Texas electricity grid has tight summer ahead. Will more power plants set up shop?

By: Bob Sechler |

The state’s main electricity grid, which is expected to be strained to near capacity this summer, has been attracting significant attention from power plant investors who are considering building new generation capacity in Texas, grid officials said Tuesday.

The trend signals that the state’s deregulated electricity market is working to balance power supply and demand, they said, although the new plants won’t be completed in time to change the near-term outlook for this year or next year, most likely.

“There’s a high level of interest” in building new plants, said Warren Lasher, senior director of system planning at the Electric Reliability Council of Texas, which oversees the electricity grid that serves most of the state and is commonly known as ERCOT. Investors “are looking at market conditions and market opportunities,” Lasher said.

ERCOT has pegged the grid’s “planning reserve margin” for this summer — meaning the cushion between estimated peak summer electricity usage and maximum generation capacity — at about 11 percent, compared to 18.9 percent last year.

The reduction is partly the result of the closure of some coal-fired plants last fall deemed uneconomical by their owner, Vistra Energy. Meanwhile, demand for electricity this summer is expected to hit record levels, primarily because of the state’s growing economy and population.

But Lasher said a number of new wind, solar and natural gas plants — with combined generation capacity of 60,000 megawatts to 70,000 megawatts — are under consideration by investors, in addition to some other new plants already in the works.

Current generation capacity in Texas is about 78,000 megawatts. Some of the potential new plants may not be built, while added capacity from those that are probably will be partially offset by the closing of some older plants, Lasher said, so it’s unclear at what level ERCOT’s planning reserve margin will settle long-term.

Still, he said he’s comfortable with the current 11 percent cushion for this summer, a figure that is expected to be about the same next summer.

“We are tighter today than we were last year (and) we will still be in relatively tight conditions next summer,” said Lasher, speaking during ERCOT’s annual media day event at its headquarters in Taylor. But “we still have 11 percent above and beyond what we think the need will be” at peak summer usage, he said.

ERCOT officials previously have expressed confidence in the reliability of the electricity grid under typical summer weather conditions this year but called the reserve margin slim, warning that so-called “load-control measures” — including the possibility of rolling blackouts — might be needed if conditions turned out to be much hotter than normal or otherwise extreme.

Lasher acknowledged “the risk is always there” that extreme conditions could trigger a need for emergency actions, such as rolling blackouts.

But “it’s highly unlikely” this summer, he said. “The likelihood … I think is very small.”

Texas electricity grid has tight summer ahead. Will more power plants set up shop?