Reserve Margins in Texas Barely Healthy Again, ERCOT Says

Texas could again see tight power supplies in the summer of 2013 and beyond—with reserve margins dropping to 2.8% by 2022—even though the outlook has improved, the Electric Reliability Council of Texas (ERCOT) warned in its latest long-term outlook released on Monday.

The Capacity, Demand and Reserves (CDR) report anticipates that the grid operator for about 85% of the state will have 74,633 MW of power to serve anticipated peak electric use (or load) of 65,952 MW next summer. That reflects a reserve margin of 13.2% in summer 2013, which is slightly below ERCOT’s 2010-established target of 13.75%. ERCOT said that though the reserve margin is not mandated by the operator itself or the Public Utility Commission of Texas (PUC), ERCOT uses the target for reliability assessment purposes.

"The projected reserve margin for summer 2013 has dropped slightly since May, but we are seeing healthier reserve margins in future years," said ERCOT CEO Trip Doggett in a statement on Monday. "Although peak demand is expected to grow less quickly than previous economic predictions indicated, we should continue to encourage new generation and develop more demand response options to reduce our electric use during periods of highest use—the hottest hours of the hottest days of summer."

By 2014, projected reserves drop to 10.9%, below the target—but it is an improvement from the previous CDR report released in May 2012. The margin continues to decrease in future years, dropping to 2.8% by 2022, also an improvement compared to previous projections.

The improvements can be explained by the new report’s consideration of existing resources and additions that have already received required air permits and interconnection agreements with transmission providers, ERCOT said. “Resource owners typically do not complete the criteria required for CDR inclusion more than a few years before a resource is available for use in the ERCOT grid.”

Several entities have announced plans for new generation that is likely to come online in future years, but those projects have not yet acquired the level of certainty required to be included in this report, said Warren Lasher, ERCOT’s director of System Planning. "The long-term outlook will change over time as new projects move forward."

Load forecast in the CDR is based on a 15-year average weather profile, combined with economic factors such as per capita income, population, gross domestic product and various employment measures. For this CDR, ERCOT said it used a more conservative economic forecast than it used in the most recent report, based on slower economic growth seen in recent years.

Since the previous CDR in May 2012, projects totaling 2,360 MW have been removed from the long-term outlook due to changes in project status. Another 2,305 MW have been added, including 1,309 in new wind power projects, which are counted at 8.7% of their maximum capacity based on historical output. The CDR anticipates 961 MW of new non-wind generation by summer 2013: 925 MW from Sandy Creek 1, a new coal-fired unit in McLennan County, and 36 MW from the NoTrees Battery, a new storage facility in Winkler County.

Some of the units included in the 2015 summer outlook could be available in time for the summer 2014 peak demand but are not included in the 2014 projections. New units being developed by Panda Power Funds in Grayson and Bell Counties are expected to add 1,681 MW by summer 2015 and another 780 MW by summer 2016. Also by summer 2015, the Lower Colorado River Authority expects to begin operating a new 570-MW combined cycle plant in Llano County, for a net addition of 216 MW when it retires an existing plant at the same site. The Texas Clean Energy Project is slated to bring 240 MW of new coal-fired generation to the mix by summer 2016, and a new 1,380-MW gas-fired project could begin operations in Harris County later that year.

Meanwhile, more than 900 MW of mothballed capacity is expected to return to service by summer 2013. Another 1,130 MW of currently mothballed capacity is included in summer capacity totals because owners already committed to return those units to service for the summer 2013 peak season. Under existing market rules, ERCOT may deploy other available mothballed resources if needed in an emergency situation.

ERCOT was forced to cut power to large industrial users in the summer of 2011 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, 2011. ERCOT had previously 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.

Sources: POWERnews, ERCOT