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Why is Texas the Model for Energy Deregulation?


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States deregulating their energy markets regard Texas as the model to follow

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Why is Texas the Model for Energy Deregulation?

  1. 1. Why is Texas the Model for Energy Deregulation?
  2. 2. States deregulating their energy markets regard Texas as the model to follow. Why? <ul><li>Texas is the #1 energy user in the country. </li></ul><ul><li>Texas produces and consumes more electricity than any other state. </li></ul><ul><li>In spite of the demand to power up the state every day, Texas has made its deregulated electrical market succeed. </li></ul>
  3. 3. More and more people are demanding more and more electrical power. State regulated markets lack agility to tackle rapid growth. <ul><li>Building new power improvements is a slow, bureaucratic process. </li></ul><ul><li>Power utilities & state regulators must negotiate to build new generators and transmission routes. </li></ul><ul><li>They must wrestle with the means of how to pass the expense on to consumers --(aka: state taxpayers) </li></ul><ul><li>Because regulators spend public money cautiously, innovations are often technologically out of date when deployed. </li></ul>
  4. 4. State experts realized the state regulated system lacked the agility to handle 21st century demands. <ul><li>Texas has the 2nd largest population in America. </li></ul><ul><li>Texas is among the fastest growing, expected to have 50 million people by 2040. </li></ul><ul><li>Houston, Dallas, and San Antonio are among the top 10 populated US metropolitan areas. </li></ul><ul><li>The Austin area is expected to balloon to five times the current population over the next 30 years. </li></ul><ul><li>Texas is also the second largest economy in the United States (15th globally), with an annual output of over one trillion dollars. </li></ul>
  5. 5. The Electricity Reliability Council of Texas (ERCOT) estimates increased demand. <ul><li>Peak demand for Texas electricity has increased from 46,755 megawatts (MW) in 1990 to 62,339 MW in 2006 at an annual rate of 2.5%. </li></ul><ul><li>By 2030, demand will require 60,000 to 80,000 MW of new electricity generation capacity. </li></ul><ul><li>Between 1990 to 1997, the regulated system added only 6 gigawatts (GW) of electrical generating capacity, much of it replacing obsolete generators. </li></ul>
  6. 6. Why Did Texas Succeed? <ul><li>Deregulation stimulated new investment in electrical generation. </li></ul><ul><li>Deregulation has spurred the growth of more efficient, less-polluting electricity technologies. </li></ul><ul><li>Market transformation maximized the Texas electrical grid's efficiency and reliability. </li></ul><ul><li>Market competition is all about managing supply and demand. </li></ul>
  7. 7. Deregulation stimulated new investment in electrical generation. <ul><li>Power generation companies now build facilities when they see the potential for profit. </li></ul><ul><li>This created over $25 billion of investment in 39,000 MW of new generation. </li></ul><ul><li>Investors, not consumers, took the risk on the sale of all of that electricity. </li></ul><ul><li>Market competition from 1998 to 2008 added 36 GW of generating capacity, 6.4 GW (most renewable) added in 2008 alone. </li></ul>
  8. 8. Investment and building generation capacity added reliability to the system. On hot days, electricity demand in the ERCOT area can threaten to overload both generators and transmission lines, blacking out large areas of the state. An example of this occurred on April 18, 2006; rolling blackouts affected much of southeast Texas. Additional generators provide back up against system shortfalls.
  9. 9. Deregulation has spurred the growth of more efficient, less-polluting electricity technologies. <ul><li>Rising energy fuel costs and environmental concerns spurred developments in co-generation, combined cycle generation, and green power. </li></ul><ul><li>There is nationwide demand for green power; consumers want green alternatives. </li></ul><ul><li>More companies now sell green power than ten years ago. </li></ul><ul><li>Green power sources are less expensive to operate in the long term than conventional systems. </li></ul>
  10. 10. Two major innovations in renewable power in Texas are wind and solar power. <ul><li>Texas leads the nation in wind-generated energy having over 9,000 MW of installed wind energy. </li></ul><ul><li>Over 2,000 wind turbines operate in the West Texas hills alone, more coming as wind turbine technology improves. </li></ul><ul><li>The 736 MW Horse Hollow Wind Energy Center in central Texas is the largest wind power facility in the world. </li></ul><ul><li>Texas wind capacity already exceeds its federally mandated Renewable Portfolio Standard (RPS) years ahead of schedule. </li></ul>
  11. 11. Texas solar energy plans are shining. <ul><li>A University of Texas study estimates up to 123,000 new Texas jobs in solar power panel manufacturing and installation. </li></ul><ul><li>Several solar interest groups are already lobbying for a plan to generate 1,000 MW of solar power by 2015 and 5,000 MW by 2025. </li></ul><ul><li>Developments in solar panel hardware make panels even easier to install on consumers' roofs. </li></ul>
  12. 12. Market transformation maximized the Texas grid's efficiency and reliability. Challenge: The Texas grid is largely disconnected from the rest of the country and shares only a few interconnects. This restricts electrical flow between Texas and the rest of the country.
  13. 13. <ul><li>Solution: </li></ul><ul><li>The Public Utilities Commission of Texas (PUCT) set energy efficiency standards and established programs. </li></ul><ul><li>Texas utilities must save 2 MW through efficiency measures for every 10 MW of increased demand. </li></ul><ul><li>Transmission and Distribution Utilities (TDUs) administer incentive programs while Retail Electric Providers and energy efficiency service providers implement the programs: </li></ul><ul><li>TDUs pay incentives to a third-party sponsor for energy efficiency measures installed in residential customers homes. </li></ul>
  14. 14. TDU Energy Efficiency Programs <ul><li>Reduced peak demand by 756,000 kW </li></ul><ul><li>Saved 2,005 million kilowatt hour (kWh) per year, 1999 - 2006 </li></ul><ul><li>Saved 457,808 megawatt hours (mWh) in 2007 </li></ul>
  15. 15. Wind Power Cheap if You Get it to Market In 2009, the PUCT invested $5 billion in transmission projects for Texas' Competitive Renewable Energy Zones (CREZ). CREZ power-line projects will eventually transmit 18,456 MW of wind-generated power from West Texas to power-hungry East Texas.
  16. 16. Market Competition Managing Supply & Demand to Succeed <ul><li>Regulated monopolies provide only limited service through </li></ul><ul><li>limited infrastructure investment </li></ul><ul><li>limited technological advancement </li></ul><ul><li>limited customer options </li></ul>
  17. 17. Market Competition Managing Supply & Demand to Succeed <ul><li>The deregulated electricity market integrates wholesale and retail competition. </li></ul><ul><li>Generation is separate from retail. Generating companies must produce power more efficiently and cheaply to compete with each other. </li></ul><ul><li>Retailers and their customers can choose where they buy power. </li></ul><ul><li>Retailers succeed by being efficient and offering consumers real choices. </li></ul>
  18. 18. True The Texas electricity deregulation process has been rocky. International political and economic turmoil can affect volatile fuel commodity market prices… And markets don't guarantee the lowest possible prices… … BUT they do guarantee the best possible prices based on a customer's preference.
  19. 19. Information is a Consumer's Best Friend <ul><li>Texas electricity consumers can save money on </li></ul><ul><li>their bills by staying informed about: </li></ul><ul><li>Their energy usage </li></ul><ul><li>Their energy plan's pricing </li></ul><ul><li>Their energy provider's competitors -- shop around for a better deal. </li></ul><ul><li>The place to shop is at </li></ul>
  20. 20. Texas Electricity Deregulation made possible: <ul><li>New investment in electrical generation </li></ul><ul><li>Innovation in conventional and green power technologies. </li></ul><ul><li>More reliability and efficiency in power transmission. </li></ul><ul><li>Market competition encouraged generators and retailers to cut costs and deliver better service at a lower price to consumers. </li></ul><ul><li>The old regulated system </li></ul><ul><li>never could have met current demand. </li></ul>
  21. 21. That's why all the other states are following Texas.