TCEC-led report finds renewable energy and natural gas both play substantial roles in future Texas electric market

AUSTIN, Texas, Dec. 10, 2013 /PRNewswire-USNewswire/ -- The future of the Texas electric market will very likely include substantial amounts of renewable energy and gas-fired power, economists with The Brattle Group find in a new report prepared for the Texas Clean Energy Coalition (TCEC).

Released today, "Exploring Natural Gas and Renewables in ERCOT, Part II: Future Generation Scenarios for Texas" provides a 20-year outlook for natural gas and renewable power in Texas. It is the first examination of its kind to be conducted and shared publicly in Texas.

TCEC Chairman Kip Averitt, a former state senator and chairman of the Senate Natural Resources Committee, said the report funded by The Cynthia and George Mitchell Foundation (www.CGMF.org) uses state-of-the-art modeling in a series of scenarios – including a range of natural gas prices, a required reserve margin, and different wind and solar energy costs – to simulate the Electric Reliability Council of Texas (ERCOT) system through 2032.

"The objective of this report was to examine broad patterns of interaction between renewable resources and natural gas over the next two decades," Averitt said. "The report illustrates the key drivers of gas and renewable development in ERCOT to better inform Texas policymakers and decision makers about the range of possible outcomes."

With over 12,000 megawatts of installed capacity, Texas is the largest state producer of wind-powered electricity in the U.S., more than double the next two largest wind capacity states combined. At the same time, Texas is the leading U.S. producer of natural gas, and the state generates over 40 percent of its electricity from natural gas plants. Add to that the prospects for solar energy from the abundant sun and Texas is in a position to produce cleaner, more affordable and reliable electricity than ever before while helping improve economic well-being for Texans.

In June, The Brattle Group produced a white paper for TCEC exploring qualitatively the short- and long-term interaction between natural gas and renewables in Texas' energy future.

This preliminary review by the Brattle economists found the relationship between natural gas and renewables had aspects that were both complementary and, in some cases, substitutive. The research team also found that over the next two decades the degree to which natural gas or renewables "crowd out" the other source, as opposed to develop together, was a function of future policies and market design features, technological developments, and the price of electric fuels and resources of all types.

In the new report, the Brattle team examines the future of gas and renewable power in Texas analytically through the simulation of several grid expansion scenarios.

"In each scenario, our modeling system simulates both the market-driven additions and retirements of capacity by power generators and the operation of the system by ERCOT, down to the intra-hour time frame, once these additions are installed," Dr. Peter Fox-Penner, chairman of The Brattle Group, said.

"By combining the long-and short-term time frames, our approach ensures that the resource additions selected by the market result in a system that is able to provide grid power at the lowest total cost consistent with reliability standards."

Co-author Dr. Ira Shavel agreed: "Our modeling approach is guided by the assumption that as the amount of variable or intermittent renewable energy added to the electricity grid increases, so does the relevance of short-term dynamics such as the ability to quickly start and ramp power resources up and down to closely follow the fluctuating renewable supplies. Traditional approaches to analyzing the optimal addition and retirement of power plants over time tend to represent such dynamics in a very simplified form at best. Our approach allows us to model these shorter term operational constraints in a very detailed fashion."

Key findings related to the future of natural gas and renewable energy, include:

• Under the range of scenarios, natural gas and renewables both play substantial roles in ERCOT and provide all new generation needed to respond to growth in the state's population. No new coal plants are built in any scenarios.

• Across the more likely scenarios, wind and solar grow from their current 10 percent generation share to levels between 25 and 43 percent. Natural gas-fired generation provides all of the remaining incremental generation, adding 12 to 25 gigwatts of new combined-cycle capacity – a 38 to 80 percent increase in the current installed base.

• The mix of new gas and renewables generation is sensitive to the price of natural gas and cost declines in wind and solar power. Changes in these three factors can cause significant shifts in the mix of future installations, leading to a wide range of plausible generation shares for wind, solar, and natural gas.

• Among gas-fired power plants, nearly all future additions are combined-cycle gas turbine (CCGT) plants rather than traditional gas turbines, due to the fact that CCGTs are more efficient and expected to be more flexible than other turbines.

• The study found that the ERCOT system could accommodate all levels of variable renewables likely to occur during this period with no reliability problems. However, accommodating higher levels of renewables required the model to use an additional ancillary service – known as the intraday commitment option – and to adjust the levels of current ancillary services.

• The analysis shows that federal production tax credit and ERCOT ratepayer funding of new transmission lines remain important drivers of wind development.

• A reserve margin has a very small overall effect on the generation mix or emissions in ERCOT through 2032. However, scenarios using higher gas prices and lower renewables costs reduce the growth of CO2, NOX, and SO2 substantially. A stringent federal carbon policy reduces 2032 CO2 by 66 percent versus 2012.

• Existing coal units in ERCOT remain profitable and are not retired unless a relatively stringent federal carbon policy is adopted. A federal carbon policy requiring 90 percent capture and storage of carbon, for example, would prompt the retirement of most ERCOT coal units.

• Under the strong federal carbon policy scenario, gas and renewable generation would together replace the energy formerly supplied by coal plants. In this case renewable energy could rise to become 43 percent of ERCOT generation by 2032.

The complete report is available at http://www.texascleanenergy.org/2013-research.php.

About the Texas Clean Energy Coalition
The Texas Clean Energy Coalition is an alliance of business and economic development groups, faith-based organizations, the Latino and African-American communities, labor, and academia dedicated to building a clean energy economy that creates jobs and economic growth in the Lone Star State. Its goal is to educate Texans and support a state energy policy that promotes clean energy markets, job growth, energy security and Texas' energy leadership in the U.S. and around the world. For more information, visit the coalition Web site at www.texascleanenergy.org.

SOURCE Texas Clean Energy Coalition (TCEC)