Policy & Regulation

ERCOT: What’s changed since Uri and what weaknesses remain

Everyone agrees Winter Storm Uri was a wake-up call. While the ERCOT grid operated successfully through Winter Storm Landon, some work remains to ensure the grid doesn’t snooze during the next major winter weather event.
ERCOT: What’s changed since Uri and what weaknesses remain
(Original public domain image from Wikimedia Commons).

By Barbara Clemenhagen, V.P. of Market Intelligence at Customized Energy Solutions.

Last February, Winter Storm Uri rolled through Texas and triggered controlled outages effecting more than four million customers, leaving some without power for days. Considered to be one of the biggest power outages in U.S. history, Uri spurred leadership changes at the Public Utility Commission of Texas (PUCT) and ERCOT, along with several adjustments within the ERCOT market.

So, when Winter Storm Landon hit Texas almost exactly a year after Uri, all eyes were on how the ERCOT grid would hold up under the new changes.

Major changes implemented following Winter Storm Uri

Winter Storm Uri brought sustained, record-low temperatures, and widespread freezing and icing. Frozen instrumentation and wind turbine blade icing were some of the biggest contributors to power outages during Uri. As such, weatherization was a top priority post-Uri.

New weatherization rules put in place by the PUCT and ERCOT now require electric generation and transmission owners to protect their cold weather critical components that are susceptible to freezing and icing. ERCOT released its Final Winterization Report in January, which found 98.3% of the total ERCOT generation fleet inspected had met the new weatherization standards.

The other big contributor to power outages during Uri stemmed from natural gas supply issues.  Some natural gas facilities had frozen equipment or were not designated as critical loads, which led to an inability to deliver fuel. Additionally, some natural gas providers participated in ERCOT’s Emergency Response Service (ERS) program, which pays qualified loads and generators to curtail electricity use when the grid needs more power during an emergency. When these natural gas facilities were ordered to go offline, fuel supply and pressures decreased and some power plants couldn’t get enough high pressure natural gas to produce electricity, compounding the energy shortage issue. Under recent changes, natural gas providers are no longer allowed to participate in the curtailment program.

There’s also been an overall shift in the market to move toward a command-and-control approach to enhance reliability. ERCOT has taken a much more conservative approach in recent months, operating with added reserves to avoid a repeat of Uri. As part of this, ERCOT is bringing more generation online sooner as insurance to protect the grid.

Changes were also made that allow for the ERS program to be deployed before an emergency occurs, and for earlier price signals via the Operating Reserve Demand Curve (ORDC) formula to incentivize additional generation to come online and for large consumers to adjust their demand.

During Uri, ancillary service prices skyrocketed to over $25,000 in some instances, leaving generators, energy companies, consumers, and others with billions of dollars in costs. Since then, the system wide offer cap has been lowered from $9,000 to $5,000 for both energy and ancillary services, reducing market participants’ risk of exposure to high prices.

ERCOT is also introducing new products to add new revenue streams opportunities for generators through incentives and will help keep the grid running smoothly. The first is a firm fuel product, which will pay generators for having onsite fuel storage. Another, which is being fast tracked, is the ERCOT contingency reserve service that will allow ERCOT to procure reserves on a market basis, rather than relying on out-of-market deployments.

Additionally, ERCOT will compensate generators for voltage support service. While the development of this product is still on-going, once it does come to fruition, generators will be compensated for the reliability benefit that they provide to the grid.

These market adjustments helped prepare the grid for future extreme winter conditions, such as Winter Storm Landon, though there are still some vulnerabilities.

Why Winter Storm Landon was different and what vulnerabilities remain

In Texas, Winter Storm Landon ran about 20 degrees warmer than Uri’s deep freeze last year, so much of the weatherization that was enacted was not fully tested.

Although almost all of the natural gas infrastructure is designated as critical load under new rules, the new weatherization standards for electrical power plants do not apply to natural gas entities. Given that natural gas fuels a large share of the electricity generation in Texas (52% in February 2020), this leaves a big vulnerability in the grid.

If this vulnerability does not get addressed through future regulatory changes, it could be resolved contractually in the commercial market. For example, power plants may begin stipulating contractual requirements and noncompliance penalties for fuel delivery during extreme weather to ensure deliverability.

During Winter Storm Landon, ERCOT increased the amount of reserves in the market. At peak points, ERCOT had over 10,000 MWs of reserves compared to ERCOT’s minimum contingency level of 3,000 MW.  This conservatism comes at a high price and ERCOT will need to find a healthy balance between market costs and reliability.

This conservative approach impacts generators’ bottom line as the plants are holding reserves, or online but unloaded and not actually contributing energy to the market. End-consumers are also absorbing the costs of having this much reserve energy idling. The end result is suppressing market prices and not reflecting true market conditions because so much capacity is available.

Everyone agrees Winter Storm Uri was a wake-up call. While the ERCOT grid operated successfully through Winter Storm Landon, some work remains to ensure the grid doesn’t snooze during the next major winter weather event.



Barbara Clemenhagen is an expert in regulatory advocacy and market design, with a focus on energy markets. During her extensive career, she has taken on projects that range from strategic to operational, and include strategy and business planning, market design, regulatory, project finance, acquisitions and divestitures. Barbara currently serves as Vice President of Market Intelligence at Customized Energy Solutions.

Tags