As the nation’s largest net energy supplier, no state feels and sees the effects of energy market shifts as much as Texas – and more specifically ERCOT. The challenges and intricacies of power supply and demand in the state cannot be underplayed.

The Current State of the Texas Power Market

Texas’ power infrastructure paints a concerning picture of aging assets:

  • 10% of Texas’s existing generation has been in service for over 50 years
  • 30% has seen over 40 years of service
  • And a staggering 40% is beyond 30 years.

This aging infrastructure poses three key challenges. It compromises the effectiveness of power delivery, escalates the operational risks involved, and drives up the cost of energy across the state.

Dispatchable Energy: A Beacon of Reliability

The evolving dynamics of the Texas energy market highlight a pressing concern.

Capacity is not growing in tandem with the surging demand.  

Notably, the value of dispatchable energy skyrockets as coincidental peaks change. For instance, from a traditional 5 p.m. peak to the projected 8-10 p.m. for ERCOT this year. This shift underscores the necessity for readily dispatchable energy.

Moreover, energy demand in Texas set a new all-time high on July 31, 2023. In fact, in the summer of 2023, ERCOT set 10 new all-time peak demand records.

System Wide Prices

These demand peaks are happening in the face of a precarious challenge:

  • These soaring daytime temperatures are affecting energy usage into the night as well, with high evening temperatures inflating air conditioning demand in residential areas. Meanwhile, the interconnection of more solar power assets is pushing the critical risk period later into the evening, between 8-9pm, when solar generation falls but temperatures remain high. 
  • This dynamic has given rise to dominating high prices across the state and long-term strategies to manage this critical shift are essential.
  • This dynamic is evident from the data we’ve collected on the outlook for ERCOT, and has given rise to dominating high prices across the state. Long-term strategies to manage this critical shift are essential.

Natural Gas Reliance: A Double-Edged Sword

Texas Statistics
Source

Texas’s significant reliance on natural gas brings forth its own set of challenges, especially when considered against the backdrop of the state’s aging infrastructure. 

Wind generation is driving the swings in energy demand across a large portion of the Texas market, driving scarcity season into September with the perfect storm of conditions:

  • The same heat-wave-driven high evening demand that the state is seeing in August
  • Earlier sunsets creating a longer shortage window before wind increases in the evening
Energy Net Load

The fact that Texas is also grappling to align its energy asset requirements with the escalating population and demand only adds to these challenges. 

With people flocking to hubs like Dallas, Houston, Austin, and San Antonio, the infrastructure simply can’t keep pace. Constructing new assets might seem like a plausible solution. But in fact, rate adjustments remain the only viable mechanism to fund them, further driving up energy costs.

Emerging Challenges on the Horizon

Aging infrastructure and shifting energy demands aren’t the only energy challenges facing Texas. Other challenges are looming, like

  • Escalating land prices
  • Increasing interconnection queues
  • Transmission congestion (among wind and solar power)
  • The risk of winter outages

Given this context, a new approach is clearly needed to fortify the energy future for Texas businesses and residents. This challenge calls for not just reactive measures but a proactive, visionary strategy.

Grid-Tied Microgrids – The Future of Reliable and Resilient Energy

The idea of microgrids has often focused on trying to replace the connection to the central grid entirely. We don’t see that as a viable solution for RECs and C&Is in Texas. Instead, grid-tied microgrids can act to bolster the grid’s capabilities. This is particularly effective during disruptions and peak-demand challenges.

What is a Grid-Tied Microgrid?

At its core, a grid-tied microgrid operates as a compact, localized energy network to reduce the cost to you and your membership of high-priced power in the market.  

Within this system, a range of distributed energy resources (DERs) can be incorporated, which notably include:

  • PV Solar: A reliable source of renewable energy, essential in reducing dependencies on the broader grid
  • Battery Storage: Capturing and storing energy to provide uninterrupted power during shortages, playing a key role in supporting the reliability of sustainable energy solutions
  • RECIPs: Ensuring instant-start backup power to fortify renewable energy investments

Significance in the Texas/ERCOT Market

Texas is poised to lead the nation in 2024 with the largest installation of solar and battery storage capacity. This investment in distributed generation assets is a huge stride toward a reliable and resilient grid for:

  • Energy Independence: Reduce grid dependency, ease the strain on aging infrastructure, and ensure stable power delivery
  • Cost Predictability: Harness on-site, non-fuel-dependent energy at predictable costs
  • Sustainability: Address the increasing demand for renewable sources that value the environment and energy security
  • More availability of dispatchable energy: When renewable assets are supported by battery storage or reciprocating engines, suppliers can plug the efficiency gaps of renewable fluctuating generation 

The near-term effects of this in the Texas/ERCOT market are huge. 

Electricity prices are expected to fall in 2024 due to the surge in the interconnection of renewables and storage solutions, coupled with low gas prices. This price dip isn’t expected to last long though, with gas prices expected to rise once more by 2025. This only serves to underpin the extreme importance of reducing reliance on natural gas and the wider grid. 

Rather than viewing microgrids in isolation, we champion their use as complements to the grid. Battery storage solutions are central to this, with 4-hr batteries expected to become the norm for new additions by 2035, which is unsurprising given they provide readily dispatchable energy when it’s most crucial.

Customized Distributed Generation Solutions for the Texas Market

The complexities of the energy sector call for a deliberate blend of distributed generation resources. Wind and solar power have gained a foothold in the Texas market that will not be overcome by baseline generation. The best solution is the right mix of distributed generation resources. This ensures the availability of dispatchable energy to cater to the unpredictable environmental factors and aging energy infrastructure.

Our approach at Perceptive Power Infrastructure is to build long-standing relationships. Through a transparent process, we determine the right distributed generation mix for every client.

After open conversations, if both ourselves and our client agree that Perceptive Power Infrastructure is the right partner for them, then we turn to our financial model to outline exactly what that custom solution will look like. Using relatively simple and easy-to-source data like yearly load and monthly energy bills, our model identifies areas of improvement and the right solutions to achieve it.

Our commitment to Texas RECs is unwavering:

  • Rooted in Rural Heritage: We partner exclusively with RECs & C&Is. We wear our passion for rural Texas communities on our sleeves as proud members of rural communities ourselves
  • Swift Deployment: Financial bottlenecks are not an issue on PPI projects. Backed by  True Green Capital Fund IV’s $660 million in capital, there’s no need to go to market and raise capital
  • Transparent Engagements: Our energy expertise is vast, but our approach is personal. We champion open-book methodologies, unclouded discussions, and community-centric decisions
  • The Science & Math of Energy: Harnessing our proprietary modeling, we delve deep into technical and financial analytics. This ensures the right energy mix, tailored to your community’s specific needs

 

The Perceptive Way encapsulates our ethos. It’s more than just a methodology. It’s our pledge to the rural communities we serve. We believe in forging relationships with REC partners rooted in understanding and mutual respect. By decoding specific challenges and needs, we ensure our solutions resonate at both an operational and emotional level.

Your Energy Challenges Met With Precision

The data is clear. The Texas energy market needs new solutions to combat the challenges facing the industry and create better cost and reliability. 

With almost 60% of generating capacity expected to be wind and solar by 2050, Texas RECs are at a critical turning point. Only a fresh perspective can secure the energy future of rural Texas communities.

Grid-tied microgrids are the logical step to do just that – by balancing stability and sustainability, reliability and resilience.

Connect with our team to discuss your energy challenges and how we can help you achieve a more reliable and resilient energy mix.