“No Panacea for Our Current Grid Dilemma” By Bill Ponton
“One important thing to know about the grid is that supply and demand of electricity must always match. If the grid operator can dispatch supply to meet changes in demand, it works flawlessly.”
No Panacea for Our Current Grid Dilemma
By Bill Ponton
January 29, 2025
The U.S. power grid is a crowning achievement of our age. It has served the public well for over one hundred years. One important thing to know about the grid is that supply and demand of electricity must always match. If the grid operator can dispatch supply to meet changes in demand, it works flawlessly. A problem emerges when the operator is required by state mandate to include a percentage of supply that is completely outside his control. Then the operator must use his remaining dispatchable resources to not only balance out demand but also compensate for wind and solar sources that vary with weather and time of day. It is not the end of the world for the grid operator, but it certainly makes his job more difficult and makes his dispatchable resources more expensive to operate as the owners of these assets must recoup capital and O&M costs across a smaller window of power generation time.
Mandates for renewables have been enacted in both conservative and liberal states, which should remind us that insanity can emerge on both sides of the political divide. For another example of the same, we have ethanol mandates that have enriched conservative farmers in the Midwest for almost five decades.
That is why I am a bit skeptical when the American Clean Power Association (ACP) discovers a panacea for grid operator woes. With additional solar and battery capacity, they promise to keep energy costs low for Texas consumers, avoid conservation appeals to the public during weather events and mitigate concerns over widespread power outages. In a nutshell, they propose to cure the problems with the grid with more of what got it into trouble in the first place. I think that I have heard such appeals before from my children when they were young.
An in-depth look at the ACP report, reveals that by increasing solar capacity by 13 GW and battery capacity by 10 GWh, one can supply 5 GWh of the 75 GWh of demand from a battery from 7pm – 9pm. According to their report, it shifts the price peak to later in the evening and magically saves $750 million. Of course, the report’s author is being less than candid when he fails to mention that prices are already distorted by perverse economic incentives built into the state renewables mandate.
To get at the truth, one needs to strip away the mandates and subsidies and look only at the costs of building and maintaining different types of generation. If you do that, you come to a radically different conclusion. In 2023 the cost to Texas grid operator, ERCOT, of generating electricity was 1.6 times greater with its current energy mix of gas, solar, wind and battery than it would have been with gas only. My calculations are here for all to examine. The current approach of retiring fossil fuel plants and replacing them with renewables and batteries is suicidal and no amount of sophistry from ACP will allow one to escape that fact.
Bill Ponton heads Princeton Venture Advisory.