ERCOT Warns Demand Could Outpace Dispatchable Power This Summer

Texas officials on May 4 warned that peak demand for electricity could—for the first time—exceed the amount the Electric Reliability Council of Texas (ERCOT) can generate from on-demand dispatchable power, forcing the grid operator to rely on renewables to keep the lights on this summer.

During an annual public update ahead of summer 2023, Peter Lake, chairman of the Public Utility Commission of Texas (PUCT), and Pablo Vegas, ERCOT president and CEO, sought to lay out in stark terms what they described as the state grid’s “new reality:” The increase in demand for electricity has outpaced the supply of on-demand power from power plants that can be turned on and off according to market needs.

It means, as Lake said, “On the hottest days of summer, there is no longer enough on-demand dispatchable power generation to meet demand on the ERCOT system.” The grid’s “risk goes up as the sun goes down because it’s still hot at 9 p.m.,” he added.

“The sun sets faster than the atmosphere cools and our solar generation is all gone. At that point in the day, we will be relying on wind generation on our hottest days. If the wind does not pick up, we will have to rely on our on-demand dispatchable generators,” Lake explained. “And the data is showing us that on our hottest days, under some circumstances, we may not have enough on-demand dispatchable generation to cover the gap between when the sunsets we lose the solar and when our wind generation picks up.”

Lake said the issue stems from sparse growth—of only 1.5%—in the supply of on-demand dispatchable power generation on the ERCOT system between 2008 and 2020. By contrast, the state’s population surged 24% during the same period.

Vegas, who underscored that the grid is currently “as reliable as it has ever been,” described the issue as a “long-term resource adequacy” risk. “When we say that the grid is more reliable than ever, it’s because of the investments that have been made to ensure that all of the resources on the grid will be available and running when called on those investments have been made,” he noted. “So we expect the thermal dispatchable fleet to be in good operating condition. We expect the transmission facilities to be in good operating condition.”

To further illustrate the issue, Vegas drew an analogy, comparing the grid to a car. “So what we’re saying this summer is that the car is ready to go. It’s ready to run. It’s going to be reliable,” he said. “However, we’re asking it to go further without adding more reliable fuel. So now it’s a supply and demand issue. The grid is reliable, we need to make reforms that are going to incentivize building more dispatchable generation so that as demand continues to grow, as the state of Texas continues to grow, we’ll always have reliable supply to serve it,” he said.

The public update was issued the same day ERCOT released its final Seasonal Assessment of Resource Adequacy (SARA) for summer 2023, a scenario-based analysis that highlights system risks under different conditions. The summer 2023 SARA suggests that if ERCOT—the grid that serves 90% of Texas—experiences typical summer conditions, it will have sufficient installed generating capacity to serve the system-wide peak of 82,739 MW between June and September 2023.

ERCOT expects 91.1 GW of the grid’s 73.2-GW installed capacity will be available to serve the summer peak. Of that figure, about 65 GW will be thermal, summer-rated capacity, 12.2 GW will be utility-scale solar, and 10.4 GW will be wind resources.

Vegas on Wednesday noted the most severe risk scenarios explored in the SARA assume a “very high peak load, extreme unplanned thermal outages based on historic observations, and extreme low wind output.” The grid set several peak demand records set last year, and ERCOT’s models estimate that this summer’s peak could be about 6 GW greater than last summer, he said.

“However, we’re only expecting a nominal increase of about 850 MW of thermal capacity since last summer. The majority of new generation capacity that has been added since last summer in our economy continues to come from intermittent resources. On the renewables front, we’re expecting about 1,000 MW of additional wind capacity about 3,400 MW of solar capacity compared to last year’s SARA,” Vegas noted.

“As a result, we are expecting to have to rely more on renewables during peak conditions than we ever have before. And as a result of this dynamic, this summer could have tighter hours than last summer with a higher risk of emergency operations. ERCOT may experience these tighter conditions after the traditional 5 p.m. peak load as generation from solar units begins to decrease when the sun sets,” he said. Texas experienced similar conditions on July 13, 2022, when wind and solar generation began to decrease simultaneously in the evening hours spurring tight grid conditions, he noted. 

Vegas said that to help mitigate risks, ERCOT plans to continue to operate the grid “conservatively.” That means “bringing generating resources online earlier, to mitigate any sudden changes in generation or demand,” Vegas said.

ERCOT on June 8 also plans to launch a new ancillary service, the ERCOT Contingency Reserve Service (ECRS). The service will seek to restore or maintain frequency of the ERCOT system or provide capacity for large and sustained net-load ramps.

According to Texas Competitive Power Advocates (TCPA), a trade association representing power generators in the ERCOT wholesale and retail electric markets, the SARA and accompanying 2024–2033 Capacity, Demand and Reserves (CDR) report don’t come as a surprise. “The CDR and SARA confirm what we already knew—that ERCOT will need more dispatchable generation to meet peak net load,” said TCPA Executive Director Michele Richmond said. “It underscores the importance of implementing a functional [Performance Credit Mechanism (PCM)] that sends the market signal to retain existing dispatchable generation for now and to build new dispatchable generation for the future.”

The PCM, which the PUCT unanimously adopted in January 2023 as directed by Legislature, seeks to ensure reliability of the grid during times of low non-dispatchable power production. Following a lengthy stakeholder process, the PUCT concluded a reliability service that incentivizes new dispatchable power in the ERCOT market best meets the grid’s needs. Implementation of the PCM, however, has been delayed pending consideration of the 88th Legislature, which is set to adjourn on May 29.

“Texas’ continued economic development miracle hinges on reliable energy, and the PUCT-adopted PCM market will ensure its successful continuation, while nothing being considered by the Legislature currently will do that,” Richmond said. “TCPA members have announced 4,500 MW of new gas generation, but that is in jeopardy of being canceled if SB 6, SB 7, SB 1075, or SB 2012 are enacted into law. The CDR and SARA show the importance of those 4,500 MW moving forward and the market signaling the need for more to be built.”

—Sonal Patel is a POWER senior associate editor (@sonalcpatel, @POWERmagazine).

Editor’s note: This story is being updated