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March 1, 2012, AUSTIN – Generation capacity for the state’s wholesale power system is expected to be tight this summer, according to a preliminary summer assessment released today by the Electric Reliability Council of Texas (ERCOT), the state grid operator and manager of the wholesale electric market.

“Based on the National Weather Service’s three-month outlook, we are expecting above-normal temperatures this summer – though not as extreme as last summer’s,” Vice President of Grid Operations and System Planning Kent Saathoff said. “If that’s the case, we expect to be able to meet the peak demand on the grid, unless we have above-normal generation outages,” he said.

Saathoff noted that initiatives are underway to increase voluntary demand reduction during peak summer hours.

“We are working with the Public Utility Commission to increase our load management options – or voluntary interruptible load that is paid to be curtailed in an emergency situation,” Saathoff said. “These are typically a mix of large industrial companies, but we’re now including smaller industrial and commercial companies and trying to facilitate the ability for these smaller customers to aggregate their load for this emergency interruptible load service,” he said.

The projected summer peak demand has been increased to 67,492 megawatts (MW) – 1,297 MW higher than would be expected with “normal” summer temperatures, based on the Climate Prediction Center’s 40 percent chance of hotter-than-normal weather for summer. The new forecast is 887 MW less than ERCOT’s all-time record-peak demand of 68,379 MW which occurred Aug. 3, 2011, during extreme weather conditions. (One megawatt is roughly enough electricity to power 200 average homes during hot weather when air conditioners are running for longer periods of time.)

“If we have a higher-than-normal amount of generation outages or if we experience record-breaking electricity demand because of extreme temperatures – like we had last summer – we may have to ask the utilities to initiate rotating outages to protect the grid from a state-wide blackout,” Saathoff said.

“Overall, we expect our reserves may get low enough to put us into the initial stages of our emergency procedures on some days, but not necessarily rotating outages,” he said.

Consumer conservation can play an important role, Saathoff noted.

“Although we implemented emergency procedures on six days last August due to low reserves, the consumers and businesses helped us reduce the demand by responding to our requests for conservation,” Saathoff said.

Recent rains have improved the drought conditions for the near term, Saathoff said.

“We don’t anticipate the drought to be a major factor this summer, but we will continue to monitor how it’s affecting capacity due to its impact on cooling water resources available for generation units,” Saathoff said. The recent rains have improved the current situation, and given our latest information, we don’t expect to have significant generation loss due to the drought this summer.”

Initiatives underway to address capacity concerns

In addition to the load management options, a number of other initiatives are underway to address capacity shortages for the short term.

The ERCOT board recently approved a process governing ERCOT’s use of emergency authority to recall idled units for capacity. Approximately 2,600 MW is currently mothballed; including about 1,500 MW which could be returned to service with one to four months notice. Although this preliminary assessment has not caused ERCOT to implement this option at this time, it is available if conditions change.

ERCOT and the Public Utility Commission have also made administrative changes to ensure that market rules align with ERCOT’s need to bring on maximum generation during peak periods.

ERCOT management also announced at the Feb. 21 board meeting that they were close to selecting a consultant on another resource adequacy initiative – a project to identify factors that influence investment decisions related to generation development. The project will consider both supply-side and demand-side resources from a wholesale and retail perspective, as well as, include suggestions for ways to enhance investments for long-term resource adequacy in ERCOT. The report is expected to be completed by June 1.

“We’re also participating in Public Utility Commission Chair Donna Nelson’s meetings with market participants concerning how to ‘get the message out’ for conservation,” Saathoff said. The preliminary summer assessment anticipates approximately 750 MW of demand reduction due to the effects of price-responsive demand, conservation appeals and other demand response programs managed by market participants, based on estimates of the results of those appeals last summer.

BACKGROUND

The preliminary summer assessment, which will be updated May 1, is a new ERCOT report – the Seasonal Assessment of Resource Adequacy – designed to improve the assessment of near-term conditions. The seasonal assessments are based on the most-current available data on seasonal weather, the status of power plants, and the impact of factors like economic activity and the ongoing drought.

The ERCOT region includes 23 million people and represents about 85 percent of the state’s electric load. ERCOT does not include the El Paso area, the Texas Panhandle, Northeast Texas and Southeast Texas.

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