Two Senate committees, Natural Resources and Business & Commerce, convened April 15 to examine how the state will provide for the state’s future energy needs. One thing is for certain: The state will need a whole arsenal of energy sources.

Public Utilities Commission chairman Barry Smitherman told lawmakers that Texas can expect a population of 50 million by 2040.

Texas, Smitherman said, is a "gas on the margins state," which is why the price of natural gas sets the price of electricity.

The consensus among legislators is that Texas needs to diversify. Bob Kahn, CEO of the Electric Reliability Council of Texas (ERCOT), made the following points::

*Out of just over 73,000 MW of currently installed electric generation capacity, over 50,000 of it (about 68 percent) comes from natural gas. Another 12,000 MW (about 17 percent) approximately comes from coal — the bete noire of environmentalists — with wind a distant third at and nuclear close behind, both at about 5,000 MW (about 7 percent) each. Kahn said that ERCOT is currently using less than 10 percent of its total installed wind capacity.

*Another 100,000 MW is under review. Almost 45,000 MW of that is wind. About 31,000 MW is natural gas, nearly 16,000 MW is nuclear, and coal is just over 8,000 MW.

TCEQ Chairman Buddy Garcia said that all options for future energy sources must remain available. He also said energy conservation efforts must continue to expand.

Communication is key

So as to facilitate the diversification of energy sources, Natural Resources chairman Kip Averitt (R-Waco) and Business & Commerce Chair Troy Fraser (R-Horseshoe Bay) are looking to open up lines of communications between the various state agencies including PUC, ERCOT, ‘and the Texas Commission on Environmental Quality.

Averitt, no stranger to managing a scarce resource for a booming population, was the principal author of last year’s omnibus water legislation, SB 3, which, among other things created an advisory committee on water management. He suggested forming a similar committee for future management of the state’s power needs.

"It’s a very similar issue," Averitt said. "We have a certain amount of water, and we have twice as many folks using it. And so we’ve developed a process where we identify where the water is going to be needed and where it’s going to come from, and how we’re going to get it there." He suggested that in the same vein, PUC and TCEQ work together to develop a long-range energy plan that identifies where energy will be needed, which fuels used , and how it would get there."

Averitt addressed TCEQ Chairman Buddy Garcia: "PUC and ERCOT are charged with making sure we have reliable energy for all the consumers in our state, and you’re [TCEQ] charged with permitting those generating units, and your consideration has a lot to do with environmental impact.

"There’s apparently no meaningful discussion between our agencies today about them trying to provide for generation and you permitting generation. You have different charges and different responsibilities. But the fact of the matter is the generation is going to affect the quality of air."

Averitt wants the agencies to coordinate a plan that looks 30 years into the future.

Garcia said his staff is prepared to look at ways to increase communication between TCEQ and the other agencies, despite the lack of regulatory requirements to do so. That may change next session. "[For] the long range energy plan," he said, "it would make all the sense in the world for all of us to be working together."

Smitherman agreed: "I think there’s certainly value in us communicating with each other."

Michael Webber, associate professor of mechanical engineering at the University of Texas-Austin, said the Texas Water Development Board should be involved in the discussion of future energy needs as well, with energy becoming more water-intensive and vice versa. Averitt agreed.

Wind challenges remain

Former State Rep. Paul Sadler, now president of the Wind Coalition, extolled the virtues of wind, saying that wind power could lead to significant production cost savings according to ERCOT. But Kahn told the committees that as more wind power comes online, fuel cost savings will reduce over time.

Fraser expressed concern that wind energy currently is not used for base-load capacity; i.e., it is not used first in Texas’ energy arsenal. "I continue to be concerned," Fraser said, "that we treat wind as peaking power, and we cut them on and off and make them secondary to the gas peaking market. Why would it not be good public policy to accept 100 percent of what wind produces rather than cutting them off and then giving priority to peaking gas?"

Smitherman said this is because it is never certain that wind will actually be available - reliability issues again.

But Garcia and Kahn said the biggest challenge facing wind is transmission. "I think it’d be fair to say we never curtail wind if we have the transmission," Kahn said.

Fraser also was worried about what could happen if companies chose to build wind farms outside of the Competitive Renewable Energy Zones (CREZ) prescribed by ERCOT. If farms went up outside those zones, Kahn said, it would be the state’s obligation to provide the transmission. In other words, the ratepayers would foot the bill for transmission.

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