The 4 biggest challenges San Antonio's energy market is facing right now (2024)

From ensuring there is enough energy to power our quickly growing city, to physical shifts happening within the Texas grid, San Antonio’s energy sector is currently facing a unique set of challenges as state regulators work to build up reliability measures within a state that’s been scarred by costly and deadly grid failures.

CPS Energy, San Antonio’s municipally owned electric and gas utility, operates as the state’s fourth-largest energy generator in the state, and utilizes about 7% of ERCOT grid’s total energy at any given time, positioning San Antonio in an important role in the future of Texas’ grid reliability, said CPS Energy’s President and CEO Rudy Garza.

Garza spoke openly about the challenges facing CPS Energy and San Antonio Thursday during the annual State of Energy address, hosted by the North San Antonio Chamber and moderated by Andrew Hunt, senior vice president at consulting firm Project Control of Texas.

They were joined by ERCOT’s President and CEO Pablo Vegas, who spoke on what challenges the Texas energy market is facing as a whole.

These are four of the biggest challenges San Antonio’s energy market is currently facing, according to Garza and Vegas:

ERCOT may order CPS Energy to keep Braunig plant running

Over the past six months, officials from ERCOT and the Public Utility Commission of Texas have voiced concerns about CPS Energy’s plan to shut down its three natural gas-powered units at the Braunig Power Plant by the end of next spring. The three units generate about 860 megawatts of power collectively, with a megawatt being enough energy to power 250 homes on a hot Texas day.

Regulators say this may raise the risk of statewide power outages, such as the one that happened in February 2021 due to Winter Storm Uri. The state is considering requiring CPS Energy to keep the units running through 2026. Last week, ERCOT issued a request for proposals looking “for alternatives that are capable of providing an acceptable solution to the reliability concerns that would otherwise be solved by the [operation of] one or more of the Braunig Resources.”

Garza said Thursday if CPS Energy is required to keep these units running, it will do so.

“We’re going to do what’s right for the state,” he said. “But we’ve invested millions and millions of dollars — our customers have paid for these units to stay on longer than we had anticipated to begin with,” he added.

Garza said he has been working with ERCOT to ensure that if those units do have to be kept running longer than CPS Energy plans for, San Antonians aren’t the ones paying for the costly repairs it would need to operate smoothly.

“The state has the ability to tell us, ‘You’ve got to keep running them,'” Garza said, “and if the state does that, we will keep running them … But I will say this … you’ve got a false sense of security that you have a reliable system when you’re leaning on 60-year-old plants to provide the reserve margin that the state’s looking for.”

ERCOT agrees, Vegas said, adding that he feels the healthiest market is one that’s retiring the oldest, most inefficient power plants and replacing them with newer, cleaner, more efficient power plants. These older power plants like Braunig can take up to 12 hours to fully fire up and are not very flexible, Vegas said.

“The only reason that we’re saying today that we need to consider keeping those plants is because there are some local transmission risks in this area,” Vegas said. Vegas said until additional transmission lines are built in this area, which can take three to six years, there’s the risk of squeezes happening to areas below San Antonio.

A “transmission squeeze” in electric grids refers to a situation where the capacity of the transmission network is insufficient to accommodate the amount of electricity that needs to be transmitted from generators to consumers.

CPS Energy will need to find suitable spots for new gas plants

CPS Energy was passed up by the PUCT on Wednesday to receive a new type of low-interest loan that would have supported the construction and operation of two new peaking power plants — a type of power plant designed to operate primarily during periods of high electricity demand. Garza told reporters Thursday that CPS Energy still plans to build additional gas-powered capacity to its portfolio in the near future, though.

The utility is still in the engineering process for those potential assets,Garza said. CPS Energy may initially build a single 200-megawatt unit due to current supply chain constraints, he said, and build another 200-megawatt unit later down the line.

He added that the utility “can borrow money as cheap as the [Texas Energy Fund] program, so at the end of the day,” not getting the TEF loans this first round is not going to have any negative impact on CPS Energy.

Where to put the plant or plants, however, is a whole separate issue.

Garza said the utility is looking toward other nearby areas outside of Bexar County, adding CPS Energy didn’t want to be limited by when it is allowed to run the plant under new emission stipulations being instituted by the U.S. Environmental Protection Agency.

“We could go to Guadalupe County, there’s land up there and transmission that we could put it on,” he said. “We could go out towards Seguin, where our Rio Nogales plant is. We could put it on the line between here and STP that goes towards Houston, or we could partner potentially with LCRA which is already building some new units, and do a joint project with them. Right now, all those options are on the table.”

Transmission squeezes remain an issue in a shifting Texas, especially as AI grows

Texas continues to deal with transmission squeezes across the state as Texas’ population explodes and the power generation portfolio of Texas shifts towards more renewables.

Just like congested highways that stall with too many cars on the road, transmission lines across the state are limited to how much electricity they can carry at one time, without the risk of frying the lines. ERCOT works “like the air traffic controller” of these lines to prevent this, Vegas explained Thursday.

Historically in Texas, much of the state’s power has been generated in West Texas, where natural gas flows rich. However, energy generation across the state is shifting more to other sections of the state such as the north and south, where solar and wind production are strong. This is causing some congestion on the state’s existing transmission lines, like a country road suddenly needing to become a super highway, Vegas explained.

The growth of data centers as artificial intelligence, cryptocurrency mining and internet use explode are also causing transmission squeezes, because these centers come to Texas seeking large amounts of energy, Vegas noted.

“These are the really big, fast-growing loads that we want to make sure that we’ve got all the resources and all the connections that we need for them in order to help manage their loads effectively,” Vegas said.

Garza added that CPS Energy is actively building additional transmission across the state.

ERCOT says new EPA regulations limit grid reliability

Vegas doubled down Thursday on comments he made earlier this summer that the EPA’s new emissions rules for fossil fuel power plants, which are currently being challenged in court by the state of Texas, are causing additional reliability issues in Texas.

These new rules impose stricter limits on carbon dioxide emissions from fossil fuel power plants by requiring plants to adopt advanced technologies to capture and reduce these emissions. They also set more stringent limits on nitrogen oxides, which contribute to smog and acid rain; set lower limits for allowed sulfur dioxide emissions; introduce tighter controls on particulate matter emissions; and require power plants to increase their monitoring and reporting of emissions data.

“ERCOT has gotten behind that fight as well and is also legally supporting some of the work to try to get the federal government handcuffs off of our ability to serve the customers and to develop the resources that we know we need here in Texas,” Vegas said.

Vegas added that if these rules go into effect as proposed, “it could make it almost impossible to build a base load gas power plant in the United States.”

While Garza defended the EPA’s demands for clean air, he did seem to agree with Vegas that the rules as proposed will make power generation in Texas trickier.

“I’m not even sure how much we’re going to be able to run the plants that we have in the on the ground today in Bexar County, much less where I’m going to build my plants in the future,” he said.

The rule would spell doom for Texas coal plants, Vegas told reporters Thursday.

“Likely, what would happen is all of the coal plants operating in the state of Texas would shut down if that rule went into effect,” he said. “We have over 12,000 megawatts of coal plants operating in the state of Texas today. That would all disappear if that rule went into effect.”

Environmental advocates, such as the Sierra Club Lone Star chapter, don’t buy it. In response to a similar comment made in June, the chapter’s director Dave Cortez said coal isn’t as reliable as a source as Vegas claims, adding these types of plants largely failed during Winter Storm Uri.

“ERCOT leadership claims that keeping dirty coal plants running is an electric reliability issue, but in fact coal plants can’t be counted on, especially in extreme weather,” Cortez said. “What Texans can rely on is that wealthy fossil fuel corporations will sacrifice our right to clean air and safe water in service of their bottom line, and in this case ERCOT seems happy to help the polluters line their pockets while

Texans pay the ultimate price.”