ERCOT Anticipates Summer Supply Crunch Amid Unit Retirements

By Sonal Patel

The recent retirement of older generating units and high peak usage owing to economic growth could tighten operating reserves in the region served by the Electric Reliability Council of Texas (ERCOT) this summer.

The grid operator said on March 1 that total resource capacity for the upcoming summer (spanning June through September 2018) is expected to be 77,658 MW, but a preliminary summer seasonal assessment of resource adequacy (SARA) report includes a 72,974 MW summer peak load forecast, which is based on normal weather conditions for years between 2002 and 2016.

“This forecast is higher than the all-time summer peak demand record of 71,110 MW set on Aug. 11, 2016,” ERCOT said. “Almost 3,800 MW in new generation resources began operating in 2017, and more than 14,000 MW of resources are planned to be in service by 2020.”

However, ERCOT expects that recent plant retirements—including of major coal baseload generators—and delays in some planned resources will constrict reserves. ERCOT said that in the fall of 2017, generators announced plans to retire or indefinitely suspend operations of more than 4 GW of generation resources by early 2018.

While ERCOT said it expects to have sufficient generation for anticipated needs over the upcoming winter and spring seasons, a December 2017-released Capacity, Demand and Reserves Report projected that the grid operator’s reserve margins could plunge to 9.3% for summer 2018—falling below the 13.75% target. Reserve margins are expected to increase to 11.7% by summer 2019 as more generation resources begin operating, ERCOT said.

In 2017, by comparison, ERCOT had a reserve margin of 16.9%. That was a significant improvement from dismal reserve margin projections from only six years ago, when ERCOT declared several emergencies to reduce electric demand, and stricken with capacity shortages, forecast a negative margin by 2022.

The grid entity, which has neither a capacity market nor a requirement that generators build or purchase reserve capacity to meet unexpected supply shortages, has since taken a number of price-related actions to encourage investment in generation.

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