Drought of 2011 put grid to the test
of the power industry and the Public Utility Commission of Texas as the debate continues on what, if anything, should be done to encourage the construction of more power plants.
Two PUC members, Ken Anderson Jr. and Rolando Pablos, have argued that the market is beginning to respond to the projections of power shortages and changes the PUC has made to grid operations. However, Donna Nelson, the PUC chairman, has argued that ratepayers may have to pay investors to add generating capacity to avoid the threat of blackouts.
On most days, ERCOT has plenty of power, but the 2011 drought and record temperatures tested the grid’s limits and underscored a long-range problem — investment in new generation has slowed to a trickle and, so far, has not kept up with the growing demand for electricity. Low prices for natural gas, a fuel for generating electricity, are undercutting the profitability of other generation.
ERCOT tries to maintain a reserve margin of 13.75 percent over its pro- jected demand for electricity, but the forecast shows it dipping to 13.2 percent for next summer and decreasing towards 7 percent by 2018. The state’s consultants, The Brattle Group, have warned that a reserve margin of 8 percent or less could prompt as many as 20 rolling blackouts during a record summer such as 2011.
The ERCOT forecast, updated every six months, considers new generation that is expected to come online, as well as variables such as weather and economic conditions.
Monday’s forecast shows improvement in the reserve margins over the May forecast for 2014 and beyond, but the improvement includes a slightly slower rate of economic growth, which would in turn slow demand for electricity.
That forecast expects non-farm employment in the ERCOT region to grow by more than 2.5 percent in the next few years, a higher growth rate than has occurred in recent years but lower than other scenarios.
“Every economic scenario we evaluated included a significant increase in the 2014 to 2016 time frame,” said 2013 13.2% 2014 10.9% 2015 10.5% 2016 8.5% 2017 8.4% 2018 7.1% Source: Electric Reliability Council of Texas 14.3% 9.8% 6.9% 6.5% 5.8% 5.8% Warren Lasher, ERCOT’s director of System Planning. “When the next (forecast) comes out in May, we may need to adjust that outlook based on the economic trends at that time.”
The reserve margin for 2013 dipped slightly since last spring because it is unclear whether some new generation coming online will be available by August, typically the hottest month of the year.
Wholesale electricity prices are averaging less than $30 per megawatthour this year, too low to be profitable for most generators, but prices can spike during times of high demand.
The PUC has increased the wholesale price cap from $4,500 per megawatt-hour, effective next summer, to $7,000 in 2014 and $9,000 in 2015.
The PUC is also debating whether to increase ERCOT’s operating reserves, effectively raising prices by making less generation available except in emergencies, and creating a program to encourage customers to curb power usage during the hours of peak demand, mostly on summer afternoons. her get the new business up and running. Her first location, which closed recently to make way for a new mixed-use development, was on South Lamar Boulevard near Treadwell Street.
Once the North Austin project is done, Seely says Yi plans to reopen in South Austin.
“Timing-wise, it just makes sense to do this first, then go back south,” Seely said, citing the intense interest the Shoal Creek Boulevard building is receiving.