Gas Generators Want Wind Power to Pay Comparable Backup Costs

While natural gas is often spoken of as a natural counterpoint to wind power, in Texas, the wind boom  is already spelling more idle time—and fewer profits—for operators of natural gas-fired plants.

The wind industry, which until recently didn’t represent much generating capacity, has thus far been exempt from rules that penalize power producers when they make, but fail to deliver on, generation commitments.

In just three years, wind’s share of Texas’s power supply tripled to 6 percent from 2 percent. Gas’s share, meanwhile, has dropped by 4 points. By 2013, according to estimates from Houston-based Tudor Pickering & Holt, the quantity of gas consumed for power production in the state could fall by as much as 18.5 percent.

According to the American Wind Energy Association, Texas has more wind power than any other state in the country: a whopping 9400 MW and counting.

When Texas grid operator ERCOT orders generation based on its forecast demand, inexpensive wind power is one of the first kinds of power it takes commitments for. Natural gas plants—in particular the older, more expensive ones—are last in line and often will only be dispatched during times of peak demand.

When most power producers make commitments, their failure to deliver the promised power results in them being held responsible for the cost of backup generation. By contrast, if promised wind power doesn’t materialize, the cost of backup is spread among all generators.

That exemption is being fought by natural gas interests in Texas and elsewhere. Natural gas operator Calpine Corp. proposed in the fall that ERCOT require wind farms to pay the same penalties for failing to deliver scheduled power as any other generators would. In the Midwestern power grid, a task force recently made an equivalent proposal.

The wind industry argues that even as wind prediction improves, wind’s intermittent nature makes it impossible to conform to the same requirements as other power sources. That lack of reliability has caused at least one near-disaster for ERCOT.

However, wind is popular with the public, and wind farms are quickly becoming large taxpayers in the Texas counties that host them.

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