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Will high electricity prices in Texas trigger more energy generation?

July 9, 2012

A report released in May this year predicted a gloomy picture about the state’s future electric reserves. According to the analysis, by 2014, Texas energy reserves are predicted to drop below the safe levels. What’s more threatening is that beyond 2014, the reserves are likely to dip even lower, which in turn is expected to cause rolling blackouts.

Plans for the future

With such dire predictions and an expected rise in Texas electricity prices, it becomes imminent to plan for the future. However, some experts say that there’s still hope as the outlook for 2013’s summer has actually improved since the last CDR, which was released in 2011’s December.

After the release of that report, almost 1240 MW of previously “shelved” capacity has returned, which would help meet the future needs. Another 1,130 MW is also expected, as a coal-fired plant which was earlier slated to discontinue under the Cross-State Air Pollution Rule but has been ruled over by the federal court.

After the last CDR report, ERCOT has started operation of almost 600 MW of new renewable power sources, which includes solar power (59 MW), biomass (105 MW), and wind power (432 MW).  The additional capacity of these Texas energy resources are expected to help reduce the growing blackout threats in the state. According to a forecast, by 2016, Texas will have several new power generation plants in place, which will deliver over 2,000 MW (for wind power), 3,657 MW (attributed to gas-fired facilities), 900 MW (from coal-fired resources), and 60 MW (solar energy) of power.

Demand response

In addition to the energy generation that the above sources will bring, ERCOT is also planning to bring “demand response” in use, which will allow it to deal with forthcoming summer months when the load on the grid is high. Though ERCOT has adequate electric power to serve users throughout the year, the demand response programs will help in addressing the highest demand periods, where consumers agree to decrease their power usage when particular conditions occur.

High price cap a deterrent for new power plants

According to Robert McCullough2 – an economist based in Portland, the rising power cap in Texas can discourage power companies from setting up more power plants, since by letting scarcity of power stay intact, these companies can benefit more from the higher prices. Thus, McCullough and several other experts feel that the new cap on Texas electricity will encourage traders to create artificial shortages.

Conclusion

According to McCullough, Texas has more energy resources than many other US states, and yet it has skyrocketing prices, which are higher than most of its neighboring states, due to a failing electric system. Though ERCOT’s plan to bring more energy resources into play in the near future to tide over blackouts and energy scarcity gives hope to Texas electricity consumers, only time will tell if power companies will set up power plants to trigger more generation or opt for easy profits by making the most of the higher rates and letting the energy scarcity prevail.

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