Market Information System Grid and Market Conditions

News Release

May 11, 2011

ERCOT Reviews Impact of Environmental Regulations

The Electric Reliability Council of Texas (ERCOT), the state grid operator and manager of the wholesale electric market, released today an evaluation of the potential impacts of proposed environmental regulations on generation facilities in ERCOT, as requested by the chairman of the Public Utility Commission in December 2010. 

As requested by the commission chairman, the study looked at four potential rule changes:

  • Clean Water Act – Section 316(b), regarding new requirements for cooling-water intake structures;
  • Clean Air Act – new emission limits for hazardous air pollutants;
  • Clean Air Transport Rule;
  • Coal Combustion Residuals Disposal regulations. 

The 21-page report, “Review of the Potential Impacts of Proposed Environmental Regulations on the ERCOT System,” is available on in the News/Reports and Presentations section under Operations and System Planning.

Some conclusions from the analysis include:

  • A significant amount of coal-fired generation is unlikely to be retired, based on currently available information regarding compliance requirements, unless several factors such as low natural gas prices and carbon emission fees combine to reduce the economic viability of these units.
  • Older gas steam units that are subject to retrofit requirements are more likely to be retired.  Closed-loop cooling tower requirements proposed as changes to the Clean Water Act are likely to result in the retirement of more than 8,000 megawatts (MW) of gas-fired generation, with a majority of these units being located in or near Dallas/Fort Worth and Houston.  Without additional replacement generation, the retirement of this gas-fired generation would reduce generation reserve margins to below 2 percent in 2015.*
  • Development of new gas-fired peaking capacity may require sufficient hours of scarcity pricing to justify new investment and sufficient lead time for favorable market conditions to become apparent.
  • Preliminary analysis indicates that the loss of gas-fired generation would impact transmission reliability in the Houston and Dallas/Fort Worth areas.  Redevelopment of existing generation sites in these urban areas with new generating units could reduce or delay the need for additional transmission infrastructure and would likely lead to substantial savings to the overall ERCOT system. 

* Reserve margins represent generation reserves in excess of forecasted peak demand needed to ensure reliability for extreme temperatures and unexpected major outages.  The minimum reserve margin target of 13.75 percent was approved by the ERCOT Board of Directors in 2010.

The Electric Reliability Council of Texas (ERCOT) manages the flow of electric power to more than 26 million Texas customers -- representing about 90 percent of the state’s electric load. As the independent system operator for the region, ERCOT schedules power on an electric grid that connects more than 46,500 miles of transmission lines and 710+ generation units. It also performs financial settlement for the competitive wholesale bulk-power market and administers retail switching for nearly 8 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. Its members include consumers, cooperatives, generators, power marketers, retail electric providers, investor-owned electric utilities, transmission and distribution providers and municipally owned electric utilities.