1 June 2006 ERCOT sees margin below minimum by 2008
HOUSTON, June 1 (Reuters) - The Electric Reliability Council of Texas warned on Thursday that the state's summer reserve margin will shrink below the minimum level needed to avoid blackouts by 2008 as growing electric demand outpaces construction of new power plants.
The latest calculation from the state grid operator of reserve-margin -- the amount of electricity available above the projected peak -- shows the amount will fall to 11.8 percent by 2008. ERCOT has set 12.5 percent as the minimum reserve needed in July and August when power demand soars to run air conditioners.
The margin will fall further to 8.9 percent in 2009; 7.2 percent in 2010 and 4.9 percent in 2011, ERCOT said in a report released at a meeting Thursday in Austin.
To avoid blackouts, power regions need a surplus of electricity in case extreme weather significantly increases power consumption or if power plants or lines trip offline unexpectedly .
Economic growth has increased Texans' appetite for electricity, ERCOT said. It projects power demand will grow by 2.3 percent annually in the future, up from 1.8 percent growth used last year.
Texas already set new hourly power consumption records in April and May when temperatures rose above 90 degrees Fahrenheit. In April, ERCOT was forced to implement "rolling blackouts" during an early heat wave that strained the state's power resources at time when many plants were shut for seasonal maintenance.
ERCOT said demand this summer may reach 61,656 MW, 1,382 MW above the all-time peak set in 2005.
The reserve margin this summer will be 16.9 percent, thanks to the return of 2,100 megawatts of previously mothballed generation. About 7,000 MW remains mothballed for economic reasons, ERCOT said. Another 3,100 MW has been retired permanently.
Without the return of mothballed units, ERCOT's reserve margin would have fallen to 13.3 percent this summer.
ERCOT said available generation will total 70,756 MW this summer, up from 69,287 MW a year ago.
In 2007, the reserve margin is expected to be 15.2 percent, ERCOT said. If no mothballed units can run, the margin shrinks to 12 percent in 2007 and as low as 9 percent in 2008, according to ERCOT's low-case scenario.
"We think the low case is the most realistic," said Dan Hudson, chief financial officer of Navasota Energy Partners LP. "Those steam plants aren't coming back." Last month, Houston-based Navasota Energy broke ground on two 550-MW, natural gas-fired power plants, the state's first new gas units to be built since 2003.
The facilities, located in Ector and Wharton counties, will begin producing power in April 2007, Hudson said.
Texas regulators last month approved the first of more than a dozen coal-fired plants announced in Texas, but no new coal plants are expected to produce electricity before 2010.
A power-plant building boom in the late 1990s added 32,000 megawatts, giving Texas a 35 percent reserve margin. The excess supply forced wholesale prices so low that some new plants were unable to cover capital costs and didn't operate. Dozens of proposed projects were canceled.
The situation began to reverse when a surge in natural gas prices, the most common fuel used to generate power in Texas, made aging, inefficient gas plants too costly to operate.
