Amazon warns Texas: Don’t pass bill that would drive up wind power costs

Wind turbines in Colorado.

Fallout from Texas’ statewide power outages in February continues to spread. Today, the Texas House of Representatives is scheduled to debate a bill that would require power producers to bear the costs of services that help keep the electrical grid stable.

If the bill passes, it would “unfairly shift the cost of ancillary electric services exclusively onto renewable generators rather than all the beneficiaries,” according to a letter written by the Partnership for Renewable Energy Finance (PREF), an industry group, and signed by Amazon, Berkshire Hathaway Energy, Goldman Sachs, and a number of other firms. 

Amazon and other big tech firms have invested heavily in renewable power, seeking to spruce up their images while cutting their power bills. Costs for wind and solar have dropped precipitously in recent years, making investments in wind farms and solar plants attractive to power-hungry data center operators like Amazon, Facebook, and Google. 

“It is important to note that these changes neither enhance electric reliability nor lower consumer costs,” the letter states. “They appear to be premised on the assumption that renewable energy was disproportionately responsible for the state’s February power outages, a thesis that has been unequivocally discredited.”

The bill would require the grid operator, the Electric Reliability Council of Texas (ERCOT), to “directly assign” ancillary service costs to wind and solar power, specifically. The PREF letter counters that not only do all generators utilize ancillary services, but costs for those services have remained flat over the last decade while wind and solar have grown by more than 250 percent.

Ancillary services are the levers that operators can pull to keep electricity flowing. Electrical grids are finely tuned pieces of infrastructure that must be kept in balance at all times. Uncontrolled surges in demand or generation can take down key pieces of equipment, like transformers, sending entire regions into blackout. Ancillary services cover a wide range of functions: operators might call on peaker plants to ramp up generation to counter an anticipated spike in demand, or they might rely on battery storage to stabilize within seconds threatening dips in frequency. They might also order some plants to shut down to prevent the grid from becoming overloaded.

Most electrical grids are currently set up to distribute power from fossil fuel and nuclear plants, which in most cases can be ramped up and down at will. For wind and solar, utilities use weather forecasting to determine when supplies will be high and low. As more wind and solar power is added to the grid, operators have to more carefully prepare for these fluctuations. 

Texas has become a bright spot in the wind and solar industries, together producing around 28 percent of the state’s power. But the state’s policies discouraged the development of energy storage projects that could smooth imbalances in supply and demand as more intermittent wind and solar sources join the grid; the deregulated market has made it challenging for battery projects, which are the most responsive and flexible to install. When comparing energy storage capacity with California, another big state with a history of power problems, Texas is lagging. California, which receives over 30 percent of its electricity from wind and solar, makes up for its variability by buying power from outside the state and by tapping grid-scale storage. The state already has 500 MW of battery storage installed—more than double Texas’ 225 MW—and is moving swiftly. By this summer, California will have almost 2,000 MW of storage available. Texas will have to move quickly to catch up in battery storage, and it will have to install much larger connections to neighboring grids, something the state has been hesitant to do.

Extreme weather

Texas’ grid was vulnerable when the deep-freeze hit the state. In addition to the lack of storage, several plants had been taken offline for maintenance. When the extreme weather hit, it forced more than 30 GW of generating capacity offline. Nearly every source was affected, including natural gas, coal, nuclear, and wind. Water lines and valves froze solid, wind turbine blades iced up, and equipment flooded when ice and snow melted. The problem was compounded by the fact that ERCOT predicted a reserve capacity of about 1,350 MW. Together, the problems caused widespread outages for days, leaving 4.5 million customers without power and killing at least 111 Texans.

Though this cold snap was particularly extreme, Texas isn’t a stranger to cold weather. The state experienced a similar, though less severe, cold spell in 2011, which left 3.2 million customers without power. After that, power producers were encouraged, though not required, to winterize their equipment.

Now, the state might be taking a stronger stand on winterization. Another new bill proposes fines of up to $1 million per day for electricity and natural gas companies that fail to prep their equipment. Winterizing natural gas, coal, and nuclear plants alone could cost $400 million. Preparing gas lines for the cold, which similarly froze and forced natural gas plants to shut down, would cost billions more.