ERCOT Projects Negative Reserve Margin within 10 Years

A new report shows that the reserve margin for the Electric Reliability Council of Texas (ERCOT) could plunge to 9.8% as soon as 2014, to 6.9% in 2015, and to a negative margin by 2022—well below the grid operator’s 13.75% target for electric generation capacity that exceeds the forecast peak demand on the grid.

According to ERCOT’s newly revised Capacity, Demand and Reserves (CDR) report , the grid operator that serves about 85% of Texas will struggle to maintain its 2010-set 13.75% reserve margin through 2013, requiring nearly 2 GW of mothballed capacity returned to service before this summer to remain in operation. It also requires that LS Power’s 900-MW pulverized Sandy Creek coal unit in Riesel, Texas, become operational as scheduled. That plant sustained severe damage to its boiler during commissioning testing last October and is expected to reopen in early 2013.

The 2014 outlook shows slightly more than 75,000 MW of available capacity to serve anticipated peak demand of 68,403 MW. By 2015, projected reserves drop to 6.9%, with 76,623 MW of resources available to serve peak demand of 71,692 MW.

Nearly 3,657 MW of new gas-fired capacity, more than 2,000 MW of new wind power (including 600 MW of coastal wind), about 900 MW of new coal-fired generation, and 60 MW of solar power would be added in Texas starting in 2016, but reserve margins would again take a hit as a result of CPS Energy’s plans to deactivate its two coal-fired units at the 845-MW J.T. Deely coal plant in 2018.

The grid operator said it was “unknown” if the federal Mercury and Air Toxics Standard (MATS) would result in retirement of existing coal-fired capacity. “Representatives of the Texas Commission on Environmental Quality (TCEQ) have informed ERCOT that the emissions requirements in the MATS rule for new solid‐fuel units are more stringent than those included in the finalized air permits for several new plants. This discrepancy could cause these new units to have to reapply for air permits, and as a result could further delay these projects or cause them to be cancelled,” it says.

“Although the long-term report projects a negative reserve margin by 2022, the outlook for summer 2013 actually has improved since the previous CDR was released in December 2011,” ERCOT said. That report showed the reserve margin slightly above 12% by summer 2013 and in negative numbers by 2020.

Since the December report was released, about 1,240 MW of previously “mothballed” capacity has returned to service for the foreseeable future. Anticipated capacity now also includes 1,130 MW of coal-fired generation that was expected to discontinue operations under the Cross-State Air Pollution Rule, a federal rule that has been stayed in federal court.

Nearly 600 MW of new renewable power has also begun operations within ERCOT since December, including 105 MW of biomass, 432 MW of wind power, and 59 MW of solar power. ERCOT also factored increasing “demand response” services into future summer load scenarios.

Even so, ERCOT planners cautioned that the peak forecast in the CDR report released this week “could be conservative as the Texas economy continues to thrive in spite of slow growth elsewhere in the country and the outlook for summer temperatures remains above the 15-year average.”

The grid operator was forced to cut power to large industrial users last summer to avoid rolling blackouts as the state grappled with surging power demand during a long heat wave and a devastating drought. Power demand in ERCOT’s operational region hit three consecutive records in one week, reaching 68,294 MW on Aug. 3. ERCOT had come under regulatory scrutiny in February 2011 when an unusually bitter cold snap crippled several power plants and forced the grid operator to implement rolling blackouts.

In a statement on Tuesday, ERCOT CEO Trip Doggett urged immediate action on both the supply and demand sides of what he called the “the resource adequacy equation” to ensure future electric reliability.

“Last summer, every business that reduced its operations when called upon—and every resident who turned up the thermostat when we asked for conservation—helped ERCOT keep the lights on and air conditioners running,” Doggett said. “This year, we are beginning to test new approaches to Emergency Response Service, and we also will try more ways to notify the public when conservation is needed most.”

ERCOT has also commissioned the Brattle Group to examine factors that influence investment in new generation and other projects related to ERCOT’s resource adequacy goals. The Brattle Group has been gathering and analyzing input from investors and other stakeholders to determine what incentives or other changes could improve the outlook for future electric generation and other resource adequacy solutions. Its final report is due for release June 1.

Sources: POWERnews, ERCOT