The electric grid operator of Texas is facing tighter reserve margins next summer as increasing oil and natural gas development in far West Texas, home of the prolific Permian Basin, continues to drive up electricity demand in the state.
In a report issued Tuesday, the Electric Reliability Council of Texas (ERCOT) said its planning reserve margin for 2019 is forecast to be just 8.1%, 2.9% lower than what was initially reported in a similar report in May.
The expected decrease in power reserves for summer 2019 is primarily driven by a higher summer peak load forecast and delays and cancellations of planned generation projects, the grid operator said. Given rampant drilling activity in the Permian, the annual growth rate in peak demand in West Texas is forecast to be around 8% through 2023, whereas ERCOT’s annual system-wide load growth rate is 2% during the same time.
Peak load forecast for summer 2019 is projected to be 74,853 MW, which is 651 MW higher than what was reported in the grid operator’s May Capacity, Demand and Reserves Report (CDR.) ERCOT’s current system-wide peak demand record is 73,473 MW, which was set on July 19.
“ERCOT’s ability to meet Texans’ growing power needs through the record-setting summer of 2018 was supported by the actions taken by power suppliers and consumers, and the policymakers who are committed to the success of the ERCOT market,” said ERCOT CEO Bill Magness. “We anticipate the same type of focus on system performance as we head into another year with tight reserves.”
While growing power demand is partly behind the tighter reserve margin, the cancellation and delay of several power generation projects also impacted the reserve margin for later years covered in the CDR, including three natural gas plants totaling 1,763 MW that were expected to go online in 2020 and 2021. Delayed projects include a 419 MW gas-fired plant that had its in-service date pushed back to June 2021.
On the flip side, resources totaling 1,714 MW have been approved by ERCOT for commercial operations since the May CDR, including 674 MW in gas-fired capacity. The latest report shows that reserves are expected to increase to 10.7% in 2020 and 12.2% in 2021.
ERCOT’s next Seasonal Assessment of Resource Adequacy will be released in March 2019, and the mid-year CDR report will be released in May 2019.