In our last ERCOT blog post, we laid out the record high demand/historically low supply scenario facing ERCOT and its customers this summer. As we reported, ERCOT acknowledges that this situation could result in emergency energy alerts. This will more than likely result in high electricity prices, perhaps record high prices. If you participate in ERCOT’s Load Resource (LR) demand response program, those high prices will mean generous revenue paid to you for participating in LR.

In the rush to enroll in LR and capitalize on some Texas-sized payouts before the summer enrollment deadline, though, a lot of commercial and industrial customers have encountered an unexpected ERCOT roadblock: UFR. And they want to know: What’s a UFR? What’s it got to do with LR DR? Why do I need it? And how do I get it?

To answer these questions and get everyone on the path to significant summer revenue, we have to start with dirty power.

Dirty power is a term used to describe electricity that is affected by abnormalities such as power surges, excessive line noise, and fluctuating frequency. It usually describes power intended for delivery through the electrical grid, and that’s how we’ll use it here. It can have several causes, but the end result is almost always the same: damage to your equipment and infrastructure that can cripple your daily operations.

You probably don’t think of electrical power as “dirty.” It’s hard to imagine, perhaps because you can’t see, smell or touch it. You can see, touch or smell dirty water and dirty air. Same with work clothes, office windows, and motor oil.

But electric power can in fact be “clean” or “dirty.” Unlike the examples above, though, dirty power stays dirty. You can’t clean it, at least not easily. The abnormalities that make it “dirty” are usually generated at the source and can flow to the farthest reaches of the grid almost instantly.

Wind is a major source of dirty power. Ironically, it’s also the current centerpiece of Texas’s nation-leading embrace of “clean” renewable energy. The Lone Star State’s drive to incorporate more renewable energy sources to power the grid has established Texas as the largest producer of wind power in the U.S. ERCOT says wind accounted for 17.4 percent of electricity generated in its service area (roughly 90 percent of Texas) in 2017.

But this intermittent source of power generation is also a major source of “harmonics” — a distortion of the underlying sinusoid of a signal, referred to as over or under frequency events. That’s dirty power. West Texas, where there are a lot of wind generators, is dramatically affected by frequency changes. As the wind increases or decreases, the generation created by wind turbines flows onto and off the grid, causing frequency changes as the load drops and rises. At the least, these frequencies can cause overheating and premature equipment failure.

That brings us to UFR. UFR stands for Under Frequency Relay. According to IEEE, UFRs are used to automatically shed a certain amount of load whenever the system frequency falls below an acceptable level for grid stability. Think of it as an industrial-strength circuit breaker that protects the grid — and your business — from shorting out.

So, why does ERCOT require that LR participants have UFRs installed? Because UFRs help them fulfill their mission to maintain the security and reliability of the ERCOT system. That includes helping the grid stabilize autonomously by stopping the spread of Under Frequency.

As the number of wind turbines dotting the windswept Texas plains has increased, so has the possibility of frequent under frequency conditions. So has the need to stop the spread of UFR throughout the grid. (The oil and gas communities across West Texas were among the first to adopt UFRs in the fields, largely to protect their machinery.)

To do that, they need you. Customers that can meet certain performance requirements can be qualified to provide operating reserves as a Load Resource and be eligible for a capacity payment. In short, LR DR. And that requires that an Under Frequency Relay be installed that opens the load feeder breaker on automatic detection of an under frequency condition.

As we noted above, dirty power can spread easily and rapidly across the state and affect every organization attached to the grid, especially commercial and industrial concerns. And we also noted that to be considered a Load Resource and receive capacity payments, you have to be available as needed. A great way to knock out an available Load Resource is dirty power in the form of an under-frequency condition. UFRs assure that your availability will not be affected by this particularly spreadable form of dirty power.

If you want to enroll in LR and don’t have a UFR, CPower can help. We work with world-class third-party resource vendors and partners who can design and install UFRs to the exact specifications of the CPower curtailment plan developed for your facility. By working with the best, we assure you of the best opportunity to save and earn.

You don’t need a UFR to go about your daily business. But you do need it to receive the financial benefits of being a Load Resource available to provide invaluable operating reserves as needed. Considering that the growth of renewables, especially wind, shows no signs of abating in Texas, and with it the threat of under frequency conditions, having a UFR might just be a good idea, period.

UPDATE March 5: ERCOT announced today that, due to expected record high demand and “historically low” 7.4% expected reserve margin, they have “identified a potential need to call an energy [emergency] alert at various times this summer.” (Emphasis ours.) Alerts allow ERCOT to take advantage of resources available only during scarcity conditions—particularly demand response. ERCOT will release its final summer report in May.

Two significant factors projected for ERCOT — the Electric Reliability Council of Texas—stand to have a noticeable impact on its energy market: Reduced supply and record peak demand. The resulting clash between these two market drivers point to the very real possibility of unexpectedly high prices for organizations participating in ERCOT’s Load Resources (LR) demand response program. Let’s take a look at what’s driving these two important factors, and how this could translate into an opportunity to generate revenue through demand response.

Reserves have dropped dramatically. Since mid-2017, ERCOT has approved the retiring of four coal-fired generation plants responsible for generating more than 4,500 MW in capacity. It’s not just coal generation, though. Since the May 2018 Capacity, Demand, and Reserves (CDR) report, three planned gas-fired projects totaling 1,763 MW and five wind projects totaling 1,069 MW have been canceled. Another 2,485 MW of gas, wind and solar projects have been delayed.

In its December 2018 CDR report, ERCOT projected total available generation capacity for Summer 2019 at 78,555 MWs—an estimate, as it turns out, that’s too low. ERCOT recently learned that it is losing another 470 MWs from the Gibbons Creek coal plant going offline this summer. That drops reserve capacity to 78,085 MWs—a low, low 7.4% reserve margin, just over half of the long-standing target margin of 13.75% of peak electricity demand.

And demand will peak. Last year, ERCOT set an all-time peak demand record of 73,473 MWs on July 19 between 4 and 5 p.m. This year, ERCOT predicts more “record-breaking peak demand usage” for the summer: 74,853 MWs, 1300 MWs higher than last year’s all-time peak.

That leaves a gap of—hold on—just 3,232 MWs. Low supply. High demand. Tight, tight margins. All that adds up to the potential for record high prices in ERCOT’s Load Resources (LR) ancillary services demand response program that ERCOT deploys to maintain sufficient operating reserves.

Already, LR prices have increased since the retiring of 4,200 MWs of generation in 2018. (see chart.) Additionally, projected wholesale energy prices in ERCOT for Summer 2019 are some of the highest we have seen. It’s not a stretch to anticipate high, if not record high, LR prices this summer.

High prices in Load Resources mean generous revenue paid to you for your participation in the program which pays businesses for being available to curtail energy on short notice when the grid is stressed. LR has the potential to pay organizations two to three times more than other ERCOT demand response programs.

CPower can help you get the most out of the Load Resources program by working closely with your organization to develop a customized curtailment strategy, including automation, that suits your business objectives and operational considerations. Start the conversation today. Learn how to maximize your curtailment revenue with CPower and ERCOT’s LR program.