Feds Not Optimistic About Texas Electricity Capacity

The Electric Reliability Counsel of Texas (ERCOT) is feeling a little better about Texas’ chances of having enough electricity to meet demand this summer and in 2014.  The North American Electric Reliability Corp (NERC) is not so sure.  NERC is the federal authority responsible for the reliability of the country’s electricity grids.

ERCOT has issued a number of warnings in recent years about potentially not having enough electricity supply to meet demand during peak periods; warning last summer that blackouts or calls for emergency conservation could occur if there was a sudden spike in demand our unexpected loss of power generating capacity.

At issue is the so called reserve margin.  The reserve margin is the safety cushion between expected peak demand for electricity and the supply that the electricity grid is able to provide at full strength.  Having an adequate reserve margin insures against blackouts in the event of weather related spikes in electricity demand such as summer heat waves.  It also helps in the event that there is a loss in power production as sometimes happens as a result of bad weather. 

13.75% is considered an adequate reserve margin for the Texas electric grid.  NERC anticipates that Texas will have a 12.88% reserve margin (pdf) this summer.  That equates to 6,780 MW of power.  ERCOT officials, however, are saying that they are comfortable that the state will make it through the summer without any significant issues based on their projections of a relatively mild summer.

Texas, which operates its own grid independent from the major continental US grids, is deregulated and relies on free market dynamics to ensure that there is enough electricity to meet demand and that electricity prices reflect market balance.   In this model, independently owned power producers sell their electricity to retail electricity providers in a wholesale market.

Cheap electricity in Texas for the past few years, while great for the consumer, has made it tough for power generators to invest in more capacity.  This has resulted in the current tight margin between supply and demand for electricity and has lead some to (unsuccessfully) try to push the state into a capacity market model for electricity.  ERCOT indicates that new natural gas power plants expected to come online in 2014 along with an improved demand response program will improve the situation going forward.