Before you listen: I will be hosting a mailbag episode in the next couple of weeks and am asking listeners to submit questions. Please send an email to douglewin@substack.com or leave your questions in the comments for this episode. 

Following Winter Storm Uri, the Texas legislature worked to identify proposals that can increase the reliability of the ERCOT grid. In this week’s episode, State Senator Nathan Johnson, representing Senate District 16 in Dallas and a member of the Business and Commerce Committee overseeing ERCOT and the PUC, shares insights into the proposals that are reshaping Texas energy policy.

Central to Senator Johnson's efforts is the establishment of a fund aimed at creating microgrids at crucial facilities such as hospitals and police stations. This initiative, now part of the Texas Energy Fund via Senate Bill 2627, secured nearly $2 billion to bolster microgrid infrastructure after receiving approval from Texas voters in a constitutional amendment. Moreover, Senate Bill 1699, spearheaded by Senator Johnson, formalizes the collaboration between the Public Utility Commission and various stakeholders to implement virtual power plants and aggregated distributed energy resources programs, while also mandating the commission to enact measures for reducing residential energy consumption.

Beyond legislative achievements, the conversation delves into pressing topics such as transmission policy, the evolving dynamics between fossil fuels and renewables, the imperative for innovative regulatory frameworks and incentives for utilities, and the pivotal role of energy efficiency in shaping Texas' energy landscape.

I hope you enjoy this conversation as much as I did. If you like the episode, please don’t forget to recommend, like, and share on Substack, Apple Podcasts, Spotify, or wherever you listen.

I look forward to hearing your thoughts; don’t hesitate to share them with me and fellow listeners in the comments. Thank you for listening and for being a subscriber! Transcript, show notes, and timestamps are below.

Timestamps

03:33 - Short and medium term predictions for the TX grid

7:45 - Texas Power Promise, microgrids, and load management to avoid prolonged outages

10:29 - Circuit segmentation

15:36 - Distributed Energy Resources, Senate Bill 1699, Virtual Power Plant pilot

18:20 - Conservation

29:07 - Texas’s explosive load growth and importance of load management

32:26 - Emerging technologies

34:04 - Relationship between oil and gas and renewables

36:53 - Transmission

44:33 - Interconnecting ERCOT  and FERC jurisdiction in Texas

48:31 - Geothermal

50:17 - Incentivizing TDU’s to spend on energy efficiency, not just steel in the ground

59:39 - Markets

1:05:15 - Scapegoating renewables

1:08:47 - Texas Energy Fund and natural gas investment

Show Notes

"The Name of the Game is Flexibility," a Conversation with ERCOT's Pablo Vegas

Text establishing the Texas Energy Fund - SJR93 / Proposition 7

Text of SB 1699 - “An Act relating to the Participation of Aggregated Distributed Energy Resources in the ERCOT Market” 

Text of HB 1500 - includes language for the Circuit Segmentation Study

Text of SB 415 - “An Act relating to use of electric energy storage facilities in the ERCOT power region”

Transcript

Doug Lewin 

Senator Nathan Johnson, thanks so much for being with us on the Energy Capital Podcast.

Nathan Johnson

Thank you for having me on. I'm excited to have this conversation.

Doug Lewin

All right, well, I wanna start from a high level. I did this with ERCOT CEO, Pablo Vegas, and I kinda like the way it kinda sets the tone for the conversation. I'm gonna ask you the same question. Where do you think the grid is gonna be? Can you kinda describe your vision for what the electric grid in Texas, specifically the ERCOT grid, will look like in a five to 10 year timeframe? And I'm not, we're not talking 20 years where it's super futuristic and sci-fi and not you know, next legislative session.

Nathan Johnson

Which is fun, which is more fun.

Doug Lewin

And we can do that. I'm looking forward to talking some of the sci-fi stuff too. I know you're a big thinker and a visionary, but let's keep to that kind of five to 10 years. What's your vision? Where do you think all this is headed?

Nathan Johnson

The first thing I'd like to say out the gate is I am very optimistic about the five to ten year timeline. It's the one to five that we're going to spend some time talking about today that I think is much more dicey. As to what it looks like, it's partly contingent on what we do in these next one to five years. It's going to be partly intentional, and there's going to be an unintentional factor. 

What we do know is that we are having, we are experiencing explosive load growth. And that is, I believe, going to continue. And I don't know anyone who disagrees, who has a different expectation. We have an aging infrastructure, and we have an infrastructure that at the moment can work okay for today. A lot of the stuff we did in response to Uri, I think, has stabilized things. What our current infrastructure definitely won't do is accommodate the load growth, the complexity of our grid, which is far more complex than it once was, and it's going to get more complex.

And it will not meet the specific resiliency demands that we need of our grid. So it was gonna have to change. I expect we will see additional, traditional gas-fired generation, hopefully well regulated, that's putting out steam, not methane. And I think we can do that. 

But we're also gonna see a whole array of alternative, alternative forms of managing our load and our generation and our usage. The way we're going to meet the gap in the next one to five years is not by suddenly having enough quote steel in the ground, although that is a long term goal. There's no way in five years we're going to build our way out of the gap we are going to experience between load and generation. We're going to have to approach it three different ways. We're going to have to have other forms of generation coming online at the same time. We're going to have to manage the load.

And we're going to have to manage transmission. And that breaks down into categories. Our generation is going to be making sure that our existing plants are up and operating. It's going to be making sure that we do get some new steel in the ground. We're probably talking about peaker plants in specific points of congestion, you know, strategically deployed. We are talking about very small sources like distributed energy resources. Those are forms of generation that we're going to talk about in this podcast.

But there is a generation component, and it will not be all giant 1 gigawatt plants. We are going to see a much more diffused form of generation. That by itself in the one to five years will not get it done. Big Gen can't get it done because we don't have enough steel. We don't have enough transformers. We can't build it fast enough. There's no way we're going to Big Gen our way out of it in one to five years. That's why we're going to be looking at smaller resources.

Load management is sort of the inverse of that. And I know your other guests know more about this than I do, but I think it's important to anyone who is listening to understand that a kilowatt saved is a kilowatt generated, right? And so when we look at demand response programs at the consumer level that might mirror what we've done at the industrial level, we can see gigawatts of power that's suddenly made available. So if we can pull two gigawatts down from the grid, that's two gigawatts we don't have to generate.

If we can manage our transmission such that when you have, say, a microgrid backing up a particular region that experiences transmission congestion a few times a year, instead of having to deploy half a billion dollars building a new line, we put in a microgrid and then we can devote our resources somewhere else. So that's the transmission management, load management as demand response and virtual power plants, aggregated distributed energy resources on the generation side.

It's a much more complex, much more granular grid. And then the two remaining components aren't physical. They're financial models. What market signals do we send in order to accommodate all of this one to five year change, as well as setting us up for that five to 10 year change? I think once we get all that in place, to answer your first question, I think we're going to see new steel on the ground at the large generation level, at the base load level. But I also think we're gonna see a huge proportion of our load growth be absorbed by solar and wind and other renewable forms that are paired with reliability mechanisms like batteries and other forms of energy storage. I think we're going to see very flexible relationships between load and generation, all managed by retail electric providers, TDUs, and the ISO ERCOT. So all these moving parts are going to create, I think, a much more, stable, resilient, adequate, affordable, efficient, and clea