Meredith Angwin is a chemist and author, most recently, of Shorting the Grid: The Hidden Fragility of Our Electric Grid. In her second appearance on the podcast, Angwin explains why the blackouts in Texas and elsewhere are happening, the “fatal trifecta” (over-reliance on renewables, natural gas, and imported electricity), why economic incentives are needed to assure reliability, and why the grid needs power plants that have on-site fuel storage.
Robert Bryce 0:04
Hi and welcome to the power hungry podcast. I’m Robert Bryce. I have power all of a sudden, for the last two weeks, about 12 hours ago our lights came on after 45 hours of being in the cold. So I am power hungry, and man Am I happy to have electricity and I am also happy to have a return guest. My friend Meredith Anglin. Meredith, welcome to the power hungry podcast.
Meredith Angwin 0:27
Very happy to be here. Thank you for asking.
Robert Bryce 0:30
So, Meredith, we talked I think in October about your your recent book, shorting the grid, and you are the hidden shorting the grid, the hidden fragility of our electric grid, which is available at all fine booksellers. But I am a victim of a recent blackout. And you’ve introduced yourself before, let’s jump right in, what is going on? Why am I getting blacked out? What is the story? Well, the
Meredith Angwin 0:56
story is, in my opinion, basically, grid mismanagement. And I hate to say that because it isn’t that the managers of the grid are just screwing up right and left, it’s just the rules that set up the grid are are do not care about reliability, they just really, they don’t have anything set up so that you could be reliable. As an example, most grids
Unknown Speaker 1:24
Meredith Angwin 1:26
15% or so redundancy, that is that they have 15% more power plants available than they would need at what they consider to be peak demand.
Robert Bryce 1:42
And is that what’s called the reserve margin is that wait
Meredith Angwin 1:45
a minute or so reserve margin? And the idea is that at peak demand, some portion of power plants won’t be available because no power plant is available all the time. But with a 15% reserve margin, you’re probably going to be okay. Texas has always had the lowest reserve margin in the continental United States as far as it’s been like 8%. If you follow things like our to insider and stuff, it’s always like, I mean, trade magazines, I shouldn’t have just named one. You always say, well, Texas is projecting that they’ll squeak through the summer again, despite low margins. And you probably see headlines event like that in Texas, you don’t have to go to a trade magazine if you’re already in Texas. So I think that that is the main thing that is going on. Now. One question is why our margins low? And the answer is you got to look at economic incentives. If you don’t have a promise that you’ll be paid for building a new plant. Maybe you will build it, because after all, you know how many hours will be it beyond the grid, it made it in the old days, and I don’t want to get on the static because they had their problems too. But in the old days, investor owned utility or not a restaurant could be any utility. It was vertically integrated and all the power plant it owned it owned or rented transmission lines it own the substation and own the wire to your house. And if you wanted to call somebody up and say something’s gone wrong, you knew who to call nowadays, you don’t know who to call, because it the RTO is the one who dispatches power plants but the RTO can order a power plant to be built the piece.
Robert Bryce 3:45
So if I can interrupt for just a second here, because I want to make sure everybody’s following No, no, no, no, no, no. The RTO is or the regional transmission organization. So here in Texas that’s are caught in the US it’s miso. In the east, it’s PJM New York has its own the New York ISO and then in New England, the New England ISO right so yeah. ISO New England. So rather than having an integrated the old model, which was the fully integrated and regulated utilities, now that’s all been disbanded in favor of regulation or oversight, I would maybe as the right word, by the artios.
Meredith Angwin 4:26
Yes, the act to still regulate they okay, right. They, they they they dispatch, they set up the auctions and they they design rules for the auctions. What is what are these auctions, okay, these auctions are the distribution utility, which is actually going to send some power to your house bids on a generator producing the power, so it got to get the flower power from somewhere. It doesn’t have its own power plant. So it bids in these auctions and the Archie O’s like I’d set up the rules for the auctions. And these rules don’t have anything to do with reliability. I mean, and that’s the major problem. And they also don’t have anything to do with building a reserve margin. Plant, somebody wants to build it, and they can get permission from the PC, and they can get permits they can go on. But if they, if they, if they don’t want to build it, nobody’s gonna say, you know, we need a new power plant. Here we are, this area is getting a little shaky, we need to do more.
Robert Bryce 5:37
So, so let me interrupt because I think this is key in terms of, you know, I’m in Texas, as I said, we spent 45 hours in the dark and the cold are all in the cold and a lot of it in the dark. But we were lucky we have natural gas when we plugged in natural gas when we bought this house, we had plenty of firewood we had water the supply. So I mean, yeah, I’m not gonna cry about it. We’re, you know, we’re pretty comfortable. But the in to bring it back to your point about the economic incentives and the lack of reserve margin to go back to that. So fundamentally, are you saying in Urquhart, that it was the lack of reserve margin, that was there wasn’t enough spare capacity then to come on when things stripped off?
Meredith Angwin 6:19
Well, that was the beginning of it, for sure. The next stage is our part of the two parts of the what I call the fatal trifecta, which is that there was a lot of reliance on renewables, specifically wind. Now, in a way, there was a reliance on wind, because if you watch the pro renewables and anti renewables, people going at it right now, the pro renewables, people said, we were making as much wind as we were expected to make. I mean, they basically, we only make about, you know, 10% of the wind, during the winter, during the winter is in the wintertime, we don’t make a lot of wind here. So the grid wasn’t expecting more than we were making.
Robert Bryce 7:08
So that’s, so they’re so they’re saying, Well, our capacity factor was expected to be low. Therefore, we’re not our capacity factor. That is how often we’re going to be actually producing power at full at full tilt. Are they the RTL? arcot wasn’t expecting much from us? We didn’t deliver much, therefore, it’s not our fault. Is that the essence of
Meredith Angwin 7:28
the essence of their argument, then the other part of the argument is, Well, yeah, but you know, it’s supposedly Texas this like, 30% of its total power for weight. And you can just say, oh, and bad weather, we go away. And we’re all supposed to say, yeah, yeah, that’s fine. That’s fine. Well, we love it. No, you know that. You know, I mean, so I think one of the things is that there always has to be something that’s backing up, wind or solar, because wind and solar go away, and come on, more or less when they want to. Now you can make them not come online, if your lines are overloaded, you can curtail when it’s called, you say, I’m sorry, wind turbines don’t put your power online, but you can’t order it out. You can’t say, hey, a more turban started spinning now, because you know,
Unknown Speaker 8:24
it can’t be
Meredith Angwin 8:26
can’t be dispatched, it can be dispatched, it can only be curtailed, it cannot be dispatched. So here we have the fact that we have something that may not be available, everybody knows it may not be available. So you have to have pretty much 100% backup of that with something which you can dispatch. And in Texas, that is natural gas, most places, it’s natural gas. Now you say well, we have coal in Texas, and we have we have nuclear plants in Texas. And that’s true. And that means that you’ve got a kind of baseline, and that the wind or natural gas, or on top of that. But the thing is if let’s say all you’ve got going is your baseline and all of a sudden the wind goes away and the natural gas has frozen bounce, and you can’t get it either, then you have a problem.
Robert Bryce 9:20
Right. So you, you’ve talked about this, and we’ll follow up on the fatal trifecta, because I think this is in your book. You make a lot of great points. But he made this point when we talked when we talked on the podcast last time, specifically about California. What’s the fatal trifecta?
Meredith Angwin 9:38
the trifecta is the following. You decide that you’re going to be a grid that is going to have a lot of renewables on it. Okay, and you know that renewables go on and off, you say, Okay, I’m going to back it up with a lot of natural gas. So you get, so you say, Oh, well, natural gas, right. The trouble with natural gas is just in time delivery, it can be interrupted, it can be interrupted by the simple fact that in really cold weather, lots and lots of houses buy natural gas and heat their houses with it. And there’s less available for the power plants for many reasons. power plants are not in front of houses in line for natural gas. Because the idea is a power plant, for example, could have kept some just sort of fuel on site and use it. If you have a natural gas furnace in your house, you don’t also have a lot of ability for different nozzles, different types of fuels, and so forth. Right. So anyway, so the first part of fragrant tire factor is a lot of renewables, which go on and off when they want to the second is backing that up with just in time natural gas, which may not be available, because all of a sudden, it’s in tremendous demand in the winter, all of a sudden, other power plants may be icing up. And so you want to put on more natural gas power plants, but they don’t have the gas. Okay. And the third part of the fate trifecta is in is much more visible in California and in New England than here. And that is that people just say, Hey, you know, we’re not the only grid in the world. If we’re having problems, we’ll get some from our neighbors. The reason that that’s a problem is if you’re having problems because of weather issues, weather issues, don’t stop at the grid line, weather issues go across big swatches of a continent. So the first time I encountered this, we were having a polar vortex in New England. And I was checking where’s our power coming from? You know, I didn’t know that much about it. This was in 2013, I think. And I thought, well, for heaven’s sakes, Hydro Quebec is supposed to send us more power, they’re sending us half the power they usually do. Well, you know why? Because they needed it in Quebec. And, you know, when you get right down to it, and then the other thing is, and we could go into this, they had I didn’t know this, they had actually only taken on an obligation to send us half the power. Either the rest of this, what other power we got above that, that was their goodwill toward us, and they needed it, oh, we can sue them for not sending it, we were only obligated, they were only obligated to send us half the power that they usually send?
Robert Bryce 12:31
Sure. So just to review them, the fatal trifecta is too much reliance on renewables, just in time natural gas and imports. And that was that was really the gist of the failure in California, which I think all the reviews of that have pointed that exact same thing. Well, so let me shift gears a little bit, because there’s a lot of finger pointing over what’s going on in our car, right. And as you pointed out on Twitter, it’s just very interesting to watch the pro renewables crowd jumping up and down saying, Oh, it’s not our fault. It’s not our fault. It’s not our fault. It’s the gas guys. Right? But to me is, you know, I’ve written about this, oh, well, the view of the all renewable crowd is we’re we’re gonna eliminate gas. And now suddenly, they’re saying, Oh, no, we don’t have enough gas, which to me is, I mean, pretty ironic. And I’d say it’s funny, except that it’s indicative in my view of, well, is it a fatal flaw in their thinking? How do you how do you see their positioning on this?
Meredith Angwin 13:30
I seen is totally inconsistent if you do I mean, in other words, you know, if they’re going to say we were we were doing great, it was a gas guys at fault, I think really thinking that they could do 100%. I mean, they they count on those gas, guys, because I mean, command, imagine, you’re totally getting, you know, maybe 50% of the wind energy that you think you that you have installed wind turbines,
Robert Bryce 14:01
the total capacity you’re talking about. Yeah.
Meredith Angwin 14:03
Okay, so you’re only getting 15% and you’re backing it up with gas. If you had to back it up with wind turbines? Well, first of all, the wind might not be there at all, there’s such a thing as alone. Okay. And the second thing is that, let’s say you have to take that the, the wind turbines and you take that 15%, you’ve got to have enough Winterburn so that that 15% is all the wins you need. That is going to be a lot of winter, a lot of expense. And it’s and the trouble is I don’t like to talk about expense. And you know, I don’t like to talk about it, because it’s the crowd that is very concerned with we got to shift to 100% renewables. They go back and forth between we have to save the planet, even if it’s more expensive and renewables are the cheapest thing around Anyway, not counting the fact they have to be backed up? Well,
Robert Bryce 15:04
that’s a great point. Because one of the things that I that I’m looking at and I’ve talked to some people in the gas business is that the electricity bills that people are going to see in the wake of this Blizzard are likely to be gargantuan. Have you have you thought about that? Or what? What’s your any visibility on that?
Meredith Angwin 15:22
Well, I don’t know how much they’re going to be allowed to pass through to the end user.
Unknown Speaker 15:27
The utility is really limited.
Meredith Angwin 15:29
They may be limited. In other words, what you may be seeing is utilities going bankrupt. And he was and and this was this happened in California during the very early outage, and they, they weren’t allowed to pass through all the money they were paying. During a scarcity condition. They’re paying all this money for electricity to the generating plants, and then they could pass it through to the to the ratepayers. And, and I think that is something that may be happening again. And as a matter of fact, I’m following it a little. And I mean, I’m trying to follow this best I can. But it may actually be happening now. Because apparently, some utilities have gone to the situation and said, some distribution utilities have gone into the situation and said, I actually can’t afford to buy the electricity right now. I can’t get reimbursed for it. I can’t afford to buy it. All I can do is blackout my service area. That’s what I got to do. Because I mean, there’s no no magical pot of money for me to pay this stuff.
Robert Bryce 16:39
Right. Well, and that seems to be a direct follow on to this disaggregation. Right. What? It’s interesting, my first Well, I think it’s interesting, I hope you do but my first book was on Enron, I published it 20 years ago, when Enron went bankrupt, we were using about 5 trillion cubic feet of gas per day, or 5 trillion cubic feet of gas per year for power Gen. Now it’s over 11 trillion cubic feet. So we’ve seen that in the last 20 years of complete change in the natural gas market and the natural gas is role in the electricity business. But what I’m hearing now is that this the disintermediation which Enron word This is the point that I’m getting to? Well, we’re going to disintermediate. So Well, what’s that? What happened in the electric largely in the electric utility business, including here in Texas, that there are these retail electric providers? They’re the distribution companies, they’re the generators, but ultimately, the buck doesn’t stop anywhere. Right. So that there’s no one this is this your fundamental point that there’s no one ultimately responsible for reliability? Yes, that is the point. And, and one of the things is that there are groups that advise on it, for example, a
Meredith Angwin 17:51
national electricity robot reliability console NERC may may bring up a statement saying, we consider the Texas reliability to be sub optimal. We think they should do something about it. No, can’t be isn’t responsible for for Texas reliability, is only responsible for saying we’ve made a we’ve made a study and it isn’t good. Okay,
Robert Bryce 18:14
so, so. Okay, well, I’ll come let’s come back to NERC in just a minute. So you said, Well, okay, why did nuclear outperform? Because I think that that’s like you I believe if we’re serious about decarbonisation, we need nuclear, we need a lot more. And yet we’re seeing this year plants in Illinois and New York are slated for closure. But South Texas project and Comanche peak, both of all the forms of generation, those plants did better than any other in staying online. Why? Why Why? Why were the nuclear plants so good in the blackout?
Meredith Angwin 18:50
Okay, couple of things. First thing is that they have fuel stored on site. Just like we decided to put nuclear power plants on our Navy ships, some of them because then you don’t have to be refueled at sea, or every field in a port that might have turned hostile to you. You see, right. What do I maybe ships because the power is there? Well, a nuclear plant has 18 months worth of power on site in the reactor ready to go now. It’s been running for six months, it only has a year’s worth. But what I’m saying is that
Robert Bryce 19:29
that’s still but that’s still a year’s worth of fuel that they don’t have to wait that they don’t have. There’s no truck it’s not gonna be stopped by an ice storm or something else that that. And that was one of the key issues that Rick Perry pushed right under that when he was Secretary of Energy and it was met with this fierce backlash didn’t know
Meredith Angwin 19:47
they that they just absolutely laughed at him. They thought Oh, yeah, sure. He’s just trying to save coal. That’s what he’s trying to do. And I wrote in my book, Rick Perry comes from the state with a lot of natural gas reserves. So if he said, we can eat more than natural gas, we need stuff. We need fuel stored on site and some of our power plants and many of our power plants. He’s not saying that because he hates natural gas. He’s saying that because he knows that just in time delivery is not a very resilient model.
Robert Bryce 20:19
Well, and that’s such a key because that’s one of the things that to me it, and I wrote it in the piece that I published in Forbes on Monday that we’ve had all this talk about resilience in in our society recently after 911. After superstorm Hurricane Sandy, after obviously, we’re still in the midst of the Coronavirus. And here was Perry saying, Well, no, this is a method of resilience as a way for heart, you know, for energy security. And it got absolutely nowhere. I mean, I was really, as you point out, whiskey was ridiculed. But, but it wasn’t a DLP decision, right. It was a firk matter was that was that ultimately their responsibility of trying to enforce it? How did that play out? I forgotten?
Meredith Angwin 20:59
Well, the way it played out is he didn’t get to do what he wanted to do. And the reason was, that, as I said, in my book, he doesn’t want you to name that fuel. It doesn’t want it wants everything to do with a market where all fuels are treated the same? Okay, no, no, you know, you don’t get to say natural gas is good for this. And nuclear is good for that you treat them all the same? Well, this is absolutely ridiculous. I mean, it’s sort of like trying to build a business and saying, Well, I think that the, the engineers should have really, really good spelling skills. And, and, and the people who are in our public relations department had better really understand the engineering they’re talking about, and be willing to actually make suggestions about it. And I mean, you know, people, different people have different skill sets, different fuels have different skill sets, if you look at it that way. And, and, and and yet, firk was like, No, no, it’s all done by the auctions. And the auctions have to treat everybody the same. And so you go around saying, We’ve got to store fuel on site, you’re giving an advantage to the fuel that’s stored on site you that isn’t alone. No, no, no, don’t do it.
Robert Bryce 22:24
I hear in your voice this kind of, well, it’s not it’s not anger. It’s just kind of this frustration, or how do you describe your feeling about it? Because I mean, you’ve lived with these ideas. I know how hard it is to write a book. And now you’re seeing this real life situation that you you wrote about worried about thought about for years? Is there any feeling of vindication? Are you just mad that no one was really paying attention?
Meredith Angwin 22:51
I think I’m more mad than no one. No one was paying attention. I mean, I feel I feel like somebody who has been running around saying, you know, those guys, they’re mashing the troops on our border. Have you noticed? I mean, they’re mashing them. I mean, we can see even the satellites. Well, you’re vindicated if they invade, but it doesn’t make you happy.
Robert Bryce 23:24
I like I like that analogy. So back to back to the this idea that Texas being an it was an energy only market, right, no capacity payments, we’re gonna have a sky high number, if we have, you know, peak demand will those those generators will be able to make the money during those times of peak demand. So the short question is, is this a market failure?
Meredith Angwin 23:46
It’s a market failure. And I would like to say, though, that everybody’s blaming it on the fact that it’s 10, Texas has energy only and doesn’t have a capacity market. We have seen similar market failures in New England. It didn’t get all the way to New England has a capacity market. But when it comes right down to it, the power plants don’t go online, if they can’t afford to get natural gas and ends and nothing is really setting up a market is not an answer to having overloaded natural gas pipelines that can’t deliver as much as they need to deliver. I mean, what you have to do for that is build the pipelines and build incentives to build plants that have fuel stored on site so that not every single bit of fuel has to come through the pipeline. I mean, I guess,
Robert Bryce 24:40
if I if I if I can interrupt there because I think that’s a critical point that the gas the gas generators, and as I understand it, didn’t have pipeline capacity and and firm delivery contracts, right that they were interruptible contracts. So that was goes to your point about well, they weren’t going to go ahead and spend that money too. Make sure they had firm delivery because it would, there was no to go back to your point about the economic incentives weren’t there?
Meredith Angwin 25:06
That’s right. There’s no economic incentive for them to pay extra for gas for firm delivery, because what’ll happen is, let’s say, let’s say there’s no crisis. And there’s a power plant that didn’t make a firm contract. And a power plant that did the power plant they did is paying more money, but they’re both getting the same money on the auctions. Okay. Now, let’s say there’s a crisis. So the power plant that didn’t get that didn’t have firm delivery may not be able to get online. But let’s say you can get online some of the time. Well, both of those power plants are going to make that those really high prices that are running on the auctions. So you see, the thing is that the power plant that didn’t get a firm contract, may be doing just fine. Because if it gets on at all, it’s going to make tons of money. I have a section in my book, and I know that you’re going to be interviewing a friend of mine, Jim bright, fairly soon, but he he is a really good explanation of what he calls and many other people call the search for the missing money. That is the power plants can’t make it on selling kilowatt hours at the average auction price, they end up not being able to buy fuel if the fuel gets too expensive. I mean, and so I guess what I’m trying to say is that that there is no incentive for a plan to have that firm price. Confirm contract, let us imagine that a plant decides it’s going to have that firm contract
Robert Bryce 26:49
for just to remember, just to remind you, everybody’s that’s for firm delivery of the gas. So if I own a power plant, and I need a billion cubic feet of day, I’m going to get a contract with both the supplier and the pipeline that guarantees at a certain price that I’ll get that billion cubic feet per day no matter what. And I have to pay a premium for that. Because if I get the guaranteed delivery, that’s a that’s a higher price than if I agree to have it interrupted or only get half of that, right. Just to be clear. Okay. All right.
Meredith Angwin 27:23
That’s right. So Well, the thing is that for three years in a row, the clearing price on the on the auction is not going to be different from those either of them. And both of them will be able to get online, both the pirate pack with the interruptible and the power plant with a non interruptible, they’ll both get onto the, they’ll get their plants online, and we’ll get the clearing price of the option. The only difference is for three years, the one with a non interruptible contract is being paid paying more for the gas, getting the same price as the other guy, but paying both for the gas. So then in the fourth year, this big crisis, and the guy with the interoperable contract can’t get online. And the guy with the first contract gets online and is making 1000s of dollars every day, you know, over what he 10s of 1000s every day over what he he would have been otherwise? Well, if that’s kind of gambling, isn’t it? He’s kind of by this extra pipeline. firmness, this guaranteed delivery for years before it pays off? Well, what if it doesn’t pay off for eight years? What if it pays off the next year? I mean, big companies that are supplying very big quantities of commodities, don’t actually like to play that kind of game, I might be paid off in eight years, I might be paid off next year. How does that look to you? You like a stare?
Robert Bryce 29:08
doesn’t do much for that for the trader or the the the the entrepreneur who’s trying to note that his bet his bonus depends on his profit this year. Not.
Meredith Angwin 29:20
Right. Right. Well,
Robert Bryce 29:21
so then this seems to, you know, lead to the obvious question. And Meredith Whitney, what’s what should be done? I think you fairly well identified this lack of economic incentives. Well, actually, before we get to that, the other thing that’s been clear and stated over and over by the pro renewable people in particularly about what’s going on in our cotton is I’m going to make it as short as I can. Well, this kind of weather nobody could ever plan for it. I mean, this is unprecedented and it is unprecedented. You know, six inches of snow. I mean, I’ve never seen it show like this and often so what’s your response to the people who say well, you know, this Blizzard, nobody could affect you. No predicted this. How do you reply to that?
Unknown Speaker 30:03
Meredith Angwin 30:04
you know, I’m, I’m gonna say that if you were talking about downed power lines over an extended area, I might say, Oh, yeah, that comes rarely. That’s, that’s, that’s true, you can’t necessarily predict it. I mean, I, we had an ice storm in the northeast one time that took down amazing numbers of power lines. And you know, you can’t predict when such a thing will happen. But this isn’t the same kind of situation. This is a situation where power plants were not performing as they should. And that’s a market question that isn’t that there was there wasn’t a power plant that just was so I mean, it was destroyed by a tornado or something. I mean, I don’t know how to describe it. But the difference is that when there’s distribution and the problems and transmission and distribution, those problems are often unpredictable, except to say that they’ll come when things are getting icy, or during tornado season, or, or during, you know, hurricane season. But
Robert Bryce 31:16
how and that’s and that’s and that’s the poles and wire part of it, right? Which is yes. Right, that when one guy in the a power business said, yeah, this opposing wire business, you’re gonna be in this business, the other poles, you got wires, but that’s wholly separate from the generation part.
Meredith Angwin 31:30
It’s right. And the things that were happening here were happening in the generation part. And they were happening for economic reasons, as much as anything else. In other words, is some power plant some gas fired, plants went off the line because they they had frozen valves, some mass fire plants went offline because they couldn’t afford to buy gas.
And and that latter one is an economic question. It’s not a poles and wires question. I guess the thing is that people kind of conflate things, they push things together to make the point. It’s a rhetorical thing. In other words, everybody knows that things are harder in the winter. Everybody knows, for example, if I had an appointment, and it’s snowing out there, I might cancel the appointment, or I would certainly leave really early for it. So I wouldn’t have to race down the street. Right? I mean, we know things are harder when the weather is bad. And so we are likely to give everybody a pass on that. Even though it is not about the weather, per se, it’s about the market and incentives for for for reserves margin, it’s about market incentives for a power plant, being able to buy gas and and so forth. It’s about Is there any incentive to build a new power plant that’s coal or, or nuclear, nuclear is my favorite. But that stores fuel on site so that the gas lines don’t have to carry as much because one of these power plants is right there ready to take? Right. Always going? I mean, there’s incentives that have not been aligned with being reliable. And that’s what it boils down to. I mean, to me, that’s what it boils down to.
Robert Bryce 33:23
The is that the economic incentives if I’m paraphrasing, which should be economic incentives, and arcot? Didn’t incentive reliability?
Meredith Angwin 33:33
Absolutely. You said it much better than I did. I. That’s it, you send it.
Robert Bryce 33:41
To Jim. I’ve been in touch with Jim bryden. I want to have him on the podcast. And you mentioned him earlier. In an email to me, he said that this market don’t that this energy only market in Texas, because the way it’s structured, as I recall, his message to me was well, because that the if you want to if he said it made it impossible to finance a new gas fired power plant, because you can’t predict what how often it might be used, right, what a factor would be and therefore you can’t predict the return on capital. Is that Do you agree with that?
Meredith Angwin 34:16
I think that’s probably true. I mean, the thing is that the way it goes in in areas where you have a capacity auction, the power plants are someone who wants to build a power plant, the capacity option is for three years in advance. So let’s say I’m thinking I want to build a power plant and I I bid into the capacity option, and I say if I build this power plant, you’ll have to pay me this amount because I’ve got a good power plant and I’m I’m bidding in at a really very reasonable price. And let’s say I clear the auction. Well then I get a sort of piece of paper from ISO which says you clear the auction three years from now. With a power plant of so many megawatts, you can expect so many 1000s 10s of 1000s, hundreds of $1,000 a month in capacity payments. And I can take that piece of paper over to a bank and say, I got it. I know it’s all a big complex world here, but I got it, I have a guarantee I will be able to pay back. Or
Robert Bryce 35:21
just just to be clear that capacity payment is just for the operator to have that power plant ready to go when it’s needed.
Meredith Angwin 35:28
Exactly. It’s only for the capacity to have that power plant when it’s needed, it is not about that capacity payment will be there if the if the operator doesn’t supply a single kilowatt hour to the grid, because the grid doesn’t need their kilowatt hour.
Robert Bryce 35:46
So this would be a bit like an interrupt again, it’s it just so but this is similar to a power purchase agreement, except since a capacity agreement, it’s a capacity payment. A power purchase agreement is one where the generator gets a signed deal with an off taker to take as many watt hours as they produce over a certain period. Is that a fair description?
Meredith Angwin 36:07
Yeah, that’s a fair just gonna be there different kinds of power purchase agreements. So I don’t want to say that’s the one. I mean, we made one with Hydro Quebec, that I could never figure it out. So anyhow, um, yeah. But basically, the capacity payment. The whole point is the capacity payment, is what they call cone cost of new entry, that it allows people to build a new plant, because the capacity payment is a significant portion of the cost of new entry, the capital cost of new entry, it’s not the whole thing. But it’s enough. So you can go to the bank and say, it’s looking good. You know, if you lend me money, the chances I’m going to default on it are very bad. I won’t, I won’t be, I won’t be defaulting. I’ll be I’ll be there for you. Now, now that I brought up, I’ll be there for you. I want you to know that that’s the power plant owner talking to a bank. Well, we talk about ISO New England or talking to a power plant owner. Let’s just go with ISO New England because it has a capacity payment. So the the I saw New England says you are you’ve taken a capacity payment, and we need you come online, the plant may say no, I can’t I’m down for repairs, I can’t get the gas, I’m sorry, my, my my cat ate my homework. I mean, they can say anything they want and not come online. And it turned out that in a fair portion of my book is about it New England trying to make rule after rule after rule to make plants that have already received capacity payments, come on line when called they you know, to be fine if they don’t come on line to to have to pay their capacity payment to a plant that does come online, and so forth. And so on rule after rule. So from the point of view of building new power plants, it’s probably good from the point of view of reliability. It’s a mixed bag. It’s not, it’s not a guarantee that I’ll be there for you. The plant will be there for you.
Robert Bryce 38:29
I got you. So let me just wanted to touch on a few more questions, because I’m eager to get this podcast posted today. But one of the things that I keep coming back to in all of this, Meredith is the nomenclature in the business. Energy is the ability to do work power is the rate at which work gets done. Energy is watt hours power is measured in watts, it seems to me and I’m curious to get your view on this that the basic contract in the business is a power purchase agreement and the renewable if you have a wind plant, a solar plant, if you say you’re going to build this many say 100 megawatts and you’re going to produce this many watt hours Well, you can go into the market and sell the power purchase agreement or get a get a power purchase agreement with an off taker. But those contracts are mis named. They’re not providing power they’re providing energy. So that when it here’s my my thought and tell me if I’m missing this, one of the fundamental distortions it seems to me in Texas in particular, is that these big renewable providers, whether it’s solar or wind, they signed power purchase agreements, but they’re not required to deliver power. When power is dear. Their only requirement is to provide watt hours not watts. Is that am I missing something? If I if I
Meredith Angwin 39:51
know the trouble is it really your your your prop? You’re right but i i get very confused about all this. That no I understand the difference between water and water. So I’m not confused about that. But what I’m trying to say is that the usual renewable statement around here is something like world building. For a four to two megawatt wind turbines, we’re gonna have eight megawatts of wind on the system. And that’ll be enough to power x houses. What do you mean by that? I mean, you don’t, you don’t power house with a megawatt your power house with the kilowatt hours that the house is going to use. And so they get away from having to say, oh, we’re going to have eight megawatts of wind on the system. And since the wind capacity factor around here is about the 20%, or 40%, that is going to be, we’re going to have about roof. So many, what our megawatt hours available. I mean, they don’t go there, they really don’t like to go from we built such a such a big wind turbine to how much how much you can actually supply to the house. Now, the other thing you say, though, is that you see, if you if there by somebody has decided to buy a certain number of watt hours from a winter bed or solar panel, they are buying those watt hours when they’re available, not when they’re needed. And that’s really, really different situation. And let me give you another example. And that is I think it was Vermont, but maybe it was I said, No, it was Vermont, made a deal with Hydro Quebec. And they they made a deal to buy power from hydrochloric. And they, they made the deal that they could buy 16 hours of power of gay at a time convenient to the state of Vermont. So in other words, Vermont, Hydro Quebec has to turn on and stands when Vermont wants it. Now, of course, people really tried to get along with each other, and so forth. And so they’re not going to just say, turn it on now turn it off. Now they’re going to say, we’ll probably need it tomorrow between about 9:30am and 430 in the afternoon, and then again, around eight to midnight, because the Superbowl is on and everybody will have their TVs going. I mean, so they do plan ahead for this. But the idea is that that is a agreement for a certain number of watt hours per day.
Robert Bryce 42:40
And that’s a power deal. That’s a power agreement. That’s a power agreement, not an energy contract.
Meredith Angwin 42:47
That’s right. It’s a power purchase agreement.
Robert Bryce 42:50
Because they’re required to deliver power when power is needed, not energy when it’s not needed. And that’s the part that I see. When I look at the ercot situation I see. Oh, wind, it’s available. Oh, look at this massive amount of wind that’s coming in. We did 60% today? Well, that’s fine. It’s warm and sunny, and you know, the power demand is low. But when it was 12 degrees, the other morning, there was no wind. And so I’m the I guess the way I thought about it is that the renewable providers and I have solar on the roof of my house, they’re free riding on the other generators, is that a very well, how would you describe it? Is it free riding? How do you describe that?
Meredith Angwin 43:28
Well, they are they the thing is they don’t pay for the system’s costs of backing them up, or providing power when it’s needed, as opposed to when they feel like providing it. I mean, and and and and and so this is this is a it is a definite problem that they try to work around this with some things like elcc energy, something load carrying capacity. I forget the first word elcc. What it means is, how well does our wind pattern match when you need our load carrying capacity of wind. There are other studies that show that the more weight you put on the system or the more solar you put on the system, the less valuable it is because it’s all coming on at the same time. So when you need it, you don’t necessarily have it you have it when you have it, you might have too much you might have to curtail the
Robert Bryce 44:31
let’s just explore that one point really quickly because what your I’ve heard you
Meredith Angwin 44:35
say, effective low carrying capacity.
Robert Bryce 44:41
So, but your point about the higher the penetration because I’ve seen this this, a lot of studies have been done on this that if you go from every increment, let’s just pick a number from 35% wind to 45 to 55. Each of those incremental percentages as they stack on each other become less valid. To the grid. Is that a way to describe it? Yeah. And why? And why is that?
Meredith Angwin 45:06
Well, because they come on when they they want to. And so you’re more likely to curtail them, they’re more likely to be on when the grid doesn’t need them. And the grid may actually have to curtail them if it can’t turn down some other. Other. I mean, a winter oven, that’s not making any wind isn’t very useful.
Robert Bryce 45:31
I see so particularly Sunny, or particularly sunny day, if there’s a well it’s the duck. Is this the duck curve in California, where there’s just the you have so much generation that there’s there’s no off takers? And so they have to curtail or export? Is that the is that what we’re talking about?
Meredith Angwin 45:47
We’re talking about the equivalent of the duck curve for wind and equivalent countries. So losing so much, that you either have to curtail or export. And you say, well, well, the thing to do is just not have any other kinds of plants on the grid, but 100% renewable Well, yeah, but what about the next day when the wind isn’t blowing? Or there’s a big weather system moving and it’s all cloudy?
Robert Bryce 46:11
And it’s 12 degrees and your batteries are frozen?
Unknown Speaker 46:13
Robert Bryce 46:16
Well, so give me your thoughts on batteries. You like batteries with what our batteries are? Good idea. This is the again another area where see hearing just a ton a ton about oh, you know, and Elon Musk is part of this. Oh, we’re gonna store there’s all this energy. And is that even viable in a situation like the blizzard that I’m looking at all the snow in my yard here digging our batteries, a good idea.
Meredith Angwin 46:39
Batteries are overhyped. I will never say they’re a bad idea. Because batteries and solar in your house can give you more hours of your own generation. And then if you didn’t have the batteries, I mean, there’s no question about that. But they’re overhype. They can’t really backup a grid. I mean, I’m sorry to say that, but they can’t. Because they owe you the biggest, the biggest batteries that are around, you know, Elon Musk, build some big batteries down in Australia, they will back up a major power plant for three hours or something. I mean, they’re not going to back up the grid, because they’re very expensive. And they’re very, I would I would tend to say, sluggish, but I don’t know how to say I mean, you have to, you have to set aside the time to charge them. I mean, if you want to turn on a diesel generator, how long is it going to take you? Okay, not very,
Unknown Speaker 47:42
not? minute or minute or two? Yeah. Right.
Meredith Angwin 47:45
If you if you think you can use a battery tonight, you better think ahead and get that thing charged up over a period of time if you’re charging it with renewables with solar or something.
Robert Bryce 47:57
And then you have and then you and then you have the round trip efficiency problem, right. 20%, charging it up and discharging it. Right. Right. And and you mentioned backup for three hours. Well, I was without power for 45 hours. That’s a long time for a battery. And as I remember, batteries are kind of finicky. Like, like, what is it? Who was a Little Red Riding Hood? Not too hot, not too cold. Not too hot. Not too sharp? Not? It’s got to be just right. Right. Temperature and everything else.
Meredith Angwin 48:26
And batteries tend to be finicky. I mean, there’s there’s reasons paying people like power plants with fuel, you know, whether it’s natural gas, coal, nuclear,
Robert Bryce 48:38
I mean, you know, we deal with, with fuel on site, fuel lines
Meredith Angwin 48:42
that you know where it is, and you turn.
Robert Bryce 48:46
Right. Well, so what? Let me let me just go to the end here, because I want to make sure we keep this less than an hour, Meredith, and you’ve been great with your time again, my guest is Meredith angwin. She is the author. Most recently she’s published three books is shorting the grid, the hidden fragility of our electric grid. Okay, so final question. I promise it will be the last one here, Meredith, what to do? What’s the solution?
Meredith Angwin 49:11
Well, the solution, I mean, I don’t have a perfect solution for everything. But I would say the first solution is keep every power plant that has a fuel stored on site going for as long as you can keep it going. In other words, refurbish it, bring it back, bring it back to tip top condition and use it. And I would say that is especially true for nuclear because I mean, I’m not particularly fond of standing here and saying, hey, let’s refurbish all the coal plants. But when you get right down to it, if you want a resilient grid, you need plants that have fuel on site, Rick Perry said it I said it that’s the way it is. And then above that, you can have you can have just in time delivery, you can have renewables go on and off, when they want to, as long as you protect the power plants that keep fuel on site from being forced, forced off the grid by weird rules on in the auctions, and I have a whole book about weird rules and the option, so I won’t go into it. But what I’m trying to say is, they can end up meaning that the plants that keep you on site are not are not economically viable. And you don’t want that to happen, because you want those plants that keeps you on site. And and and so that that’s my basic, my basic idea is that you need the baseload or the plants that keep you on site, and then the other plants can keep you on site or not keep fuel on site, or whatever. But But, you know, you guys got into, I’ve never seen anything like it in a way because even the California blackouts didn’t get to the point where the real demand on the grid would have been 70 gigawatts, and the grid could only supply 45. That’s what you guys were at.
Robert Bryce 51:08
Well, I was really shocked yesterday when Jackie Sargent, who’s the general manager of Austin energy, she said during a press conference, that they were very close to having a grid shut down completely.
Meredith Angwin 51:18
I mean, I was I was shocked. I looked at it. They said, I had never seen anything like that. I’ll move to the California bathhouse in 2001. And they were trivial. I mean, they were trivial. But what I’m trying to say is the kind of blackouts you were having in Texas, they give rotating outages a bad name because they weren’t rotating out. They were blackouts.
Robert Bryce 51:38
Yeah, yeah. Well, I’ll just add one other quick thought, Meredith. And maybe I know I said was the last question. But I’ve also written a fair amount about the technology sector and data centers, but they’re owned by Google, Amazon, you know, Facebook, all the rest of them. They have their fuel on site, they have those big reciprocating diesel gensets. And they have big tanks and diesel fuel there. But it goes to your point about, they’re not going to mess around with reliability, they have to make sure that that generation is there and reliable. And they can point to that big old tank of fuel. And well, that’s enough for a week or however long, right. So that’s a that’s a resiliency measure that the biggest tech companies in the world are taking. But your point is that the grid that we’re relying on so much doesn’t Is that a fair statement? Yeah, that’s
Meredith Angwin 52:23
a fair statement. But we really have to recognize that the green has to be managed for resiliency, it has to be managed to be there for us, because when it isn’t there for us, like I say, a friend of mine, her her daughter is, you know, was in a cold apartment in in in Austin, and her daughter went to a, a warming station that apparently has been set up in Austin. But then then she was worried about her daughter being in this warming station, which was set up right at the last minute. And whether it is got good protection from all the people who be sleeping there about COVID she doesn’t know that is my friend doesn’t know. And she’s like, Oh my god, I mean, you know, you’ll be really cold in your apartment or go to a hastily set up place. It will keep you warm, but may not be up to the protocol. So you’d like to not get sick.
Robert Bryce 53:20
It’s a hell of a choice. I mean, it really is. And that’s one of the reasons why I felt really, you know, I wasn’t happy about being blacked out. But we have firewood I was out cutting firewood more this morning and we had gas on our cooktop and we had hot water and we had running water. And so it was you know, it was cold, but it was bearable. But anyway that didn’t bring about
Meredith Angwin 53:41
resiliency integrate is really important. It is not trivial, is not something we can give up easily for some ideological principle. And I want to end it even if the ideological principle is the one that’s dearest to my heart, I wrote a book called campaigning for clean air. Okay, clean air is important to me. But I’m trying to say that if you know it, the grid is just terribly, terribly important to everybody’s health, and you wrote it. You wrote a book and a movie about that. I think you know it. Very good. Very good. Let me give a plug for your movie juice is fabulous.
Robert Bryce 54:22
That’s That’s very kind Meredith. And on that note, we will stop to talk about my stuff. But listen, it’s been great. I want to get this podcast up to date because it’s very current. Meredith, thanks for your time again, and you’re charming as always, and we will be in touch soon. Everyone else out there in podcast land. If you like this podcast, give it 612 24 stars on your favorite podcast outlet and tune in to the next edition of the power hungry podcast and of course, follow Meredith angwin. She’s on twitter at Meredith angwin. So until then, thanks, y’all.
Meredith Angwin 54:57
Unknown Speaker 54:57