Talen Energy has signaled its intent to shutter almost 300 MW of gas-fired capacity in the Electric Reliability Council of Texas system, leading the grid operator to consider paying for the generation to remain online.
“The reliability analysis does not show that there would necessarily be local reliability issues if this unit were to retire,” ERCOT President and CEO Pablo Vegas said Thursday at an open meeting of the Public Utility Commission of Texas.
The local analysis is focused on transmission reliability and stability, Vegas said. “But we are looking at, more broadly, the needed capacity as we get into this winter season.”
ERCOT filed a market notice Thursday indicating it would conduct further analysis of the 292-MW unit to consider “whether there is a need for additional capacity from dispatchable Generation Resources to serve Load in the current or next Season.”
The Barney Davis plant is located in Corpus Christie, Texas, and according to generator registration documents has a total of 925 MW of capacity. Of that, 292 MW comes from a gas-fired steam unit in the territory of AEP Texas Central. According to ERCOT, the unit intends to “indefinitely suspend operations” as of Nov. 24.
Talen Energy did not respond to questions about why the unit is being retired.
“There have been multiple units that have indicated a cease operations, mothballing status or retirement, like in the case of Barney Davis,” Vegas told the PUCT. “We're going to take a look at the capacity issues for this coming winter season ... And if necessary, we'll consider evaluating units that would not be available for capacity contracts, if needed, to ensure we have adequate capacity this winter.”
If the Barney Davis unit is needed for reliability, Vegas said a reliability-must-run agreement would be presented to the ERCOT board for approval at its October meeting.
RMR agreements are “not intended to address long-term system needs,” according to an ERCOT one-page explainer. They allow plant owners to recover costs, and because the determinations are based on system-wide reliability, “costs to run RMR units are shared by all market participants.”
Experts say RMR agreements in Texas are rare. ERCOT was not able to provide data on plant retirements or the cost of an RMR agreement by press time.
“It’s going to be an expensive decision,” Commissioner Will McAdams said.
RMR contracts “are not used very often,” Texas energy market analyst and Stoic Energy President Doug Lewin said.
Lewin, who writes the The Texas Energy and Power Newsletter, also noted there has not been a spike in retiring plants. “In fact, there have been very few announcements in the last 3-4 years, and I'd expect fewer in the next few years. It's a pretty rich market for generators right now,” he said.
“RMRs are usually targeted to grid operational needs rather [than] resource adequacy,” Texas energy analyst Alison Silverstein said in an email. “But my guess is that the unprecedented jump in demand this summer and the couple of recent cold weather events is forcing ERCOT to re-examine all its assumptions about how high demand will go and how badly we might need these retiring resources.”