News Release
December 10, 2012

Future electric outlook shows improvement

Reserves below target by summer 2013; more generation, demand response still needed

Dec. 10, 2012, AUSTIN, TX -- A new long-term outlook released today by the Electric Reliability Council of Texas (ERCOT) indicates that the future outlook is improving, but the amount of electricity available for extreme temperatures or other emergencies may be below preferred targets by next summer.

 "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. "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."

The Capacity, Demand and Reserves (CDR) report released today anticipates the grid operator for most of the state will have 74,633 megawatts (MW) of power to serve anticipated peak electric use, or "load," of 65,952 MW next summer. A megawatt is enough power to serve about 200 Texas homes during the highest-demand period, which typically occurs between 3 and 7 p.m. during the hottest days of summer.

This difference between expected power generation and peak demand reflects a reserve margin of 13.2 percent in summer 2013, slightly below ERCOT’s target. The ERCOT Board of Directors in 2010 selected a target reserve margin of 13.75 percent for the amount of electric generation capacity that exceeds the forecast peak demand on the grid, based on historical averages and other factors. Although this reserve margin is not required by ERCOT or the Public Utility Commission of Texas (PUC), ERCOT uses the target for reliability assessment purposes. 

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

Warren Lasher, ERCOT’s director of System Planning, explains that this outlook includes 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 CDR inclusion more than a few years before a resource is available for use in the ERCOT grid.

 "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," said Lasher. "The long-term outlook will change over time as new projects move forward."

A closer look at load forecasts

Electric use, the "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 used a more conservative economic forecast than it used in the most recent report, based on slower economic growth seen in recent years.

ERCOT’s economic outlook is based on the "Low Economic Growth" forecast released last month by Moody’s Analytics. 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 Moody’s forecast scenarios.

"Every economic scenario we evaluated included a significant increase in the 2014 to 2016 timeframe," said Lasher. "When the next CDR comes out in May, we may need to adjust that outlook based on the economic trends at that time."

As conditions change, ERCOT also provides seasonal updates, which consider near-term weather projections and any changes to the economic outlook for the upcoming season. The Seasonal Assessment of Resource Adequacy for the upcoming winter and a preliminary assessment for spring 2013 were released in November.

Earlier this year, ERCOT also implemented a new Emergency Response Service pilot through which participants have committed to reduce up to 80 MW of demand within 30 minutes in emergency situations. Because the pilot is not yet an established program, that potential demand reduction is not included in the CDR.

Generation outlook changes

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 percent 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.

Of the units currently in "mothball" status, meaning their owners have stopped production, with ERCOT’s approval, more than 900 MW of 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 return for the summer 2013 peak season. Under existing market rules, ERCOT may deploy other available mothballed resources if needed in an emergency situation.

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Available online:

Capacity, Demand and Reserves Report -- Winter Update 2012 (.pdf version)

Capacity, Demand and Reserves Report -- Winter Update 2012 (.xls version)

Seasonal Assessment of Resource Adequacy -- Winter 2012-13

Capacity, Demand and Reserves Report -- May 2012

Presentation on economic forecasts for Dec. 3 Generation Adequacy Task Force meeting

The Electric Reliability Council of Texas (ERCOT) manages the flow of electric power to 24 million Texas customers -- representing 85 percent of the state's electric load. As the independent system operator for the region, ERCOT schedules power on an electric grid that connects 40,500 miles of transmission lines and more than 550 generation units. ERCOT also performs financial settlement for the competitive wholesale bulk-power market and administers retail switching for 6.7 million premises in competitive choice areas. ERCOT is a membership-based 501(c)(4) nonprofit corporation, governed by a board of directors and subject to oversight by the Public Utility Commission of Texas and the Texas Legislature. ERCOT's members include consumers, cooperatives, generators, power marketers, retail electric providers, investor-owned electric utilities (transmission and distribution providers), and municipal-owned electric utilities.

Contact
Robbie Searcy (512) 225-7213
rsearcy@ercot.com