Fewer wind curtailments and negative power prices seen in Texas after major grid expansion

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Source: U.S. Energy Information Administration, based on the Electric Reliability Council of Texas (ERCOT) for curtailments and SNL Energy for electricity prices

Curtailments of wind generation on the Texas electric grid have steadily dropped since 2011 as more than 3,500 miles of transmission lines have been built, largely as a result of the state's Competitive Renewable Energy Zones (CREZ) program. Occurrences of wind-related negative real-time electricity prices have similarly declined as the CREZ transmission expansions have allowed wind power to flow to more electricity demand areas in the state.

Wind capacity in Texas grew rapidly in 2006-09, when more than 7,000 megawatts (MW) of utility-scale wind capacity (more than half of the state's current total wind capacity) was built. The Texas grid experienced major transmission congestion as the large volumes of electricity from these wind plants, which were concentrated in the rural western and northern areas of the state, were sometimes unable to reach the population centers in the eastern half of the state. The limited transmission capacity connecting the wind production and power demand centers was insufficient for the amount of wind power being generated in the west. During these situations, excess wind generation was curtailed by the grid's operator, the Electric Reliability Council of Texas (ERCOT), in order to keep the transmission network operating within its physical limits.

In addition to wind curtailments, the regional supply and demand imbalances caused real-time wholesale electricity prices at the West Hub in ERCOT to drop, and even go negative, during periods of substantial wind generation. The negative West Hub prices (see graph above) reflect the region's local oversupply of wind power compared to its electric demand and the inability to move the excess wind power to other areas with more demand. Negative prices occur when generators are willing to pay for the opportunity to continue generating electricity.

Wind plants can offer power at low prices because they have low operating costs and, in particular, no fuel costs, unlike fossil fuel and biomass plants. Wind plants can offer negative prices because of the revenue stream that results from the federal production tax credit, which generates tax benefits whenever the wind plant is producing electricity, and payments from state renewable portfolio or financial incentive programs. These alternative revenue streams make it possible for wind generators to offer their wind power into the wholesale electricity market at prices lower than other generators, and even at negative prices.

To address the wind-related transmission constraints, the Public Utility Commission of Texas (PUCT) in 2008 established five "competitive renewable energy zones" (CREZ) with high wind power potential and authorized a series of transmission expansion projects that in total would allow 18,500 MW of wind power to be transported from the five CREZ zones to the rest of the state.

As the CREZ transmission projects have been completed over the past few years (see maps below), the amounts of wind curtailments and wind-related negative electricity prices have correspondingly decreased (as seen in the first graph). As of the end of 2013, the scheduled program completion date, all of the CREZ projects had been energized, at a total cost of $7 billion.

Source: Public Utility Commission of Texas, April 2014 Competitive Renewable Energy Zones (CREZ) Program Progress Reports
Note: Click to enlarge.

Source: Public Utility Commission of Texas, April 2013 Competitive Renewable Energy Zones (CREZ) Program Progress Reports
Note: Click to enlarge.

Source: Public Utility Commission of Texas, October 2012 Competitive Renewable Energy Zones (CREZ) Program Progress Reports
Note: Click to enlarge.

The elimination of transmission constraints has helped wind generation in Texas reach new heights over the past year. As reported in yesterday's article, ERCOT recently recorded a new peak record for wind output in March 2014 of over 10,000 MW. And according to ERCOT's annual report on the Texas renewable energy credit trading program, wind generation in the state was up 13% in 2013 compared to 2012. The growth is mostly attributable to the large number of wind plants added at the very end of 2012 (more than 1,000 MW was added in December 2012), but also partly a result of the reduction in wind curtailments.

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