ERCOT Warns of Tight Summer Conditions in Texas. Microgrid Opportunity?

March 10, 2020
While California is today’s hub of microgrid activity, the Texas market bears watching. Its grid operator warns that this summer could bring record electricity use.

While California is today’s hub of microgrid opportunity, the Texas market bears watching as its grid operator, ERCOT, warns that this summer could bring record electricity use.

ERCOT released its spring Seasonal Assessment of Resource Adequacy, more commonly known as the SARA report, last week and with it projections that the coming summer could look like last summer.

What happened then?

August brought extreme heat, emergency alerts, and prices that rose to the market cap of $9,000/MWh, compared with average power prices of about $30-35/MWh.

Texas faces converging forces that tend to create tight power supply conditions in the summer when air conditioning use spikes electric demand. For one, Texas is experiencing some of the fastest population growth in the US, partly because so many people are moving from California to Texas. The state also had one of the fastest growing economies last year. More people and more business means more need for power.

Basis for microgrid opportunity

At the same time the state is seeing rapid retirement of conventional power plants, coal in particular, which are not being replaced with like generators. Instead most new large-scale generation is renewable, which is variable in its production. Since renewable energy does not produce power if the wind isn’t blowing or sun shining, it presents more risky supply options during periods of high demand. Add to that the higher risk of power outages due to equipment failures when the system is working hard, and periods of peak demand become nail biters.

These are scenarios where microgrids provide value, creating reliable on-site energy for commercial and industrial (C&I) businesses and a means for them to leverage market conditions with price management and demand response participation.

“Further microgrid adoption would help grid edge stability and decrease reliability stress where there may be insufficient generation or transmission lines. This benefits the utility as well as C&I customers,” said Erik Svanholm, vice president – non-wires alternatives at S&C Electric.

Michael Boswell, vice president of distributed generation for Concord Engineering, added that the SARA report is “relatively detailed and provides potential microgrid developers with a basis to argue the value of microgrids to provide useful capacity to ERCOT and inform possible valuation to hosts on resiliency.” 

Credit: ERCOT

ERCOT anticipates record peak demand of 76,696 MW this summer, about 2,000 MW more than last summer’s peak reached on August 12. The grid operator expects to have an additional cushion of 1,500 MW in operating reserves over what it had last summer. An 88 MW natural gas plant contributes to the new reserves; the rest is from new wind and solar power.

“While this improvement helps reduce a risk of capacity shortages, we still expect tight supply conditions to occur during the highest demand hours,” said Warren Lasher, ERCOT senior director of system planning, during a press briefing last week.

ERCOT will present a more detailed picture on reserve margins for the summer when it releases its Capacity, Demand, Reserves (CDR) report in May.

Coronavirus represents unknown

One looming unknown for ERCOT and other energy forecasters is the coronavirus and any affect it might have on the supply and demand equation in electricity markets.

“I don’t think we can say today any potential impacts to customer demand,” Lasher said. “We are keeping in contact with resource developers to understand if there are any impacts to their availability to complete their projects under the timelines. We have not been notified of any delays at this time. When we issue the summer, final summer seasonal assessment, to the extent that we do gain any new information, we can reflect it there.”

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About the Author

Elisa Wood | Editor-in-Chief

Elisa Wood is the editor and founder of EnergyChangemakers.com. She is co-founder and former editor of Microgrid Knowledge.

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