TEXAS VIEW: Want to save Texas’ grid? Pay customers to cut energy usage

THE POINT: Instead of billionaires profiting off power failures, let everyday Texans save a buck when they help save the grid.

By this point in the summer, Texans know the drill. Sometime before dusk we’re likely to get a notice from our utility providers politely asking us to reduce energy usage, usually between the hours of 6-9 p.m. when solar power wanes. We grumble to ourselves for a minute, then dutifully shut off the dishwasher and laundry machine, turn off any unnecessary lights and raise our thermostats a few degrees. In recent weeks, we’ve been asked to do this several times. We’re guessing only a few goody-goodies out there have done so every single time. Why should anyone feel put upon to suffer a sweaty house if pipeline companies allegedly bilked the system by the billions when the grid needed them most?

Even so, our collective voluntary action has helped. Our wobbly grid hasn’t yet forced any major outages this summer. In the meantime, power generators reap a windfall when energy demand nearly exceeds supply. In August, Texas power prices hit a 30-month high, with some regional prices hitting $1,599 per megawatt hour, the highest since Winter Storm Uri in 2021. When you raise your thermostat, you save your retail provider a pretty penny.

Bully for them, but what if Texans got a slice of that action? Instead of begging customers to be good neighbors and sweat out the sultry evening hours, our energy providers should kick in some cash for our troubles.

This concept, known as demand response, is actually as simple as it sounds. Demand response programs offered by a handful of providers in Texas help balance supply and demand by incentivizing customers through rebates, credits or reduced rates to cut their energy usage when grid conditions are at their tightest. In case you are getting flashbacks to the Griddy debacle, these demand response plans don’t expose people to fluctuations in wholesale prices.

Demand response is a win-win for providers and consumers, as long as the savings really are shared and Texans have an easy way to both opt in and out. It’s also a smarter solution for summer dusk hours than multi-billion dollar tax subsidies for new natural gas plants.

In just the past 14 months, peak demand in Texas has grown by 10.5 gigawatts — 1 gigawatt can power about 750,000 homes — meaning our grid managers, lawmakers and energy regulators need to be thinking about expanding demand response to manage our daily energy consumption more efficiently. We already have ample evidence that these programs can help save our grid from completely collapsing, and save customers money.

Take San Antonio. CPS Energy, the city-owned utility, has long offered programs such as incentives for weatherizing homes to rebates for installing smart thermostats. As many as 150,000 homes participate.

More recently, the utility has expanded to offer a Wi-Fi thermostat program that basically automates the responsibility of cutting energy during peak demand hours. Here’s how it works: customers who enroll can choose from a menu of smart thermostats to purchase. They receive an $85 rebate for signing up, then a $30 annual rebate every time they renew. Then, when Texas’ grid manager sends out a conservation notice, enrollees don’t have to lift a finger. The utility just sends a signal to the WiFi thermostat, nudging it up a few degrees.

The results are impressive. The San Antonio Express-News reported that on June 27, when temperatures reached 105 degrees, CPS was able to reduce demand by 156 megawatts, saving enough energy to power 31,200 homes statewide. The smart thermostats save money too — lowering CPS customers’ electric bills by as much as 8 percent.

Retail electricity providers are also getting in the demand response game. Companies such as Houston-based Rhythm Energy, Gexa Energy and OhmConnect offer incentives or reward points for customers who curb their energy usage. Another company, Octopus Energy, a global renewable energy retailer with offices in Houston, offered a smart thermostat plan that was so popular — estimated to save customers $360 annually — that its sign ups increased by 250 percent. This spring, the provider announced a “Fan Club” for cities in South Texas, offering a 50 percent discount to customers who shift their energy usage to parts of the day when low-cost wind power accounts for 45 percent or more of the Texas grid’s generation.

Unfortunately, companies that offer these programs for homes and small businesses are a distinct minority in Texas’ competitive power market. ERCOT, Texas’ grid manager, offers demand response programs for industrial customers who use the most power, such as Bitcoin miners, manufacturers and big box stores.

Think about that for a second: cryptocurrency miners, whose outsized energy demand has increased electricity costs by as much as 9 percent for some customers in Texas, get paid to cut their energy usage while most residential customers who do it voluntarily get nothing more than a pat on the back.

We urge ERCOT to remedy this inequity and implement a statewide demand response program that expands the options for residential customers and makes sure they are fair. During a recent board meeting, ERCOT CEO Pablo Vegas announced that it commissioned Texas A&M to conduct a study examining the potential for expanding energy efficiency and demand response programs. That’s a good start.

The state’s Public Utility Commission, which regulates electric companies, can also play a crucial role in advancing demand response. During the legislative session, state lawmakers passed Senate Bill 1699 by Sen. Nathan Johnson, D-Dallas, forcing the PUC to establish new energy efficiency goals and include demand response programs among the services offered to customers. While the bill gives the PUC broad leeway to determine how these programs are structured, so far the commission hasn’t included energy efficiency or demand response on its rulemaking calendar.

While we have little doubt residential customers will continue to do their part to cut energy usage, relying on their conscientiousness alone to save our grid is not a sustainable strategy.

Houston Chronicle