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Summer may see Texas left in the dark

Electric grid operator's report warns of rolling blackouts.
By Tracy Idell Hamilton, thamilton@express-news.net
Updated 12:48 a.m., Friday, December 2, 2011

Texas could see a repeat of the threat of rolling blackouts next summer, according to a report released Thursday by the state's grid operator, given the expected increased demand for power coupled with the number of power plants that will be unavailable to run.

The power outage that hit the state last February could reoccur this winter if the same combination of extreme cold and power plant outages returns, although Trip Doggett, the Electric Reliability Council of Texas' CEO, says the likelihood of that is “very low.”

The grid operator's biannual assessment of the next decade showed that power reserves — the extra capacity used to avert rolling outages — will fall below the minimum target next summer, doubling the chances of blackouts.

That margin is calculated to drop even lower in the coming years if changes aren't made, threatening the reliability of the system.

“We are very concerned about the significant drop in the reserve margin,” Doggett said. “If we stay in the current cycle of hot and dry summers, we will be very tight on capacity next summer and have a repeat of this year's emergency procedures and conservation appeals.”

Last summer's scorching temperatures repeatedly broke power demand records, forcing ERCOT to dip so far into its reserve capacity that it had to repeatedly plead with Texas residents to turn up their thermostats to avoid rolling blackouts.

In addition to increased demand, Doggett said an unexpected reduction in generation capacity is exacerbating the shortage, most significantly losing 900 megawatts from a new coal plant outside of Waco that had troubles during its testing period and now won't be available until 2013.

Several existing plants will also be out of commission.

Dallas-based Luminant, for example, has announced that it will idle two 1970s-era coal units in response to new Environmental Protection Agency rules curbing emissions that contribute to health-threatening soot and smog, rather than add equipment that would reduce pollution.

And while ERCOT must approve the mothballing of plants, and can deny a request for grid reliability reasons, Doggett said the agency could not force a plant operator to keep plants online if it would exceed emissions requirements.

He also said, however, that ERCOT doesn't have access to independent pollution data, and must rely on a plant operator's word that it would exceed allowable emissions.

The grid operator is working on short-term fixes to ease demand, such as increasing the number of large power users that could curtail use during peak periods. In the longer term, it's working with the Public Utility Commission of Texason policy changes that could bolster construction of new power plants of all types.

ERCOT's reserve target is 13.75 percent, providing a cushion for higher-than-normal temperatures and plant outages. But projected reserves are 12 percent for 2012 and 2013, dropping to just 4 percent by 2017.

Diana Liebmann, a partner with the Haynes Boone law firm who represents clients before thePUC and ERCOT, called those reductions unacceptable.

“Significant steps need to be taken now to incentivize new generation to be built to avoid rolling outages and keep the system reliable.” Right now, she said, “price signals in the market are too weak to reward new capacity for building.”

But Randy Moravec, executive director of the Texas Coalition for Affordable Power, warned against efforts to increase wholesale prices, which he said ultimately would be passed on to consumers.

Environmental groups used the news to urge the state and local governments to tighten energy efficiency standards for new buildings, expanding utility incentive programs, and encourage conservation.

By doing so, said Luke Metzger of Environment Texas, “we can keep the lights on and save consumers money.”

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Incentives needed to bring power generation to Texas

By Diana Liebmann Updated 10:17 p.m., Thursday, December 15, 2011

Newsflash: Texas is in a drought, reservoirs are near all-time lows, and average temperatures are on the rise. But here is something new: Due to these factors, along with the lack of electric generating capacity, Texas is facing a near-term future with the possibility of rolling blackouts and strains on its transmission network.

The state's grid manager, the Electric Reliability Council of Texas Inc. (ERCOT) released two reports on the system's capacity and demand. One noted, "If extreme weather results in a significantly-higher than normal number of forced generation outages and high electrical demand, the ERCOT system could have insufficient resources available to serve that demand. This insufficiency would result in the need for rotating outages to maintain the integrity of the system as a whole."

Translation: The grid serving most of Texas will not have enough electric generation to meet the demand. The ERCOT market is currently below the generation reserve margin requirement of 13.75 percent — and we will likely remain below that requirement for the next 10 years unless a number of contributing factors change. The generation reserve margin is the unused capacity we should have for emergencies and spikes in demand.

By 2014 and 2015 reserve margins are projected to be roughly 7.64 percent and 3.55 percent, respectively. Given the drought and the serious negative impacts to generation resulting from proposed Environmental Protection Agency rules, the reliability of our system will be uncertain.

There is a solution — but it is likely not immediate. Our electric grid needs more capacity (power plants); unfortunately, companies will be reluctant to build new plants because ERCOT market prices are too low to allow them to cover their costs and/or receive a return on their investment.

It will take several years to build the baseload generation needed to support the grid and power Texas' economy. The state needs to incentivize companies to build plants. Possible steps include relaxing the bidding standards in the market; requiring load to contract for reserves as stand-by capacity as a new ancillary service; developing a credit system for capacity up to the reserve margin levels needed on a graduated scale; and ensuring that actions taken by the grid operator for reliability, including the dispatch of reliability must run units and emergency demand response services, do not dampen the price signals in the market. These changes must happen quickly since it takes years to develop new capacity.

ERCOT has clearly signaled what is going to happen in the coming years due to the lack of generating capacity; Texas may not be able to avoid some rolling outages. But by next year we need new rules that will give us the lead time to develop enough capacity to prevent blackouts projected over the next five to 10 years when the reserve margin is projected to disappear.

Diana Liebmann, based in San Antonio, is a partner in the Energy and Power Practice Group of Haynes and Boone LLP.

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Record heat could lead to outages

By Gary Scharrer gscharrer@express-news.
Updated 08:23 p.m., Thursday, February 9, 2012

AUSTIN — Inadequate electric power reserves likely will force Texans to cut back this summer to avoid rolling outages if the weather matches last year's record heat, utility experts warned state legislators Thursday.

"We have to have conservation, and everyone made a tremendous difference during the peak of hot, summer days (last) August. We have to have that plus some to survive this summer without rotating outages," H.B. "Trip" Doggett, president and CEO of the Electric Reliability Council of Texas, told the House State Affairs Committee.

Legislators are looking at the state's electricity market to find ways to keep lights on in Texas during peak demand periods. An assortment of issues contributes to the problem, including surging population growth, regulatory influences on the power industry, low natural gas prices that discourage new power plants and difficulties in borrowing money to build them. Texas faces "a serious problem," State Affairs Chairman Byron Cook, R-Corsicana, said after 13 experts spoke to his committee.

"It looks like we're going to really have to embrace conservation because we don't have the extra generation," Cook said.

Several older, mothballed generating plants could be revived in the short term until new power units come online in future years. The state's energy reserves this summer are projected to be lower than last year. The current reserve capacity of 13.75 percent is expected to drop "significantly below" that threshold in coming years, Doggett told lawmakers. Texas had a 17 percent reserve generating capacity during last summer's scorching heat.

Texas set a record electricity peak of 68,330 megawatts on Aug. 3 — breaking the 2010 record of 65,776 megawatts. A single megawatt can power 1,000 homes for one hour.

The state's population grew by more than 4 million over the past decade. Industry also is expanding.

"There's virtually no industry in this state that doesn't demand a lot and highly reliable electricity — whether it's manufacturing Toyota pickups in San Antonio, chip (fabricators) in Austin, telecommunications work in the (Dallas-Fort Worth) Metroplex or medical research in Houston," said John Fainter Jr., president and CEO for the Association of Electric Companies of Texas.

The chairwoman of the Texas Public Utility Commission suggested that one of the longer-term strategies for meeting the state's future energy needs includes an educational campaign in public schools.

The campaign should start with middle school children "so they become aware of energy and interested in pursuing a career in energy," PUC Chairwoman Donna Nelson said.

The agency is looking at promoting more sensor-type technologies that automatically turn off lights when rooms are not occupied. Nelson noted that conservation must be a major factor in helping the state meets future energy needs, suggesting that she may have to install sensor technology in her own home.

"I have a son at home who doesn't know that switches go down in addition to going up," she said.

Texans will respond to public service announcements preparing them for power shortages, said Jay Doegey, president of the Texas Coalition for Affordable Power.

"People want to participate in this. You just have to ask them to do it. You have to tell them what to do," Doegey told the committee. "Give them some education, and they will join."

While there aren't any quick and easy solutions, Cyrus Reed of the Lone Star Chapter of the Sierra Club suggested that Texas reduce its reliance on coal plants. New building codes should call for stricter conservation, he said, and state leaders should use unappropriated money in a special utility fund to help low-income families weatherize their homes.

Rep. Rene Oliveira, D-Brownsville, said he was stunned that Texas faces power shortages and surprised "that we were not better-prepared for this whole generation scarcity problem."

"We've been bragging about plentiful power, reliable power, affordable power for years in Texas," he said.

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