Texas = Renewables firmed by Natural Gas

Here is an interesting report sponsored by the Texas Clean Energy Coalition and delivered by Brattle Group asserting the Texas market is gas and renewables and have incredible complementarity. As I have priced out renewables and gas projects, I find the report misses a couple of key points…


  • As renewable prices drop and as the ERCOT nodal market improves, renewables will increasingly be baseload energy (wind is the least expensive new form of energy in the market) and predictable peak (solar) with natural gas providing the firming capacity and ancillary services in the market. Think about natural gas as the battery for the renewable electricity market.
  • Texas’ market is already dominated by natural gas electricity. Any additions to this will increase price volatility and increase long term rates versus investing into increasingly lower cost renewables.
  • Both of these push coal off the system. There is expected to be 5,000 MW of coal retirements in coming years.
  • The report ignores the water problems of Texas. Frankly we don’t have enough water in Texas for increased thermal load… this points us back to renewables. Now that the state is intervening by investing $2B in taxpayer dollars for water infrastructure due to “long term draught” (some Texans have a hard time saying climate change), there will be increasing prices of water which will also be embedded into the cost of electricity. Renewables require no water and will increasingly be favored in the ERCOT loading priority accordingly.
  • The countercyclicality of wind presented in the report ignores the baseload nature of Texas Coastal wind that continues to ramp, decrease in cost, and provides baseload rates less than natural gas. 
  • The pricing of solar ignores 2012 numbers and predicted numbers of dropping solar prices. It is already out of date.
  • If you are to compare apples-to-apples, then each of these need to have a comparable LCOE with embedded fuel volatility, water, environmental (yes, carbon prices), and decommissioning expenses embedded. If we did this today for a 25-year set of projects, renewables already win (caveat: wind blended intelligently with solar).

Texas with its own ISO (ERCOT), advanced nodal market, preference for generation efficiency,free market model, expansion of advanced transmission lines to renewable development areas will serve as a leading post-incentive market for renewable deployment and integration.  Let’s see how this all plays out.