The best solution to reliability concerns in Texas may be energy efficiency and demand response, according to a new study from the Brattle Group.

Natural gas and renewable energy will continue to dominate additional supply in the Texas electric grid over the next twenty years, according to a new report from the Brattle Group written for the Texas Clean Energy Coalition.

Over that same time frame, expansion of energy efficiency and demand response programs could cut projected peak demand growth in half.

The report also looked at the potential for carbon emission reductions in Texas. Coming right after EPA’s proposed state-level regulations for CO2, the report seems to offer good news.

“While Texas currently ranks as the largest carbon emitter in the country, our research proves that Texas is in a position to build a cleaner, more affordable, more water-lean and more reliable electricity sector,” said Peter Fox-Penner, a principal at the Brattle Group and co-author of the study.

Two previous reports from Brattle looked at the benefits of a close relationship between gas and renewables. With a range of options, Brattle outlined scenarios ranging from 46 percent renewables in 2032 to other cases in which nearly all future capacity additions are gas-fired.

But those studies did not look at demand-side options, as the new one does.

Looking solely at expected ERCOT energy prices, Brattle found new “economically achievable” energy efficiency programs could deliver 3 gigawatts of savings, while new demand response (DR) programs could cut demand by 2 gigawatts to 4 gigawatts. Together, they could cut projected peak demand growth by 40 percent to 50 percent.

In the near term, Brattle sees DR growing 20 percent to 30 percent by 2017, potentially leveraging 760 megawatts of resources. By 2032, DR deployment could be as high as 6,300 megawatts in the state. “An evolved DR policy, with default dynamic pricing coupled with ‘automation technologies,’ could boost it further,” state the authors.

The more demand-side resources deployed, the more money Texas would save. The scenario with the most aggressive assumptions for efficiency, DR, and combined heat and power was also found to deliver the lowest power prices in 2032, with an average wholesale price of about $56 per megawatt-hour -- lower than the business-as-usual case.

And while it wasn’t the main thrust of the report, Brattle also looked at scenarios for varying levels of carbon reduction. It was well timed, as EPA rolled out its proposed Clean Power Plan on June 2, the day before the Brattle report was released.

With the largest carbon emissions of any state, and the largest potential for reductions, EPA’s plan calls for Texas to reduce the rate of carbon emissions from 1,298 pounds per megawatt-hour in 2012 to 791 pounds per megawatt-hour by 2030, a cut of approximately 39 percent.

Governor Rick Perry and Attorney General Greg Abbot, the GOP nominee to replace Perry, both blasted the plan as “job-killing” and “ideological.” 

But Brattle’s “moderate carbon policy” scenario, with cuts of 35 percent by 2032, found a rate impact of only 5 percent to 10 percent. A high case of an 80 percent carbon cut raised prices by $10 per megawatt-hour, or about 20 percent above business as usual.

The Sierra Club’s Al Armendariz pointed out that of 118 power plants in the states, six coal plants account for more than 30 percent of all the carbon emitted.

“I suspect that what’s going to happen is that a small number of power plants are going to be phased out and be replaced with renewable energy,” Armendariz told the Texas Observer.

According to the Center for Climate and Energy Solutions (C2ES), the EPA based its Texas goal on the assumption that a 19.9 percent reduction would come from switching from coal to natural gas, 9.2 percent from growth in renewables, 5.5 percent from end-use efficiency and 3.8 percent from improved efficiency at coal plants.

Brattle Group has been spending a significant amount of time in Texas. In addition to the series for the Texas coalition, it looked in 2012 at what large amounts of solar could do for the Texas market. In that report, analysts found that 5 gigawatts of solar would have saved customers $520 million during the hot summer of 2011. ERCOT called for emergency savings six times that summer, and prices hit the regulatory cap of $3,000 per megawatt-hour on five days.

More recently, Brattle was tapped by the Texas PUC to evaluate how big a reserve margin ERCOT should maintain, a critical part of the contentious debate about capacity markets. Brattle pointed out that a traditional one-day-in-ten-years reliability standard of 13 percent to 15 percent cost $100 million a year more than an “economically optimal” reserve margin of 9 percent to 11 percent.

“ERCOT’s current energy-only market can be expected to support investment sufficient to maintain an 11.5 percent reserve margin,” they wrote.  With this lower margin, “1,600 megawatts would need to be curtailed for 2.6 hours on average” once every three years.