The Texas power grid operator on Tuesday warned that projected record demand for electricity and tight reserves this summer could result in an increased chance of alerts calling on customers to conserve energy.
At the same time, oil and natural gas developers are consuming rising amounts of power to run their West Texas operations, power companies are delaying or canceling planned generation facilities and retiring existing plants because power prices are not high enough to support more projects.
The Electric Reliability Council of Texas (ERCOT), the grid operator, forecast the system should have 78,154 megawatts of capacity this summer to meet a forecast peak demand of 74,853 MW. The current all-time high is 73,473 MW set on July 19, 2018.
One megawatt can power about 1,000 U.S. homes on average, but much less during the peak summer cooling and winter heating seasons.
ERCOT said its current planning reserve margin is a historically low 7.4 percent. The reserve margin is the difference between total generation available and forecast peak demand, with the difference expressed as a percentage of peak demand.
A decline in gas prices due to record and growing production from shale formations, like the Permian in West Texas, caused power prices in the Ercot North hub EL-PK-ERTN-SNL to drop to an average of just $33.86 per megawatt hour (MWh) over the past five years (2014-2018).
The low power prices make it difficult for some generators, like those that operate coal-fired plants, to make money selling electricity. In past years, electric prices were much higher, averaging $41.37/MWh during the five-year period ending in 2013 and $57.15 during the prior five years.
“We identified a potential need to call an energy alert at various times this summer,” said Bill Magness, president and CEO of ERCOT.
When it declares an alert, ERCOT said it can take advantage of additional resources that are only available during scarcity conditions.
Those resources include additional generation, power imports from neighboring regions, voluntary calls for conservation by consumers and demand response programs, which are agreements with industrial and other customers to curtail power use when needed.
ERCOT manages the grid for more than 25 million Texas customers, representing about 90 percent of the state’s electric load.
Some of the biggest power companies with operations in Texas include units of Sempra Energy, CenterPoint Energy Inc , American Electric Power Co Inc, NRG Energy Inc and Vistra Energy Inc.