February 17, 2023

(Austin, TX) — Electricity markets are exceptionally technical and exceptionally complicated. ERCOT is the only market in the country where generators are paid based on performance.  This system worked remarkably well until the Federal government passed massive incentives to build wind power generation which can break even at negative pricing. These massive financial incentives led to the proliferation of wind power in Texas, deflating prices and forcing out competition from more reliable sources of power generation like coal and natural gas.

In 2019, nearly two years prior to Winter Storm Uri, Representative Jared Patterson presented a bill before the House Committee on State Affairs to address the long term reliability of the ERCOT grid. Despite Texas growing by 1,000 people per day and the economy growing from the 10th largest to the 9th largest globally, dispatchable generators are largely not investing here.

Following Winter Storm Uri, the lack of dispatchability on the grid is apparent to all. During extreme weather events like Uri or like the ice storm only two weeks ago, non-dispatchable generation sources were able to produce just a fraction of their installed capacity. Wind power is essentially non-existent during extreme weather events.  Solar power, which is subsidized at a multiple of wind power, performs better during afternoon summer days, but still lacks the ability to perform during cloudy, freezing Texas days or obviously overnight.

What’s more, in August 2022, President Joe Biden signed into law the Inflation Reduction Act, which doubled down on financial incentives to non-dispatchable electricity resources. The ERCOT market design has proven to be unable to navigate the rapid growth of highly subsidized renewable energy and maintain long term reliability. Now the proliferation of non-dispatchable has been supercharged by the Federal government.

Due to the long term issues around reliability and dispatchability on the grid, the Texas Public Utility Commission (PUC) has recommended we implement a Performance Credit Mechanism (PCM) in the ERCOT market. This possible solution was not recommended by the consultant hired to study the market nor has it been favored by large power consumers or legislators working to resolve this issue. The reason the PCM was not recommended to the PUC is due to its highly complex nature and the fact that it has never been implemented in any electricity market anywhere in the world. The PCM is too complex, administratively heavy, expensive, and will take many years to implement.

Instead of attempting novel approaches which are complex and expensive to solve our dispatchability problems, Representative Jared Patterson has filed House Bill 2288, which would mandate ERCOT only allow the sale of dispatchable power into the marketplace by January 1, 2030. This legislation removes renewable energy portfolio standards in ERCOT, while still allowing residential interconnection of distributed renewable generation and surplus credits for public school solar generation. This approach is technology neutral as well, as battery technology advances in the coming years.

“It makes no sense whatsoever for 30 million Texans to rely on crossed fingers for power generation. The 9th largest economy in the world demands electricity when it’s needed.” Patterson stated. “Why complicate the market further to make up for the Federal government’s destruction of our energy-only market? If you cannot perform when ERCOT needs you to perform you shouldn’t be permitted to sell your product here. Period.”

Jared Patterson represents House District 106, which encompasses the eastern portion of Denton County. He serves on the House Committees on Calendars, Transportation, and Licensing & Administrative Procedures. He is a member of the House Republican Caucus, the Criminal Justice Reform Caucus and the Texas Aggie Caucus and serves on the Texas Cybersecurity Council. He and his family reside in Frisco.