Economic Growth in Texas Means Greater Demands on Electricity Grid

Wall Street Journal
August 12, 2011

Texas Power Grid Falls Short
Rebecca Smith

With all the recent attention on Texas’s record (and Governor Rick Perry’s claims) with respect to the growth in the number of jobs in the Lonestar state in recent years, it is worth noting that this growth in the Texas economy is also putting a lot of strain on the electricity grid in Texas. According to a recent article by Rebecca Smith in the Wall Street Journal, electricity demand in July was 12 percent higher than for any prior July, as July was the hottest month ever in Texas. Prices in the wholesale electricity market reportedly hit $3,000 per megawatthour during the first week of August, reminiscent of the prices from the Western energy crisis of 2000 and 2001. Texas has its own deregulated power market, Electric Reliability Council of Texas, or ERCOT, and because the state’s grid barely interconnects with other states, Texas cannot get any help from other wholesale electricity markets when it runs short of power. Moreover, under the deregulated model, utilities cannot be ordered to build new generation, as under the “good old days” of the vertically integrated utility; rather, power generators are expected to build new plants voluntarily, and price signals like the $3,000 per MWh reached in early August should stimulate construction of new plants. Texas’s heavy reliance on wind energy – the Lonestar state leads the nation in installed megawatts of wind generation – also is of little help when the system hits its peak on hot summer days. Wind generation tends to be the most productive in the middle of the night, when demands for electricity are low, and produces little power on hot summer afternoons when the air conditioning loads are highest. If one believes in climate change trends and the correlation with cumulative greenhouse gas emissions (and Governor Perry apparently does not), the situation will worsen before it gets better, as the Texas summers continue to get hotter (and drier as well). Investment in solar power may provide some relief for Texans in meeting these increasing peak demands, as solar photovoltaic installations (unlike wind turbines) have the benefit of producing the most power at a time that correlates with the greatest demands being placed on the electric grid – hot, sunny summer afternoons.