The Electric Reliability Council of Texas has had its share of corruption and allegations in the past and the new nodal system which has been postponed a few years out from its previous scheduled launch has created additional skepticism and lack of confidence in ERCOT’s ability to operate a sound, efficient ethically run Texas power grid. The original 2008 nodal launch is now scheduled to go into effect December 2010. The cost of the 4,000 "nodes" and nodal grid system and pricing infrastructure has doubled to $660 million so the PUC of Texas decided it might be smart to check on ERCOT and make sure they are making the right decisions.

Outside Experts Confirm System will Create Cheaper Texas Electricity

The Public Utility Commission of Texas hired a consulting company to check and see if the new nodal system will be worth the money. Based on the analysis it appears that Texas will be able to reduce their electricity costs by going ahead with the new nodal system. Based on the new study the information provided by the nodal system will allow for more efficient dispatch of power plants, a change expected to save money and reduce use of natural gas energy to generate Texas electricity. The expected savings by going ahead with the nodal system Texas electric grid project is $5.6 billion in savings over a 10 year period. The current hang up with implementing the nodal system have been several software glitches in the current design.

How the Nodal System Works

With the new nodal design there will be over 4,000 "price points" to allow for the ability to allocate resources and curtail energy resources where necessary instead of overcharging because of a less efficient design. The nodal points are also known as generation locations in the ERCOT grid and will allow the grid operators to identify transmission congestion issues faster and respond with the appropriate action in a timely manner.

The recent analysis done by a Boston consulting firm has confirmed that the nodal design is still the right decision for Texas. This new study may help to increase confidence in the Texas ERCOT grid operator, who many have written off long ago, as well as the nodal design. This nodal system may actually happen after all which is a pleasant surprise for many Texas energy consumers and industry professionals in Texas.

Comparing Current Zonal System to the Nodal System

The study made some clear understanding of what the state of Texas can expect when the nodal system goes live. When comparing the nodal system with the current zonal system ERCOT uses now the state can expect to see lower fuel costs, power-plant operations, and environmental permitting. With the new system in place, power generation plants will be rewarded for building in places in the state that will avoid the most grid congestion. This free market system will reward power generation businesses with better profits when they make the overall electric grid system more efficient. The best way to do this is by building in locations in the state that will avoid the most congestion.

The way the zonal system is now is a system that remains very volatile during the coldest winters and the hottest summers. The faster ability to dispatch power plants will cut down the real time volatility that historically has been created by congestion issues on the grid. This congestion has been seen in its worst form in and around the Houston area. The most populated area of the state of Texas will be relieved to be able to not have to worry about their electric rate doubling and even tripling because of a grid congestion issue. During the summer of 2008 many Houston residential and Texas commercial energy customers blamed tripling variable electric rates on their current electric provider not realizing that these prices were close to the same no matter what provider they might have been on. Many in Texas still do not realize this issue was the blame of the current zonal market design.

ERCOT and the public utility commission have until early next year of 2009 to decide if they are going to go ahead with the nodal project or have it suspended.