Good morning.
(item:1:Chairman Peter Lake opening statement on 2023 SARA and CDR report) Appreciate everybody being here and taking a break
from session. I know it's a very, very busy time. This
is our annual public update ahead of the summer just
like we did before last winter and before the summer
before. Uh this is our standard communication with
the public to make them aware of grid and operating
conditions ahead of our hot summer season. First and
foremost, I want to emphasize that the SARA report
is not a forecast. This is a scenario analysis that
evaluates a range of potential outcomes. It is not
a prediction of what will actually happen operationally
the archive grid is ready for this summer. The reliability
reforms that were put in place have been tested and
continue to work. We've made the grid, we've got as
strong as possible using every tool available. The
landmark reforms passed last session have been utilized
and put in place to ensure our grid operates more reliably
now than it ever has in the past. However, the Texas
grid faces a new reality data shows for the first time
at the peak demand for electricity this summer will
exceed the amount we can generate from on demand, dispatch
power. So we will be relying on renewables to keep
the lights on, on the hottest days of summer, there
is no longer enough on demand, dispatch power generation
to meet demand. In the ROS system from 2008 to 2022
Texas on demand, dispatchable power supply grew only
1.5%. In that same time frame, our population grew
24%. The increase in demand for electricity is outpacing
the supply of on demand, dispatch power. In this new
reality, our risk goes up as the sun goes down because
it's still hot at nine pm, the sun sets faster than
the atmosphere cools and our solar generation is all
gone. So at that point in the day, we will be relying
on wind generation on our hottest days. If the wind
does not pick up, we will have to rely on our on
demand dispatch generators. And the data is showing
us that on our hottest days under some certain set
of circumstances, we may not have enough on demand
dispatch generation to cover the gap between when the
sun sets, we lose the solar and when our wind generation
picks up at this point, I'll turn it over to the archive
Ceo Pablo Vegas to discuss the technical aspects of
the report. (item:1:ERCOT CEO Pablo Vegas opening comments on 2023 Summer SARA) All right. Thank you very much, chairman
and good morning everybody. So the season seasonal
assessment resource adequacy that we complete every
season is a series of models and risk scenarios that
we use to prepare for the unique challenges of each
weather season. In Texas. I want to reemphasize the
point that the chairman made that these are not forecasts
These are scenarios, they're not necessarily what we
believe will happen, but they are scenarios that could
happen based on historical data and projections. The
summer SARA includes a base and a moderate risk scenario
as well as an extreme set of risk scenarios. The most
severe risk scenarios assume very high peak Load, extreme
unplanned thermal outages based on historic observations
and extreme low wind output. These scenarios are based
on circumstances that include a combination of unplanned
forced outages and varying weather conditions when
it comes to Texas. As has been noted, the term that
we should be focused on is growth since 2002, population
growth has gone from 22.9 million to more than 30 million
Last year. We saw several peak demand records sent
last set last year. Our all time peak was set last
summer on July 20th at over 80,000 Megawatt of demand
And as we continue to experience substantial growth
in population with more businesses moving to Texas
and a rapidly growing economy. The demand for energy
is growing at a rapidly increasing pace compared to
last year. Our models estimate that this summer's peak
could be about 6000 megawatts greater than last summer's
However, we're only expecting a nominal increase of
about 850 megawatts of thermal capacity. Since last
summer. The majority of new generation capacity that
has been added since last summer in ERCOT continues
to come from intermittent resources on the renewables
front, we're expecting about 1000 more megawatts of
wind capacity and about 3400 megawatts of solar capacity
compared to last summer's SOAH. So as a result, we
are expecting to have to rely more on renewables during
peak conditions than we ever have before. And as a
result of this dynamic, this summer could have tighter
hours than last summer with a higher risk of emergency
operations.
ERCOT may experience these tighter conditions after
the traditional five PM peak Load as generation from
solar units begins to decrease when the sun sets. This
would be similar if you think about what happened last
summer during July 13th, that day, wind and solar generation
both began to decrease simultaneously in the evening
hours and tight grid conditions resulted because there
was limited additional dispatch units available to
deploy at that time. And that's in contrast to a week
later on July 20th. Well, it was much hotter, demand
was higher and it reached the highest point ever there
was ample wind that day. So there was no reliable reliability
concerns that afternoon. So we're expecting that it's
possible that the riskiest hours this summer could
be closer to the nine PM period than what we're used
to seeing around the four or five PM during the peak
heat of the day to help mitigate these risks. (item:1:Pablo Vegas on ECRS implementation) We're
going to continue to operate the grid conservatively
as we have been doing. That means bringing generating
resources online earlier to mitigate any sudden changes
in generation or demand. On June 8th this summer, we're
going to launch a new Ancillary service called ERCOT
Contingency Reserve Service or E C R S. This takes
advantage of faster performing characteristics of some
of the generating units that are out there that can
address the rapid ramps that can occur during times
of intermittent resource performance. And this summer
we're also expecting about 500 Megawatt from battery
energy storage to be available during our tightest
hours. Additionally, our team is doing weatherization
inspections just like we do in the winter. We do this
in the summer for generating and transmission facilities
to make sure that all the facilities are ready to perform
during the peak summer heat. So while our assessment
of resource adequacy indicates that there are risks
this summer, the implementation of these programs executing
last sessions reforms and new operational tools like
E C R S as well as our conservative approach to operations
We plan to operate a reliable and resilient grid this
summer. But I also want to emphasize a point that I
made during our last discussion during the winter Sara
report which is that the urgency to move forward with
meaningful electric market reforms that will incentivize
the development of dispatchable generation remains extremely
high. I've described many of the tools that we have
to deal with the real time operational challenges that
we have. But these do not substitute for significant
market reforms that will incentivize the development
of new dispatchable generation and to help preserve older
generation until it can be replaced. We're committed
to keeping you and the public informed on grid conditions
throughout what could be a challenging summer season
And so would that be happy to let me turn it back
(item:1:Chairman Peter Lake further comments in 2023 SARA and CDR) over to Peter for some close remarks and then we'll
open up for questions. Thanks, Pablo. The challenges
that we're describing today have been on the horizon
for several years. That's why the legislature passed
S B three last session to help address this. And that's
why at the direction of S B three, the P U C
went through months and months of stakeholder engagement
and work sessions. We hired an outside consultant over
a year ago and presented a plan to the legislature
in January and we await their direction. We're going
into this summer, relying on wind and solar to keep
the lights on in Texas on our hottest days. I want
to emphasize this is not an operational issue, this
is a supply and demand issue.
We will continue to use every tool available to keep
the lights on and the A CS running this summer, but
we do not have any control over DERs so
that I'm happy to take a few questions.
(item:2:What do you say to Texans asking why this wasn't fixed in 20 or 21) What do you say to Texas customers who might
be angry that this, the grid wasn't fixed as of summer
of 2021 or 22.
I'm sorry, I'm not sure. I understand the question
would be more reliable, I should say by 2021 or 2022
But this has been an ongoing,
an ongoing project, as we've said in the past SB3
gave us the tools and the legislature's actions last
session gave us the tools to stabilize the grid. We
have now and laid the groundwork to ensure long term
resource adequacy and long term supply and demand.
And those, we have done the work on both of those pieces
That's why we presented the PCM as a reliability service
to the legislature in January and it's a priority for
them and it's under consideration along with a variety
of other ideas.
So we've been doing the work, the legislature has provided
the leadership and the policy changes needed. It's
just a matter of executing on those. And we have,
(item:2:Pablo Vegas additional comment on grid reliability) I was just going to add to that, that the grid is
as reliable as it has ever been. And, and let me give
you an analogy to explain what I mean by that. So if
during the winter storm year, you would think about
the grid as a car, the car didn't start, it was not
reliable. We had issues with the reliability of the
grid during that storm in the two years that followed
significant investments and improvements have been
made to make sure that the grid would be reliable,
that the car would start. So what we're saying this
summer is that the car is ready to go, it's ready to
run, it's going to be reliable. However, we're asking
it to go further without adding more reliable fuel
So now it's a supply and demand issue. The grid is
reliable. We need to make reforms that are going to
incentivize building more dispatch generation so that
as demand continues to grow, as the state of Texas
continues to grow. We'll always have reliable supply
to serve it. But the grid is reliable and we do expect
the grid to remain reliable this summer real quick
If you could please identify, say your name and identify
who you would. That'd be helpful. Thanks. Yeah. Uh
(item:3:Phil Jankowski, Dallas Morning News - thoughts on Bills affecting PCM) Phil Jankowski, Dallas Morning news. Are there any
uh I, I'm curious what your thoughts are on any of
the uh bills that are being considered? There's been
a lot of talk about the some of these bills for the
term knee capping the the PCM um undoing the work um
possibly completely upending the work that y'all are
doing. I'd like to know your thoughts on that. We presented
the PCM in January. We've seen the market respond to
that with several 1000 Megawatt of commitments representing
billions of dollars of investment. This is, this is
a clear priority for the legislature and we're all
solving for the same thing more on demand, reliable
dispatch generation. The PCM is obviously under consideration
to the legislature along with an array of other ideas
Uh and we will implement whatever their direction is
at the end of the session and we will implement whatever
laws are on the books at that time. Are you worried
that any of those
I can't speculate on outcomes of the legislature? There's
a lot of time left, there are a lot of ideas and
discussions going on. Uh So at the, at the end of the
day, we're going to implement whatever they direct
us to. But I'll add, we share the goals of the legislature
Those goals are to improve reliability to increase
the amount of dispatch generation that gets built in
the state and to keep consumer costs reasonable throughout
that process, we share those goals and we think that
we're going to remain aligned and come out aligned
as we finish this legislative session. (item:4:Charlotte Scott, Web Spectrum News - SB7 Ancillary Services impact on renewables)
Question Charlotte Scott with spectrum news. So talking about relying
on renewables this summer, one of the Bills, Senate
Bill seven would sort of de incentivize renewable companies
by having them pay Ancillary service fees. How do you
feel about the legislatures sort of moving away from
renewables at a time when we're going into summer needing
to rely on them again, I'm not going to speculate on
particular bills or the outcome of session this is
about informing Texans of the changing dynamics of
the grid and the increase in risk this summer. And
at the end of the day, we will implement whatever existing
or new laws are on the books. But we need more of
s considering that we're going to need to rely on them
this summer. As, as we, this commission and ERCOT has
been consistently messaging over the last two years
We need more on demand, dispatch, power, renewables
provide a great cost benefit. They have the benefits
of a self contained supply chain, but they don't have
an on switch. We've got lots of renewables, but at
the end of the day, zero wind times infinity windmills
is zero electricity and the sun sets every night in
those gaps, we have to have generation with an on switch
And so that's what we, that's what we're focused on
That's what the legislature directed us to focus on
in SB3 and developing and deploying a reliability
service. And so at the end of the day, this is about
doing whatever is necessary to keep the lights on for
Texans.(item:5:Charlotte Scott - why should Texans feel confident?) That just one more question, why should Texans
knowing this, feel confident that with hot weather
they won't lose power this summer if demand is out
uh the the risk of brief periods of Load shed has increased
And again, this is, this is a new reality for Texas
This is the first time the the available supply of
on demand. Dispatch power has been less than the expected
demand. In the past, we've had more supply of on demand
dispatchable power than the expected demand. This is
the first time our base case on the hottest days has
gone above that. And so we fully expect to keep the
lights on if wind and sun perform,
but we will be relying on wind and sun. Let me add
that the high risk scenarios that are in this SARA
report are low probability scenarios. We do expect
the grid to be reliable, but we want to be up front
and communicate openly and transparently to all consumers
to the kinds of risks that we do see. And so that's
the purpose of sharing all of these different scenarios
But those high risk scenarios are low probability scenarios
(item:5:What is the probability of extreme scenarios?) What is the probability of kind of going off of that.
S you have a number or like half the summer days. S
it's the probabilities of getting into a scenario where
you have extreme high heat, very low renewable output
and very low thermal dispatch generation availability
that the combination of all of those is less than a
1% probability far below that. So throughout the summer
we do expect to have enough supply to meet Texas generation
demand and, and uh electric demand. So these are very
low probability scenarios. Thank you. (item:5:What conservation efforts should public expect?) My second question
is, should we reach that scenario? What will happen
or what should Texas expect? Are we going to conservation
efforts that you guys have put before. Kind of give
me some ideas of what may happen. We will be communicating
early and often with Texas as we get to scenarios where
we think that there may be tight grid conditions. We
have used conservation notices over the last many years
dozens of times. And I think Texas are used to conservation
in different parts of their life, whether it be water
or electricity. And so if we get to that, we would
communicate about the need to conserve energy, what
we expect the periods of time where we think those
risks are higher. And as Texans have done, they have
responded really effectively in the past and we appreciate
that. So we'll continue to communicate early and often
when we get into those scenarios, you other other scenarios
or other in addition to conservation, other ideas that
we will go with really conservation is the, is the
tool that we would communicate to the public about
And then we have a lot of tools that we would use
internally where we have suppliers that can reduce
the amount of energy that they're using, that participate
in programs that ERCOT offers. And so we have large
customers that participate in that as well as all of
our emergency reserve tools that we have available
(item:6:Brett Johnson, The Texan, probability of low wind output) Brett Johnson with the Texan. Um the extreme risk scenario
estimated, what was it? 61 megawatts obviously very
low uh uh probability of wind output that low. But
um, do we know how last summer, how frequently, how
often wind dipped, maybe not quite that low but very
very low. Uh, during the summer heat last summer, we
had at least 12 days where in the 8 to 10 o'clock
PM range, which is the new time period of increased
risk. We experienced less than 20% of all the windmills
generating and data shows that
on average, on our hottest days, we need 50% of all
the windmills generating power at nine PM. So we, I
mean, these are the changes in the data that are driving
this update. So at least 12 days, last, last summer
where we experienced low wind later in the evening
8, 9, 10 o'clock at night when we, we'll have zero solar
generation, (item:6:Chairman Lake on CONE cap in PUC PCM Plan) I wanna follow up um in your PCM plan,
I don't think it had a cap. Um Obviously, we see a
cap in the two legislative proposals right now. Why
in your plan? Did you not include a cap on that? So
again, I'm not going to speculate on, on pending legislation
or ongoing discussions, but just as a technical clarification
the base case report from the consultants did include
the same 1, 1.5 times cost of new entry cap that is
in other parts of the ERCOT market.
(item:7:Question on a new reality of conservation calls) So you, you mentioned uh that this is a new reality
um sounds kind of dire, but you're also saying that
it's more reliable than, than ever. So I'm having a
little trouble fully understanding what that means
Does that mean a new reality of regular brownouts or
is that a new reality of, of more conservation calls
and alerts? What exactly does that mean? (item:7:Pablo Vegas on widening gap in supply and demand) So I would
say the supply demand risk is growing. So, one of the
core differences between last summer and this summer
is that we're seeing the amount of demand for electricity
grow faster than the supply of dispatchable generations
So that is a growing risk that we've been talking about
That's the long term resource adequacy risk. When we
say that the grid is more reliable than ever. It's
because the investments that have been made to ensure
that all of the resources on the grid will be available
and running when called on those investments have been
made. So we expect the thermal dispatchable fleet to
be in good operating condition. We expect the transmission
facilities to be in good operating condition. So the
grid is reliable and the car will run if we ask it
to run further than we have reliable fuel for those
are the low probability scenarios that we're talking
about. And as the chairman noted last summer was the
first time we saw a scenario where during the peak
of the summer, there was more electric demand than
there was dispatchable generation supply. And so that
continues to get wider that gap. And so the risk of
getting into tighter hours because of that reality
is growing. (item:7:Chairman Lake comment on widening gap) Another way to think of it is that before
Uri, nobody was really maintaining the car with minimal
margin of safety. There was, there was no operating
with abundance of caution. There was, it was skating
on a knife's edge and that's why the legislature had
the foresight to authorize us to make the changes,
bring more units online sooner rather than later. That
never happened before. Expand the margin of safety
that never happened before. Better coordination with
the natural gas system, better communication with the
public in advance of any need for conservation notices
So those are the operational changes that have been
made. Um And the not to mention the weatherization
so that the the existing pieces of the grid we've stabilized
we've fine tuned and optimized to the greatest extent
we possibly can. It is now a question of supply and
demand like Pablo said and again, that this challenge
has been on the horizon, the risk of that occurring
is increasing as we have more and more people. We have
the equivalent of the entire city of Oakland, California
moving to Texas every year with more devices, more
demand for electricity. And so it's that increase in
demand without the market incentives to increase the
supply of the dispatch power. That is now the resource
adequacy problem. It's the lack of dispatch on demand
supply rather than will the car start. Is it operating
conservatively? And operating well compared to last
year's uh report, the scenario for an extreme amount
of unplanned or unplanned outages for dispatchable. Um
(item:8:Question to Pablo Vegas on improved solar performance in report) Last year, you were projecting that that would create
a nine gigawatt um loss this year. It's only six gigawatts
How come, why, why did that change? The reason that
changed is because the amount of solar production at
peak is greater. And so during the S A R report, the
scenarios are modeled at the five pm hour of the summer
And so we saw increases in solar resources during that
time. And so the deficiency during that peak period
shrunk during that point in time. And that's why we're
talking about the risk period shifting really away
from that five o'clock peak period because of the more
availability of solar resources to the evening where
if it happens to be a very hot day, the heat remains
the demand remains high and we have low wind wind is
what we depend on more in the evenings that creates
the bigger risk scenario. Last really technical question
(item:9:Question to Pablo Vegas - does growth of batteries mitigate risk?) Um I also noticed that the amount of batteries is seems
to have risen pretty dramatically even though it's
still a small, small profile. Uh uh 2000 or roughly
3500. Y'all are only saying 500 will be available.
Um I'm curious are not batteries mitigating this way
Yeah, so the growth in batteries is it's a great trend
to see batteries are operating throughout the day.
In the market. And the reason, the way that we set
the expectation at the peak hour is based on historical
performance. And the way batteries operate in the energy
market, they are, they are discharging and charging
throughout the day. And during the tightest hour, it's
a percentage of their total capacity that is typically
available during those tight hours based on how they
perform prior. And so our 500 Megawatt number is based
on that historical evidence. As we see more and more
batteries come on and get more data to work with, we'll
continue to refine those forecasts but they are providing
a valuable service. Another way to think about that
is they have limited duration, which is a factor and
so on a hot summer day when prices are high, we don't
control when they discharge. But there's historically
the data has shown that a lot of batteries will discharge
from 6 to 8 PM or 7 to 9 PM and they're
out of juice. But if wind doesn't pick up at eight
or nine PM, we still need that dispatch power, but
the batteries are empty. And so that historical performance
factors into a bit of a lower number later in the day
(item:10:Chairman Lake on new dispatchable generation entry) Chairman Lake you mentioned earlier, generators committing
to additional generation specifically natural capacity
energy was one cal is another there been a few others
Do you expect more of those kind of commitments to
come? Oh, I'll have to defer to those companies on
and the broader investment universe on what those plans
are. The legislature directed us to develop and procure
a reliability service to ensure reliable power during
periods of low non dispatch power we developed and
unanimously approved the PCM as what we thought was
the best way to deliver that reliability service. And
like Pablo said, and you've heard us say frequently
we're completely aligned in supporting the legislature's
desire for more on demand dispatch power. There are
a lot of ideas under consideration and a lot of discussions
going on and I'm sure there are many discussions, the
investment community. Um but uh that's a question for
them. OK. What uh what kind of rate would we have to
increase dispatch to catch up to the demand? Correct
Uh I mean, again, this is, this is a scenario analysis
So there's no single one number, there's, there's some
good analysis in the consultant's report in E3
Uh So I, I refer you to that. I wanna get to
the, (item:10:Do dispatchable generators want to some to Texas?) I have one more question. So when we talk about
uh too much or too much demand, not enough supply,
are there suppliers willing to come on them to help
us with that issue or I guess I'm just trying to understand
like, do suppliers want to come on to Texas this grid
right now? Uh Well, I mean, that goes back to the investment
question. We, we've got the, the existing generators
we've got, are the ones that we're gonna be operating
with this summer. No, you can't build a new generator
in anything less than a couple of years. So we're operating
with the, the grid we had last summer. And if you look
back to July 11th and July 13th when we issued calls
for conservation, every generator that could operate
in Texas was operating on those days and our reserves
were tight enough that we needed to ask for conservation
And Texans responded and we, we saw it in the data
and that was a tremendous help. This year we have the
same amount of generators with a lot more Texans.
Right? We've got some, some reporters on the phone
It uh moderator. Is it Brad? Correct? Yes. Yeah. If
you have to take some, some uh questions from callers
and they can say their name and identifying their,
who they're representing. That'd be great. Sure. And
if anyone for the phone lines at this time has a question
please press one then zero on your telephone keypad
And again, if you have any questions at this time,
please press one and then zero.
Once again, if there are any questions for the phone
lines, please press 1 to 0 at this time.
And it does appear at this time. There are no questions
in Q sir,
I don't want. So for next summer, um the population
is gonna go up. Are we expecting that um there to be
enough supply or the supply to start catching up or
how long is this gonna be a problem for Texans going
forward with the supply and demand open. This is about
the analysis and the expectations for this summer,
the scenarios, potential scenarios. This summer, the
CDR report looks at longer term resource supply and
demand resource adequacy. So that's the best data we
have now on the longer term picture. But of course
a lot of this depends on the outcome of the legislative
session. And that's why the legislature both I know
that both the House and the Senate and the governor
consider this a top priority. Their work. Both chambers
and the governor are working hard on this and we look
forward to implementing the policies they direct us
to. But the urgency to act is now the urgency is high
and we need to make changes soon in order to get us
on a trajectory where the market design incentivizes
building more dispatch, generation, supply
MOUs checks from phones. Yep, we do have a question
here from the line of Herbert. I'm sorry, Herman crave
please state your affiliation followed by your question
(item:11:Herman Trabish, Utility Dive - how are Load flexibility affecting calculations) Hi, my name is Herman. I'm with utility Dive
Um I would like to know how your calculations
on your demand response program figure into this. I
appreciate the urgency of your situation and I appreciate
you communicating it, but I don't understand how the
most flexibility options that you have figure into
your calculation.
So hermit the way that we factor in the Load responses
as we operate throughout the day and we see reserves
coming down. What we do is we deploy the emergency
reserve services that we have before we ask Texans
to start conserving their own generation usage. So
we have demand response programs that include large
industrials and aggregated um supplies of Load that
we would leverage. We purchase those each season so
that we've got enough to be able to manage those fluctuations
As we showed in the report, the total amount of deployed
reserves that we have typically is between four and
5000 Megawatt of reserves that we would deploy throughout
the cycle of leading up to an emergency operation and
then into an emergency operation, we would pull the
levers on differing emergency reserves. But the Load
and demand response is one of the first ones that we
would pull and we would ask our suppliers of that to
do this to do so before we would ask Texans to conserve
their own energy supply.
Uh If I may follow up, are you saying that the calculations
that lead to your, your uh the urgency messaging include
the demand response or that that would come into play
and then
no, it includes the demand response. So we include
the utilization of the demand response through the
um the scenarios that we're showing in the S A R report
And as you look at the as the scenarios indicate a
tighter condition, you'll see there's a row for the
deployment of emergency resources. And so we do include
those in the calculations of the net result of the
of the performance of that scenario.
Got it. Thank you. You have any other questions on
the phone at this time? There are further questions
Thank you. Thank you very much. Thank you. Thank you
No problem.