REPORT: ERCOT still needs more power

A long-term outlook by the Electric Reliability Council of Texas (ERCOT) shows that reserve margins within the grid operator’s region will remain below target levels during the summer of 2013 and beyond.

The document “Report on the capacity, demand, and reserves in the ERCOT region” was released Dec. 10 and projects reserves beyond 2013 that are still below target levels, though shortfalls are smaller than previously predicted for the out years.

“The projected reserve margin for summer 2013 has dropped slightly since [the previous report in] May, but we are seeing healthier reserve margins in future years,” Trip Doggett, ERCOT CEO said in a statement accompanying the report. “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 report anticipates ERCOT will have 74,633 MW available to serve an expected peak load of 65,952 MW during the summer of 2013, resulting in a reserve margin of 13.2%. A target reserve margin of 13.75% was set by the ERCOT board of directors in 2010 based on historical averages and other factors.

“Although this reserve margin is not required by ERCOT or the Public Utility Commission of Texas (PUCT), ERCOT uses the target for reliability assessment purposes,” the grid operator said. 

The outlook for the longer term continues to be concerning, as reserve margins continue to shrink in the years beyond 2013.

By 2014, projected reserves drop to 10.9%. Although that is well below the grid operator’s target, it represents an improvement from the May 2012 capacity, demand, and reserves report. The reserve margin continues to decrease in the longer term, dropping to 2.8% by 2022, although that is also an improvement from previous projections, which indicated that demand would be greater than supply in 2022.

Further, the outlook may not be as bleak as the numbers indicate.

In an important caveat, ERCOT officials explained that the outlook does not include all planned generation resources, but is limited to existing resources and additions that have already received required air permits and interconnection agreements with transmission providers. 

Resource owners typically do not complete the criteria required for inclusion in the report more than a few years before a resource is available for use on the ERCOT grid, officials explained.

“While several entities have announced plans for new generation that is likely to come on-line in future years, those projects have not yet acquired the level of certainty required to be included in this report,” Warren Lasher, ERCOT’s director of system planning, said in the statement. “The long-term outlook will change over time as new projects move forward.”

The load forecast used in the report is based on a 15-year average weather profile coupled with an economic forecast. For its most recent report, ERCOT used a more conservative economic forecast based on slower economic growth seen in recent years than it used in the May report, officials said.

“Every economic scenario we evaluated included a significant increase in the 2014 to 2016 timeframe,” Lasher said. Indicating that an upward economic trend would be a two-edged sword with regard to demand and reserve margins, he acknowledged some adjustments to ERCOT’s forecasts would likely be made at the time the next report is issued in May 2013.