Renewable Energy: A Texas Success Story

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Renewable Energy A Texas Success Story

• Julie Caruthers Parsley, Commissioner
• Public Utility Commission of Texas
• Testimony Before U.S. House of Representatives
• Subcommittee on Energy and Air Quality
• Committee on Energy and Commerce
• March 15, 2007

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National Electricity Interconnections
SPP SPS
SPP SWEPCO Cap Rock
ERCOT AEP TX -Central AEP TX -North CNP Sharyland
TNMP TXU (Plus municipals and co-ops)
WECC EPEC
SERC EGS
ERCOT - Electric Reliability Council of
Texas SERC - Southeastern Electric Reliability
Council SPP - Southwest Power Pool WECC - Western
Electricity Coordinating Council
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Renewable Generation in Texas

• Over 3000 MWs of wind generation installed in the
  State since 1995, with another 887 MWs under
  construction and an additional 3125 MWs announced
• Most capacity in ERCOT, but 122 MWs installed and
  161 MWs under construction in the Southwest Power
  Pool
• Texas surpassed California last year as U.S.
  leader for renewable energy
• Texas has the world's largest wind farm (735 MWs)
  
• In 2005, Texas increased its Renewable Portfolio
  Standard (RPS) from 2880 MWs of installed
  renewable generation to 5880 MWs by 2015, with a
  target of 10,000 MWs by 2025

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Why Does Texas Have Such a Successful Renewable
Program?

• A commitment by Texas leadership to renewable
  energy, facilitated by three factors essential to
  its success
• Robust markets for renewable energy
• Significant transmission investment
• Positive economic incentives

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1. Robust Markets for Renewable Energy

• Competitive wholesale and retail markets that
  fully support renewable generationwilling buyers
  and sellers of renewable power which can continue
  to increase, rather than integrated utilities
  with a mandate to utilize renewables up to a
  certain level, which serves to cap growth
• Earlier this week a coalition of environmental
  and renewable energy groups sent a letter to FERC
  Chairman Kelliher stating that competitive
  electric markets are necessary for successful
  renewables and demand response, and that
  approximately 73 of installed wind capacity is
  located in regions with well-structured regional
  wholesale electricity markets

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But what about high residential retail
electricity prices in ERCOT?

• Natural gas is the marginal generation in ERCOT
• Approximately 72 of electric generation in ERCOT
  is natural gas
• Energy prices in ERCOT track natural gas prices,
  which are volatile and have increased since the
  retail market opened in 2002
• Currently 175 increase
• 500 increase at peak in 2005
• In contrast, other areas of Texas and US in which
  coal is the predominant fuel have lower
  electricity prices

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2. Significant Transmission Investment in ERCOT

• Over 2.2 B in transmission infrastructure
  investment in ERCOT from 1999 - 2005 (over 4,100
  circuit miles)
• Additional 3.1 B expected from 2006 - 2012 (over
  3,400 additional circuit miles)
• Texas law uses "postage-stamp" method to price
  wholesale transmission services in ERCOTi.e.,
  all costs are socialized across the region (PURA
  35.004)
• Until very recently in Southwest Power Pool,
  transmission upgrades have required participant
  funding. Now base plan upgrades have a
  cost-allocation methodology
• In 2005, Texas Legislature directed the PUCT to
  designate competitive renewable energy zones
  (CREZs) and develop a plan to construct
  transmission capacity necessary to deliver
  renewable energy (PURA 39.904)

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3. Positive Economic Incentives

• Federal Production Tax Credit
• Texas Renewable Energy Credits (REC) Trading
  Program (P.U.C. Subst. R. 25.173)
• REC 1MWh of renewable energy
• Tradable and separate from the energy
• Competitive retailers required to retire RECs as
  a percentage of retail sales to support the
  renewable capacity target

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Recommendations

• Ability to fund, site, and build transmission is
  critical to success of any RPS or REC programif
  power cant move to the load then generation
  wont site regardless of the economic incentives
• Consider renewable transmission corridors with
  socialized costs
• Allow for regional flexibility