Texas blackouts seen as electric surplus shrinks

(Reuters) – Rolling blackouts could hit Texas more frequently in coming summers as the state’s electricity surplus shrinks dramatically, the independent grid operator said in a report on Thursday.

The state’s electric power reserve margin — a cushion against blackouts — will fall to 12.11 percent next summer, well below the agency’s minimum target of 13.75 percent, the Electric Reliability Council of Texas (ERCOT) said.

Statistically, the lower reserve margin means a doubling of the chance of a power outage from once in 10 years to twice in 10 years, said Trip Doggett, ERCOT chief executive.

“The magnitude of this drop was not expected.” Doggett told reporters on a call.

The closely-watched forecast calls for the reserve margin to keep shrinking through 2019. In 2020, it says, power supplies could fall below expected power demand in the summer when air conditioning use soars.

ERCOT struggled this year to keep power flowing to homes and businesses as extreme weather and record power demand exhausted the state’s healthy power surplus.

“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,” Doggett said.

PLANTS TO BE CLOSED

The latest forecast reflects generation owners’ plans to shut plants that are unprofitable or that fail to meet next year’s stricter federal environmental rules.

It also reflects the difficulty for developers trying to build new power plants, including new natural gas and nuclear plants.

The new forecast no longer counts 2,623 megawatts of generation previously expected to be online next summer. That includes 2,234 MW of additional units to be mothballed or suspended; 1,259 MW of new generation that is delayed; and 681 MW from private networks that will not be available.

Luminant, the state’s largest generator, will suspend two coal-fired units totaling 1,200 MW at the end of the year to comply with a stricter emission rule. [ID:nN1E7921TQ]

Doggett also said a delay in completion of LS Power’s 900-MW Sandy Creek coal-fired plant was a “significant surprise” that reduced expected supply. [ID:nN1E7B01PT]

Longer term, NRG Energy (NRG.N) has abandoned plans to add 2,700 MW of new nuclear capacity at the South Texas Project site which had been expected to boost supplies beginning in 2016, due to regulatory uncertainty following the Fukushima nuclear disaster. [ID:nN1954405]

“NRG will continue to look at the development of new generation and are optimistic that our existing generation can help support the expected load growth in Texas,” said John Ragan, NRG’s Gulf Coast region president.

“We will work with ERCOT and (Texas regulators) to meet the needs to Texas consumers and industries,” Ragan said.

Texans used record amounts of electricity during extreme weather conditions in the winter and the summer of 2010 and this year as the state’s economy kept growing.

The state saw seven hours of rolling outages in February when extremely cold weather hampered operations at dozens of power plants.

In August, ERCOT declared six emergencies and came close to implementing rolling outages as a protracted heat wave and drought pushed air conditioning demand to record levels. [IDnN1E79420S]

Adding to uncertainty about Texas’ future power supply is the effect of new federal environmental rules since the state operates as a stand-alone grid with little ability to import power from other states. [ID:nN1E76I1WG]

Had emission regulations to be implemented next year been in effect in 2011, Doggett said the state would have seen rolling outages during the August heat wave.

Stricter EPA regulation pose the biggest risk to reliability in Texas and New England, the North American Electric Reliability Corp said in a report this week.