Energy Central-News Article

Sep. 13—The head of San Antonio's CPS Energy says Texas hasn't done enough to ensure the state's power grid can make it through a hard winter without another emergency.

Fresh off the most stressful summer on record for power operators, CPS President and CEO Rudy Garza is worried the biggest challenges of 2023 are still to come.

"What we've seen here in Texas is the winter peak rivals a summer peak these days in those moments where it gets really, really cold across the entire system," he said during a panel hosted this week by the United States Energy Association.

And, he said, state regulatory authorities have yet to adequately address the issues that crimped natural gas supply during a winter storm in 2021, leaving millions of Texans in the dark for days and more than 240 dead.

"I believe it's still a risk," said Garza, who oversees the nation's largest municipal utility.

He shared his thoughts on natural gas accessibility, the role of renewables, rising rates and other challenges facing Texas utilities during the discussion on grid reliability and changing dynamics in power generation. The United States Energy Association, a nonprofit and nonlobbying organization, hosted industry experts, journalists and a power operator from Northeast Texas in its discussion.

Renewables future

Garza made clear much of his focus is on how best to use natural gas and renewables such as solar power together — and that it's not an either-or scenario.

"The transition that's happening is happening, and it's going to happen whether you like it or not," he said. "So operators across the system are going to have to learn how to make it all work together."

CPS has made commitments — which will ultimately depend on ERCOT's final approval — to shut down its remaining coal plant by 2028 and convert another into a natural gas plant.

Among other additions to its sources of solar power, CPS recently started accepting bids to add 50 megawatts of community solar, meaning that more of its customers will own panels, or portions of panels, to offset their own power use and costs. But the increasing reliance on renewables also means reducing the cost of solar and adding battery storage so that power can be utilized after the sun goes down, Garza said.

"And then I've got to also focus on ensuring I've got enough dispatchable power to cover my system," Garza said. "Not so much even for the summer months — it's more the winter that I'm concerned about."

Dispatchable power is the industry term for power it can turn off and on — usually a reference to gas- and coal-fired power plants or nuclear energy.

The biggest lingering question for Texas operators, Garza said, is how best to manage the transition from a grid powered mainly by gas and coal to one that relies more on renewables but maintains enough dispatchable generation to get through the tightest periods. That echoes concerns repeatedly raised this summer by the chief executive of the Electric Reliability Council of Texas, the state's grid operator.

Gas supply concerns

Gas-fired power plants typically don't have much fuel storage on site — even though they need that fuel to run their plants — but rely on a flow of natural gas through pipelines across the state, such as from the Permian Basin in West Texas. But that flow was interrupted when wellheads froze and distribution infrastructure lost power during Winter Storm Uri in February 2021.

"I'll tell you, probably my No. 1 priority and CPS Energy right now is getting my gas supply strategy right and diversifying where that gas is coming from," Garza said.

That priority was echoed by David Naylor, president of Rayburn Country Electric Cooperative Inc. The Rockwall-based co-op is a nonprofit transmission utility with four member companies outside of Dallas.

"We actually acquired a natural gas facility this year, really as a fallout from the Winter Storm Uri," Naylor said, referring to the 2021 deep freeze. "That was a big step for us. It came down to: We need to be able to control our own destiny here."

His co-op's new generating plant in Grayson County runs on gas delivered via interstate lines that are under federal regulation, he said. Having a plant that relied on intrastate lines and Texas regulation "was almost just a non-starter for us."

Naylor said his co-op's demand load can swing as much as 30% or 40% during a cold front, so ensuring generation is key.

"Being prepared for that, it's tough," he said.

Garza didn't let renewables get lost in the discussion about natural gas, though, pointing out how vital the cushion from solar power has been to the grid in keeping up with this summer's record-breaking power use. It's also helped keep the cost of power lower during some of this year's hottest days.

'Kind of ironic'

But again, he said, the supply of gas required to operate plants CPS can turn on and off and that ERCOT can rely on to keep the grid in balance must be made reliable. Texas utilities also need to have dispatchable power at the ready for sundown when solar power drops off or whenever wind generation drops off.

ERCOT CEO Pablo Vegas has also voiced concerns this summer about the state's fleet of aging gas- and coal-fired plants being replaced too quickly by renewables.

"We're in a place now where we are dependent upon renewables to meet demand," he said in a late July interview, but worries about them too rapidly outgrowing dispatchable sources keep him up at night.

The reality of such challenges facing the nation's power supply wasn't lost on another panelist.

"It's kind of ironic that the turn we've seen to renewables is actually increasing our reliance on natural gas," said Howard Gugel with the North American Electric Reliability Corp., a nonprofit that works to assure the adequacy of the nation's power supply. "Because we need generation that can follow loads and follow that renewable generation as it goes up or down during the day."

The power pros also discussed cyberattacks — which they all agreed power companies are fighting off in greater numbers than ever — and a labor force that's changing in step with the industry itself.

Garza and his Rockwall counterpart agreed that while they expect new buckets of federal money from the Inflation Reduction Act to become available to support renewables, they have yet to reap any of those benefits. Garza described it as a "slow go so far."

He also addressed a key issue on the minds of many CPS customers: their rates.

The utility is poised to ask the city to approve a rate increase of about 5.5%, by the new year. Garza said the biggest challenge for all utilities across the country now is keeping rates affordable while still meeting policy goals based on regulations in response to climate change — which are coming both from the local and federal level.

"For us, it's going to be billions and billions of dollars that we're gonna have to layer in over time," he said. "It's going to be a real challenge for our customers to understand why these investments are necessary."

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