The Electric Reliability Council of Texas region could see a net 2,552 MW added to the grid this year, as newly completed wind energy facilities, some backed by new gas-fired power plants, more than offset the retirement of coal-fired plants.
Out of 5,203 MW of coal-fired generation in ERCOT to retire this year, almost 4,400 MW were announced in late 2017 by Vistra Energy Corp. Those plants have already been taken out of service. The remaining capacity is coming offline at city of San Antonio utility CPS Energy's 840-MW J.T. Deely plant, though the decision to retire that facility was made in 2013.
Of the 7,755 MW of planned additions in ERCOT, 65% of the capacity will come from wind-powered plants, 19% from gas-fired additions and 16% from solar-powered plants. Almost 3,800 MW of the planned additions are already in either advanced development or under construction, and 216 MW began operating in January.
The largest addition planned to come online this year is Dallas-headquartered developer Tri Global Energy LLC's 600-MW Canyon Wind Project in Scurry County, Texas. The project is estimated to cost $1.17 billion and is scheduled to begin operating in December.
The next-largest addition is a gas-fired peaker plant being developed by private Houston-headquartered developer Quantum Utility Generation to support growing renewable energy supplies in Texas. The Van Alstyne Energy Center is a 579-MW gas-fired project, made up of three gas combustion turbines. The project is estimated to cost more than $550 million and is currently scheduled to be online in June.

Supply/demand analysis
Between 2012 and the end of 2017, the ERCOT region saw a net increase in available operating capacity of almost 16,000 MW. During that time, the average peak load was 68,414 MW — ranging from 66,464 MW in 2014 to an all-time peak of 71,093 MW in 2016. With capacity increasing and load remaining largely stagnant over the six-year period, the supply-to-demand ratio increased from 39.49% in 2012 to 56.22% in 2017. A yearly ratio was determined by calculating the difference between unadjusted total operating capacity per year and peak load reported by the ISO, and dividing that difference by the same peak load. The calculation is not meant to reflect discounted reserve margins.

The supply-to-demand ratio in ERCOT should continue to increase if demand remains flat and scheduled additions and retirements in the region come to fruition. This could continue to increase competition for customers in an already-tight market. Vistra Energy cited this competition as a reason for retiring several coal-fired plants, stating that "these two plants are economically challenged in the competitive ERCOT market" because of "sustained low wholesale power prices, an oversupplied renewable generation market, and low natural gas prices, along with other factors."
ERCOT itself, meanwhile, predicted in its latest capacity, demand and reserves report released in December 2017 that its reserve margin would increase the next few years, narrowing beginning in 2022.
Commodities outlook
Looking closer at power forward prices for the year ahead as of Jan. 29, ERCOT's LZ North and South zones had very similar trajectories, with around-the-clock prices in the North zone falling from $34.95/MWh for February to $24.46/MWh in April before spiking in the typically higher-demand months of July and August to $46.67/MWh and $67.59/MWh, respectively. Prices return to below $30/MWh levels to finish the year after from September through December.
Gas forwards at Henry Hub as of Jan. 29 for the year ahead show February having the highest price, at $3.51/MMBtu. The low price for the year ahead was May, at $2.90/MMBtu. Eight months in 2018 are expected to have gas prices within the $2.90/MMBtu to $2.99/MMBtu range.

About the data
S&P Global Market Intelligence guarantees comprehensiveness and accuracy on power projects on units over 1 MW and supplying more than 50% of power generated to the grid. Projects included in this article are those that will be dispatching power to the ISO once online.
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