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Texas Electricity Reserves: Grim Outlook for Electric Companies in Texas

December 28, 2011

It will be a grim outlook for electric companies in Texas as they will be caught in a “power” play between keeping the fires burning in old power plants and keep Texas electricity reserves at safe levels, and complying with new environmental rules imposed by the Environmental Protection Agency (EPA). Unlike water or gas, electricity is not stored but generated as needed and the shutting down of antiquated power plants will have serious implications on the state’s generating capacity. In a latest assessment by the North American Electric Reliability Corporation (NERC), significant concerns were raised regarding the lack of Texas electricity reserves by next summer and that electric companies in Texas may not have enough generating capacity to meet demand by the year 2013. What complicates things is the fact that the Electric Reliability Council of Texas (ERCOT) grid is isolated from the emergency power supply systems from other states and can be cut off – a catastrophic event in the making that should be addressed now. Capacity Assessments ERCOT is targeting at least 13.75 percent Texas electricity reserve levels to ensure continued grid operation even during high temperature scenarios similar to what was experienced last summer. This reserve may be enough for electric companies in Texas to sustain increase in usage from consumers as well as generator outages and breakdowns. However, the latest biannual assessment released by the grid operator for the next 10 years projects reserve margins to be only at 12 percent, or 2,600 megawatts less for the peak seasons in upcoming summers of 2012 and 2013. This lower projection was assessed after higher load forecasts were announced, compounded by additional announcements from electric companies in Texas planning to shut down several outdated power plants. Power Play The US Department of Energy recently stated that it has the legal authority backed by the Federal Power Act to require the continued operation of power plants during energy emergencies to keep the grid capacity safely above the projected demand. This puts electric companies in Texas in a dilemma as many plans to shut down coal-fired power plants to comply with the new EPA rule – compliance to either federal ruling would mean defiance against the other. What this imply is that when electric companies in Texas keep the power plants running to prevent rolling blackouts from occurring, they would be penalized for environmental violations. ERCOT’s forecasts however indicate that rolling blackouts is not a theory but an upcoming possibility and will come to reality the moment power generating units are idled or shutdown. ERCOT however reported that it would not put electric companies in Texas to be in position that would break the law by asking them to continue operating power plants to ensure grid reliability. The EPA on the other hand insist that generators need not close down power plants to comply with the new rule but instead should switch fuels, purchase emissions allowances, and boost pollution controls. With ERCOT’s forecast putting a grim outlook for Texas electricity reserves in the coming periods, legislations are currently being drafted by Texas lawmakers that aim to protect power plants from lawsuits from breaking environmental laws by continuing operation as a response to Department of Energy orders. Experts on Environmental and Natural Resource Law stated that the EPA can waive compliance for electric companies in Texas and would do so according to the needs of the state.

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