Approximately 4,400 megawatts of such capacity already exists within ERCOT, but the program would incentivize the creation of more.
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ERCOT and the PUC have spent the last several months working through details of the proposed “firm fuel product,” which policymakers see as one tool among several to prevent weather-related generation outages similar to those that incapacitated Texas last February.
Under the program, ERCOT would issue periodic requests for proposals in which generators could receive payments in exchange for commitments for having on-site fuel available in advance of the winter season. Approximately 4,400 megawatts of such capacity already exists within ERCOT, but the program would incentivize the creation of more.
In parallel memos filed January 26, PUC commissioners Lori Cobos and Will McAdams laid out implementation guideposts for the new program. Although writing separately, both commissioners agreed that only gas-fired generators with at least 48 hours of on-site fuel should be eligible for participation.
Commissioner Cobos wrote that the ERCOT board must approve new rules for the program by March so that the organization’s staff can quickly begin work on its computerized settlement systems to accommodate the new program. “ERCOT should procure the product in a phased-in manner, which would require ERCOT to issue its first (request for proposal) no later than August 2022 to send a price signal to the market and launch the product by next winter,” wrote Commissioner Cobos. She added that ERCOT should then increase use of the product during future winters.
Budget Limit and Price Cap
Commissioner McAdams, in his separate memo, said ERCOT should enforce a yet-to-be-determined budget limit and cost cap as they issue requests for proposals. He wrote that implementation questions remain, such as how much growth in firm fuel resources should be targeted, and whether units with off-site but accessible fuel should be allowed to participate.
“The over-arching objective is to have expedited implementation so that we know that we have our generators out there, building tanks, scouring tanks, purging tanks in the next two years,” said Commissioner McAdams during a discussion of the program at the PUC’s January 27 open meeting.
The new firm-fuel product is contemplated in Senate Bill 3, an omnibus energy reform bill that Texas lawmakers adopted last year in response to last February’s power outages. Experts have identified gas supply failures as major contributing factors for those shortfalls. Commissioners Cobos’ and McAdams’ memos relating to the Firm Fuel Product can be found on the PUC website, under Docket No. 52373.