News Room - TCPA In the News
Texas group wants nodal power to the people
Marianne Carroll
Special to Houston Business Journal
March 21, 2005
As new attention is drawn to what is in the air Houstonians are breathing and how it could be impacting their health, a number of companies in the electric power industry -- including several located in Houston -- are urging significant changes to their own industry that would allow them to help clear the air.
Texas Competitive Power Advocates, a coalition of these companies, is supporting the adoption of a wholesale electricity "nodal" market design for the large portion of Texas served by the Electric Reliability Council of Texas (ERCOT).
This new nodal market design -- targeted for implementation in October 2006 -- is under consideration by the Public Utility Commission of Texas.
If approved, this new design would reduce pollution by dispatching newer, cleaner electricity plants and would lower consumer power bills by more fairly calculating them for Southeast Texans. Power bills here are artificially higher because users are paying part of the costs to provide electricity to other parts of the state.
A nodal market design could immediately reduce the overall cost to serve customers in Houston by $886 million, and reduce costs by nearly $6 billion over a 10-year period, according to an independent cost-benefit study filed with the PUC.
Statewide, the cost to serve customers in Texas would be reduced by more than $8 billion over 10 years. An additional $1.2 billion could be saved in annual electricity production costs just by using more efficient plants to generate electricity in a nodal market.
The current "zonal" market design allows generation owners to plan the dispatch of their plants without regard for transmission congestion.
ERCOT, which oversees the state's power grid, has to step in several times a day to make last-minute calls on certain power plants to generate more or less electricity to relieve congestion on transmission lines and keep power flowing to homes, schools, hospitals and businesses.
The decentralized dispatch by generation owners in the current market often requires ERCOT to call on expensive, inefficient, polluting plants to meet reliability needs, even when those decisions don't make the best economic or environmental sense.
Under a nodal market design, ERCOT would be able to centrally plan the dispatch of generation ahead of time based on price and efficiency, leading to the growing use of newer, more efficient plants. In addition, a nodal market provides market price signals that will give companies incentive to build more of these plants.
How much better is one of these newer plants for the environment? These cleaner combined-cycle gas turbines can produce the same amount of electricity using 30 percent less fuel and with 65 percent less air emissions, according to The University of Texas Engineering Professor Ross Baldick.
Cleaner air and cheaper electricity not only are a win/win for consumers and their health, but also for the area's long-term economic development. In the competition to attract new business, surely being able to boast of lower electric costs and healthier air would give the region an advantage.
In the long term, transition to a nodal market will pay big dividends for all of ERCOT, with Houston and Southeast Texas enjoying the healthiest share of the benefits.
Marianne Carroll is executive director of Texas Competitive Power Advocates, a trade association representing more than a dozen Texas power generators, wholesale power marketers and retail electric providers.