ERCOT Seasonal Assessment Report for Summer 2016

Although spring has just begun, summer is right around the corner. Last September, we posted a blog about the release of the Energy Reliability Council of Texas (ERCOT) Seasonal Assessment of Resource Adequacy (SARA) report. On March 1, 2016, ERCOT released its preliminary SARA report of peak load forecast for June through September and the level of available generation, and they already anticipate there will be adequate reserves to meet expected load this coming summer.

Below are a few highlights from the recent SARA report.

Peak Summer Load and Generation Capacity

ERCOT’s initial SARA report expects a peak summer load of 70,588 MW. This report refers to 10-year-normal weather and this load forecast will be updated in the final SARA report in May.

For generation outages, ERCOT analyzed historical summer outages since the introduction of the Nodal Market in 2010 and summer outages averaged 3,245 MW. ERCOT expects total resources this summer to be 79,354 MW, resulting in 8,766 MW of reserve generation margin or 11%, which would be below the North American Electricity Reliability Council’s (NERC) recommended level of 13.75%.

As the chart below illustrates, ERCOT remains mostly dependent on natural gas and coal as primary fuels for power generation. ERCOT had the most installed wind capacity in the U.S. at the end of 2015, (approximately 16,000 MW) which equals 18% of ERCOT’s installed capacity. Wind output tends to be the strongest in winter months as opposed to summer months. In fact, on February 18, ERCOT set a new winter generation record of 14,023 MW in the overnight hours.

New Generation

Although there won’t be any large scale retirements in 2016, there are some other important notes about new generation that will be available this summer.

There will be four new gas units coming online, totaling 1,068 MW with an additional 723 MW of new wind. By their very nature, wind and solar are intermittent resources, therefore allowing ERCOT to only review historical performance during summer months as an indicator.

For non-coastal wind, ERCOT has measured a historical capacity factor of only 12% in summer months. For coastal wind, the capacity factor is higher at 55% as offshore wind is more consistent in the summer months than inland wind farms in the Texas Panhandle. ERCOT has modeled an extreme load event with low wind output. Looking at historical data from summers of ’12-’15, wind capacity utilization could be as low as 4.1%, implying that total wind output across ERCOT could only be 679 MW on a peak summer day.

On August 10, 2015, ERCOT set a new record load, but real time prices hit their highest at a little over $1,000/MWh just three days later on August 13 due to wind output being lower, illustrating how wind output can be critical on key peak days.

Generation Reserve Margins

Customers should be aware that while new generation is coming online in 2016, generation reserve margins continue to be a long-term issue in ERCOT. Texas has had faster load growth than the rest of the U.S. and the majority of new generation coming online is renewables (wind and solar), which as mentioned earlier, are intermittent in nature.

For customers interested in reviewing their current energy strategy, contact us today and be sure to register for our upcoming Energy Market Outlook Webinar on April 20, 2016.