Texas Think Tank: Facts Speak For Themselves on Capacity Markets

The Texas Public Policy Foundation has released a new presentation: "Letting the Facts Speak: Texas' Reliable Electricity Market."

Highlights from the presentation include:

"There is no evidence that capacity markets boosts capacity

• From 2007 – 2011, capacity payments funded only about 7,000 MW of new generation, about 4 percent of PJM's installed capacity

• During the same period, Texas' energy-only market produced over 10,000 MW of new generating capacity, about 12 percent of ERCOT's installed capacity

• Capacity markets are just as vulnerable to operational and capacity disruptions as Texas' energy-only market, if not more so; witness PJM's September blackouts

• Capacity markets force consumers to subsidize services that they could get from an energy-only market at a cheaper, more efficient price

• Consumers in PJM have spent $54 billion on capacity payments since 2007, or $900 per person

• Capacity payments in 2010 added $140 to an average residential bill

• Texas capacity payments are estimated to run $3.2 billion a year; projected savings are highly speculative and unlikely to occur"

The presentation also reviews inaccurate load forecasts and inaccurate reserve margin forecasts, and out-year forecasts for resource inadequacy which turn into excess resource adequacy in the prompt year (as expected under energy-only)

TPPF also said that, "generator problems stem from poor investment decisions circa 2007."

"Companies borrowed assuming higher prices would continue -- they were wrong," TPPF said.

"Generators and their bankers, e.g., Goldman Sachs, want relief from poor investment decisions circa 2007 ... Wall Street investors and generators want better terms for current investments," TPPF said.

Link to TPPF presentation