Texas Chair: Should Generators Bear Some of the Risk of Grid Instability Caused by Intermittent Resource Integration?

Public Utility Commission of Texas Chair Donna Nelson filed a memo in advance of today's open meeting concerning issues related to prospective transmission system upgrades, ancillary services, and the transmission planning process related to renewable resources, as well as problems that have arisen as part of the CREZ build-out.

"Due to the amount of wind generation that we are now expecting on the transmission lines in the Panhandle, stability concerns and weak system strength will present significant challenges in that area," Nelson said in the memo.

"These potential grid stability issues raise fundamental policy questions. For example, should we ask electric customers to fund further investment in the transmission system to improve stability or should some of the risk be borne by generators? When I review the PURA provisions that approved construction of the CREZ lines, it is obvious to me that the Texas Legislature intended that wind developers should have skin in the game but we need to further flesh out what that means as wind generation becomes an increasingly large percentage of installed capacity in the ERCOT market," Nelson said.

"ERCOT is currently evaluating an ancillary services redesign, which gives us an opportunity to examine our current mix of services, those contemplated for the future, and the costs associated with these products. One of the reasons that ERCOT is exploring potential improvements to ancillary services is because some new resources expected to be added to the ERCOT system bring with them additional challenges. Given ERCOT's changing resource mix, I would like to look at whether there are ancillary services costs that are incurred specifically because of the unique nature of renewable resources," Nelson said.

"The ERCOT Board instructed ERCOT to review its transmission planning process. One issue that I would like to explore here at the Commission is whether the production cost savings test, most recently adopted by the Commission in March 2012, is appropriate for analyzing the benefits of transmission projects, especially projects to address transmission limitations and voltage stability mitigation that will be needed to address a system heavily weighted with wind generation, with a production cost of zero," Nelson said.

"I request that Commission Staff open a project with the title 'ERCOT Planning and System Costs Associated with Renewable Resources.' If we encounter major policy issues in this rulemaking that we believe cannot be resolved by PURA, we can seek Legislative guidance by including these topics in our Scope of Competition report," Nelson said.