The Light Must Stay On: Sustainable Power Generation

I have spent most of my professional life working in the power generation industry. I always marvel at the efforts of a wide variety and number of people who make sure the lights go and stay on whenever we flip a switch. We only notice when the electricity goes out like it did in Texas and other states this winter.

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It is worthwhile to review in a very simplified way how electricity is produced, dispatched and distributed. Also, an overview of some of the safeguards to ensure electric grid reliability is relevant. I use the US as an example, but countries around the world use similar mechanisms with some variations to manage their supply of electricity. Note that there are books, training courses and regulation around each of the topics presented below. I am purposely only presenting an overview of each topic.

How do we produce electricity?

Conventional electric power generation is based on well-established and classical engineering and science principles. The simplest comparison is the boiling of water in a tea kettle (boiler) to make steam that drives a rotating wheel (turbine). The turbine is attached to another device made of electrical coils (generator) to convert the mechanical energy to electricity. Depending on an array of economic, availability and many other factors, we can use different fuels to make the fire to boil the water and make steam for electricity: coal, gas, oil, biomass, and nuclear to name a few.

We can also turn the turbine and generate electricity without burning a fuel. We can use water and elevation differences from a dam, river or reservoir (hydraulic power) to spin a turbine. We can drill deep into the earth to get hot steam (geothermal power), and we can capture the energy from the sun to heat the water and make steam for the turbine (concentrated solar power). We can use a series of much smaller, but taller turbines that rotate by capturing energy from the wind. Finally, we can do away with the fire, fuel, steam and even the turbines by using photovoltaic cells to capture the sunlight and transforming it into electricity.

Dispatchability is Paramount

Another important concept in power generation is dispatchability or dispatchable generation. It means that electricity is generated on demand to satisfy a need. Until we solve the issue of energy storage, renewable generation is not very dispatchable. For example, sun and wind are available everywhere, but they are not available on demand. Fossil fuels such as coal and fuel oil can be stored relatively easily and close to where they need to be burned to produce electricity. Natural gas is normally supplied by pipelines and can be interrupted by weather or other events, however, under normal conditions gas is very dispatchable.

Who Controls Who Generate Electricity and When?

In the United States, the Federal Energy Regulatory Commission (FERC) formed two types of agencies:  regional transmission organizations (RTOs) and independent system operators (ISOs). The two types are very similar, but with some very important distinctions that are beyond the scope of this blog. The purpose of ISO is to coordinate, control, and monitor the operation of the electrical power system, that can encompass one or more states. RTOs coordinate, control and monitor an electricity transmission grid that is larger with much higher voltages than the typical power company's distribution grid.

Including Canada, there are nine ISO/RTOs operating in North America:

US Power Markets (ferc.gov)

The areas labeled Northwest, Southwest and Southeast, in the map above, represent traditional wholesale electricity markets, and they are comprised of vertically integrated utilities that own the generation, transmission and distribution systems used to serve electricity consumers.

The Electric Reliability Council of Texas (ERCOT) operates closest to the definition of a true free market. Furthermore, the Texas grid does not have an interconnection to the rest of the US electric grid. Texas has used its open spaces geography and abundant winds to become the biggest producer of wind power in the U.S. The state meets 25% of its annual power demand from renewable energy sources. At 12 cents per kilowatt hour, Texans pay 1 cent less for electricity than the US national average.

How do power generators get dispatched?

The independent system operator (ISO) main objective is to make sure electricity demand equals electricity production at any given time. Sophisticated analysis and prediction techniques pinpoint expected demand into the future. Determining what power producer gets dispatched to meet the demand depends on several factors such as who is available, who must be on and who is the cheapest to name a few.

Power plants are taken off-lines for scheduled or unscheduled repairs. Then, it is easy to determine who is available to generate and meet demand. The group of who must be on includes power plants that are not intermittent enough. For example, nuclear generators cannot easily turn on and off, and they remain on-line at full capacity or very near full capacity for 1 or 2 years at a time. Coal fired plants can take 8-12 hours to start. Then, rather than shutting them completely down, they are kept on-line at a minimum load that could vary from 30 to 50% capacity. They ramp up to higher loads as required by demand. Besides coal-fired plants, there are some gas fired plants that are in this group as well.

After accounting for the power generation from those plants that “must be on”, all available renewable energy (hydro, wind, solar, geothermal) is dispatched when available. Finally, fossil fuel power generators are brought in, normally in this order: gas, coal and oil (most expensive last).

What is a capacity market or capacity payment?

Some ISOs have a mechanism called the capacity market which purpose is to incentivize power generators to be available for producing electricity, regardless of whether they produce or not. Capacity prices are normally auctioned 3 years in advance, and their price varies depending on type of generators available and the region of the country, sometimes varying even within an ISO region. For 2021/2022 delivery, PJM cleared capacity payment varies from $140 to $204/MW-Day (0.60 to 0.85 cents per kilowatt-hour). Note the average price of electricity in the US is approximately 13 cents per kilowatt-hour.

Capacity markets help the ISO by ensuring someone is available to meet demand (reliability of the supply), and it provides economic benefits to the power plant owner because in some instances the capacity payment may be enough to cover the fixed costs of the power plant for the whole year. Following the Polar Vortex of 2014, the PJM ISO instituted a penalty for failure to produce when called during a crisis. The payment is stiff enough that it could wipe out the capacity payment for a year in a matter of hours.

Texas does not have a Capacity Market under ERCOT, instead they use a system that allows the wholesale electricity prices to climb up to $9,000/MWh (nominal $20- $25/MWh). The idea is that a power producer has the incentive to participate in the ERCOT market, because it could reap benefits akin to a capacity market in a matter of hours. ERCOT does not have a direct failure to produce penalty, however.

What is Reserve Margin?

The key to maintaining electric grid reliability is to always have more supply available than may be required. The electricity industry uses Reserve Margin to measure reliability and it defines it as:

Reserve Margin = (Capacity – Demand) / Demand

Capacity = expected maximum available supply

Demand = expected peak demand

Most ISOs require a reserve margin of 15%, and most usually exceeds this. NERC issues an annual Long-Term Reliability Assessment that presents a ten-year outlook addressing issues related to the reliability of the bulk power system. Summer and Winter Short-Term Reliability Assessments in May and October, respectively, that present estimates for the upcoming peak demand season. 

What happens in Texas during February 2021?

We can now try to understand what happens in Texas during February 2021. More will be known as data is analyzed, but what we do know based on initial reports is:

1. It got unexpectedly cold. Dallasnews.com reported a low temperature of minus 2 degrees Tuesday morning February 16th in Dallas-Fort Worth— making it the coldest day in North Texas in 72 years. Lesson: Texas infrastructure isn’t designed for once-in-a-century freezes.

2. Energy demand reached a record high (and did not follow typical trends). The situation worsened when energy demand didn’t taper off as electricity usage typically does overnight. According to EIA, natural gas and electricity furnaces provide 47% and 40% respectively of the winter heating in the US. Because of fewer heating days and low price of electricity, 63% of the winter heating in Texas is from electricity.

3. Energy production was affected:

a. Gas and coal fired generators were affected by the cold. Texas has built a lot of combined cycle gas plants to replace the less efficient and higher emissions coal fired plants. It seems that Texas had enough supply of natural gas to run these plants, but the pipelines froze and could not transport the gas. ERCOT planned on 67GW from natural gas/coal but could only get 43GW of it online. It is estimated that a total 185 coal and gas-fired power plants tripped or could not come on-line due to the extreme low temperatures

b. Wind Turbines Froze. Taking advantage of abundant wind, government subsidies, and falling cost of wind generation, Texas has built a lot of wind farms. The generating capacity of Texas is comprised of 51% natural gas, 25% wind, 14% coal, 4% nuclear, 4% solar and 2% (biomass, hydro). ERCOT figures indicate that less than 20% of the wind turbines could function during peak demand.

c. Nuclear plants were also affected by the cold weather. Initial reports indicate a nuclear reactor near Houston shut down because one of the safety sensors froze. The reactor was safe, but it could not operate without one of the sensors used for safe operations.

The real picture of exactly what happened in Texas has not emerged yet. One thing is clear. A series of events and decisions led to a statewide crisis, and stakeholders would need to find ways of preventing or mitigants future similar crisis. The hope is that some decisions would be made to safeguard those mechanisms that has worked for Texas and replace or correct those mechanisms that failed.

Sustainable power generation has its challenges. AVEVA has a software solution for every need of the power industry. Please visit our website to learn how your industry peers use our digital solutions, from design and build, to operate and maintain.