Growing Population, Growing Economy, Growing Demand
Texas is the second largest manufacturer and fastest growing state in the country. Demand for affordable and reliable electricity is increasing, and Texas’ market-based system, which uses a balanced portfolio of fuels, is responding to that demand. However, this balanced approach, and its reliability, are at risk due to Presidential mandates and EPA rules.
The Electric Reliability Council of Texas (ERCOT) oversees approximately 90% of Texas’ total electricity load. Without incorporating the effects of any of the U.S. Environmental Protection Agency’s (EPA) recent rulemakings, by 2024, the ERCOT region will fall approximately 4,640 megawatts short of its historical capacity reserve margin needed to maintain electric reliability. This is the equivalent of approximately 4 nuclear plants, 8 coal plants, 44 gas plants, or 19,330+ wind turbines. Once EPA’s rulemakings are taken into account, this shortfall could grow to as much as 12,746 megawatts, or the approximate equivalent of 10 nuclear plants, 22 coal plants, 120 gas plants, or 53,100+ wind turbines. Under these conditions, ERCOT will have a negative capacity reserve margin of up to -3.8%.
By 2024, the ERCOT region will fall 4,640 megawatts short of needed generation, equivalent to:
gas plants or
The Southwest Power Pool (SPP) is a regional transmission organization that oversees the production and distribution of electricity majority for the majority of the parts of Texas not in the Electric Reliability Council of Texas (ERCOT), in addition to numerous other states. SPP’s assessment of reliability found that EPA’s Proposed Clean Power Plan would lead to a 200% increase in expected electricity generation retirements, which will lead to a 4,600 MW shortfall by 2020 and 10,100 MW in 2024, resulting in in a -4.0% reserve margin by 2024. SPP ultimately concluded that the proposed Clean Power Plan “will impede reliable operation of the electric transmission grid in the SPP region, resulting in violations of NERC’s mandatory reliability standards and exposing the power grid to significant interruption or loss of load.” A new SPP assessment of the Final Clean Power Plan is expected in the near future.
Texas has no megawatts to spare, and the state must be thoughtful about how we ensure reliable, affordable electricity for growing demand in the future.
Sources, Impacts of EPA's Rules on ERCOT
Baseline capacity and demand data obtained from ERCOT, Report on the Capacity, Demand, and Reserves [CDR] in the ERCOT Region, 2015-2024, Dec. 1, 2014.Capacity Required to Maintain 13.75% Reserve Margin (Low-Growth) is based on demand projected in the December 2014 CDR Report, with reductions in demand based on the 5% demand efficiency projected by ERCOT by 2029, prorated to 2024. The 5% efficiency reduction is prorated based on the percentage efficiency gain EPA projects for Texas in the Clean Carbon Plan by 2024. See EPA, Clean Power Plan, Goal Computation TSD, Appendix 1 and 2.Capacity Required to Maintain 13.75% Reserve Margin (Moderate-Growth) is based on the demand projected in the May 2012 CDR report, with the same efficiency rates assumed above. Demand for 2023 and 2024 were based on a continued estimated demand, based on the average of demand growth between 2018-2022.Projected Capacity (Minimum EPA Forced Retirements) is based on the minimum coal and gas retirements projected by ERCOT in its Analysis of EPA Rule impacts. See pg. 28. The minimum coal retirement scenario was an incremental 3,300 MW over baseline. The minimum gas retirement was 1,300 MW, but since this was 700 MW less than baseline, it is reflected as an increase in generation. There is no addition of renewable generation over baseline. The total net reduction was 2,600 MW from baseline.Projected Capacity (Maximum EPA Forced Retirements) is based on the maximum coal and gas retirements projected by ERCOT. The maximum incremental coal retirement scenario was 7,700 MW over baseline. The maximum incremental gas retirement scenario was 4,100 MW over baseline. See pg. 28 of ERCOT’s Analysis of EPA Rule Impacts. Renewable generation totals are added to this calculation. Half of the maximum projected renewable wind generation is modeled to be non-coastal (1750 MW at 12% contribution value = 210 MW) and the other half as coastal (1750 MW at 56% contribution value = 980 MW). See id. at pg. 20, n. 24. Incremental solar of 3,600 MW is calculated to have a 70% contribution value, for a total of 2520 MW. 1300 MW of new natural gas combined cycle generation is also added, but 3,600 of lost incremental simple turbine generation is subtracted. The total net reduction of capacity was 10,390 MW from baseline.
Under both the minimum and maximum retirement scenarios, since EPA projects the bulk of the rule compliance deadlines to fall between 2016 to 2022, retirements are assumed to incrementally take effect from 2015 through 2020. All retirements are modeled to be in effect by 2020.
The 13.75% reserve margin is ERCOT’s historical reserve margin target to maintain reliability and the North American Electric Reliability Corporation’s reference margin level for the ERCOT region. See NERC, 2014 Summer Reliability Assessment (May 2014).