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Build Your Own Texas: Where (and When) the Wind Blows and the Sun Shines


Episode 2

It has now been a year since discussions of the Texas Electricity Grid grabbed headlines as Winter Storm Uri bore down on Texas. In our debut episode, we introduced the interactive Texas Generation Model, allowing users to choose the generation mix for the state of Texas and determine how that portfolio performs compared to electricity demand.  The “what-if” analysis capability of this model allows us to discuss outputs and their importance in shaping the future of energy. In this episode, the model uncovers challenges and capacity demand that regulators, utility executives, and customer advocacy groups should consider as coal phases out and renewable resources become king.

Renewable energy has been gaining momentum and is expected to grow to 42% of the U.S. electricity generation mix in 2050 according to the 2021 U.S. Energy Information Administration Annual Energy Outlook. As we continue to see renewable resources, primarily wind and solar, replace carbon-emitting resources like coal, operating characteristics, such as ramp-up electric production speed from their baseload counterparts, raises new challenges and questions of adequacy.

The Model

For example, if we run the model in “carbon-free” mode, we see the urgency behind replacing the current frontrunner in Texas generation—natural gas. We can also consider other renewable resources, such as hydroelectric generation, but the long lead times for project development for new hydroelectric generation led us to use it as-is for the model. So, what is the answer?

To make up for the energy shortfall in the “carbon-free” scenario, first, try doubling the current level of wind and solar generation resources. The gap between electricity demand and energy produced gets considerably smaller, and we start to see instances of excess energy in the March and April 2021 timeframe. When analyzing the hourly breakdown of energy generation, wind and solar resources produce less energy in the evenings, so another dispatchable resource needs to ramp up and close the demand and supply gap. For example, look at a single day, like November 2, 2020, where there is more than enough output except for a few hours in the afternoon when the electricity output falls short of demand. Under today’s generation mix, the resource making up for the shortfall in electricity supply is typically natural gas “peaker” plants. Utility-scale battery storage energy is one solution, and the possibility of advanced nuclear is another (we will discuss both topics in upcoming episodes).

Now, try a generation portfolio scenario where there is four times the amount of wind and solar resources. As shown by the model results, the demand and supply gap decreases—on most days, the demand is met or exceeded. However, there are times when demand falls short of the energy supplied. February (the time of Winter Storm Uri) is not the only instance of a significant demand and supply gap. For instance, September 2020 was a time of sustained low winds where ERCOT sent notices asking Texans to consume less electricity.

On most days, the demand is met or exceeded. However, there are times when demand falls short of the energy supplied.

One of the significant challenges with renewable energy development, especially wind—is surface area. When wind and solar resources are quadrupled in the Texas market, the surface area required for that development is equivalent to an additional 111 Washington, DCs or 5,500+ square miles. When deciding where to put a generation facility, factors such as transmission access, grid capacity, resource availability (is it a windy or sunny spot?), and nearby neighbors need to be considered. 

The availability of wind and solar (i.e., energy production) will vary each hour.  An important aspect of increased solar and wind generation is what the model notes as “excess energy.” In our view, each area of excess energy that shows up on the model is an opportunity. As more renewable resources become available on the grid, the associated excess energy production can support new and growing electric applications.

Each area of excess energy that shows up on the model is an opportunity.

For instance, co-generation. Why not use the power to generate another resource such as hydrogen? Another opportunity is diverting it toward mining cryptocurrency. Excess energy can support many other opportunities, such as charging electric cars or fleets. ScottMadden has supported clients with business cases evaluating several of these options.

As we continue efforts to decarbonize the energy industry, one big question sticks out to us: how will we effectively replace natural gas? In our next episode, we will dive into some key implications of relying primarily on natural gas.

How can we help?

  • Education Sessions – Educate your leadership team on the considerations and implications of these trends to your service territory.
  • Business and Strategic Planning – Supporting your organization’s strategic decisions around changing energy generation mix
  • Integrated Resource Planning – Challenge your organization with different considerations to your current integrated resource plan.
  • Regulatory Policy and Strategy – Support the development of a regulatory strategy that considers the changes in your planned generation mix
  • Grid Modernization – Help you navigate the new grid technologies and their impact on your utility operations and business model.
Model Methodology:
  • Collected hourly demand and generation data from ERCOT
  • Collected capacity from March 2021 (from ERCOT) by generation source (e.g., nuclear, natural gas, etc.)
  • Calculated hourly capacity factor by generation source
  • Calculated total generation by generation source based on the hourly capacity factor
  • Assumed energy storage (batteries) are charged using energy from renewable resources; when all battery charging is complete, any additional energy beyond that needed to meet demand is deemed excess energy
  • Energy storage is sized based on the average output of solar and wind, i.e., when a selection of 1 on the capacity toggle and the average daily output of solar and wind is 250,000 MWh, there would be a storage capacity of 250,000 MWh
Key Assumptions and Data Sources:
  • Demand is implied by total historical generation but could have been higher in select time periods (e.g., Winter Storm Uri) due to imports, demand response, and/or outages
  • Generation cost by generation source is based on Lazard October 2020 levelized cost of energy (LCOE) reflected in $/MWh. LCOE refers to the estimates of the revenue required to build and operate a generator over a specified cost-recovery period. Note that LCOE is highly dependent upon financing parameters (debt-equity mix, cost of capital, depreciation schedule), installed cost, and fuel costs. Lazard’s analysis, updated annually, is frequently used in industry discussions
  • Used NuScale forecasted LCOE of $65/MWh as per NuScale SMR Technology – An Ideal Solution for Repurposing U.S. Coal Plant Infrastructure and Revitalizing Communities, 2021
  • The analysis excludes demand from distributed energy resources
  • The analysis also excludes renewable integration costs from calculations of LCOE
  • Generation includes proportionally larger technologies and not smaller (in % of total generation) technologies such as thermal peaking plants, hydro-power, and biomass
  • Cost of storage is modeled as a fixed cost based on the financing and ongoing O&M costs (e.g., maintenance, warranty, and cell replacement); whether the storage is used or not, the full cost is reflected in the portfolio LCOE
  • Emissions calculated using the following values, per EPA
    • Coal: 2.21 lbs./kWh (20.3% of total baseline generation)
    • Natural gas: 0.91 lbs./kWh (47.4% of total baseline generation)
  • Required surface area (land use) values are based on NREL analysis for large-scale wind (1 – 10 MW) of 44.7 acres/MW and large-scale solar PV (1 – 10 MW) of 6.1 acres/MW as compared to Washington, D.C.’s footprint of 68.34 square miles
Limitations of the Analysis:
  • The goal of the model is to provide a simplistic view of energy-only characteristics to illustrate the what-if generation mixes and the impact on cost of energy and carbon emissions
  • Analysis does not include the various detailed elements such as ramping non-variable fuel cost assumptions, price of energy calculation
  • The analysis considers current technology costs and does not consider changes in technology costs
  • The carbon-free scenario considers a limited number of non-carbon generation resources (i.e., solar, nuclear, wind, and energy storage) and does not consider new technologies under development such as carbon capture and storage technologies
  • Calculating specific wholesale electricity power prices would require a detailed system modeling

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Additional Contributing Authors: Bill Hosken, Morgan Schadegg, and Chris Vlahoplus.

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Contributing Authors

Cory O'Brien Director

May we suggest:

Mining Bitcoin with Nuclear Power

Expansion of renewable generation will change the way power is produced. Nuclear power is still a necessity for its steady and reliable output. However, not all of the output may be needed all the time, and, potentially, ratepayers will demand only a fraction of total nuclear power plant capacity. What should utilities to do with the extra power? In the hunt for new sources of revenue, nuclear owners should consider cryptocurrency mining as one of their first ideas.

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