While the outlook for the environment may often seem bleak, there are many proven methods already available for cities to make their energy systems and other infrastructure not only more sustainable, but cheaper and more resilient at the same time. This confluence of benefits will drive investments in clean, efficient energy, transportation, and water infrastructure that will enable cities to realize their sustainability goals.
Given that many of the policy mechanisms that impact cities’ ability to boost sustainability are implemented at the state or federal level, municipalities should look to their own operations to implement change. Cities can lead as a major market player, for example, by converting their own fleets to zero emission electric vehicles, investing in more robust and efficient water facilities, procuring clean power, and requiring municipal buildings to be LEED certified.