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Hot summer, supply pinch would mean rotating outages in ERCOT

TheElectric Reliability Council ofTexas Inc. should have sufficient reserves to meet demand forelectricity during the hottest months of this year; however reports issued bythe ERCOT grid operator on May 3 cautioned that during the summer, uncertaintyaround weather and outages could bring operating reserves to levels thatnecessitate out-of-market actions, including rotating outages, to maintain gridstability.

"Weexpect to have enough generation available to serve consumer needs this summer,based on the current forecast," ERCOT director of system planning WarrenLasher said in an announcement accompanying the release of the reports. "However,hotter-than-normal weather combined with low-wind conditions or high generationoutage rates could cause operating reserves to drop below target levels, makingit necessary to take additional actions to maintain grid reliability."

Accordingto the grid operator's final seasonal assessment of resource adequacy, or SARA,for the upcoming summer, ERCOT will have 78,434 MW of total resources to meet70,588 MW of peak demand, leaving 7,846 MW of reserve capacity. Accounting fora typical rate of maintenance and forced outages, ERCOT expects to have 4,675MW of reserve capacity this summer. But reserve capacity under other scenariosfall far short of that level.

Inthe event the grid must sustain extreme loads while experiencing typical outagerates, ERCOT expects to have 1,921 MW of operating reserves. Under a scenariowhere the ERCOT grid must contend with low wind output on top of extreme loadand a typical outage rate, the grid operator expects to be short of reserves by157 MW. Under a scenario where the grid operator experiences extreme load andan extreme forced outage rate, the grid expects to have only 119 MW of reservecapacity.

WhenERCOT's operating reserves dip below 2,300 MW, in order to maintain gridstability the grid operator takes out-of-market actions, such as relying oncapacity from other grids and committing all available units. If reserves fallbelow 1,750 MW, the grid operator deploys demand response resources andemergency response service and may block load transfers to other grids, ifappropriate. If reserves continue to trend lower, the grid operator instructstransmission operators to implement rotating outages, leaving the areasaffected to those utilities' discretion.

Theimpact of temperatures and wind mean weather will play a critical role thissummer.

"[Thetransition from El Niño] has resulted in the summer of 2016 being a much morechallenging forecast than typical," ERCOT senior meteorologist ChrisColeman wrote in a May 3 weather update. "The El Niño is going through aperiod of rapid weakening in the spring season. While its influence could carryover into the early-summer period, it will likely trend to neutral for much of the summer and potentially a La Niñabefore the summer is complete. While this El Niño was one of thestrongest on record, I do not expect the anywhere near similar intensityassociated with the possible La Niña development later this year. That's a keypoint worth stressing. While you may hear from multiple sources that a La Niñais likely later in 2016, it's notlikely to be a strong La Niña. That means its impacts will be limited."

Colemanwrote that he does not expect the forecast, which is based on 10 to 15 years ofhistorical observations, to deviate much from a normal summer.

Lookingforward to the milder temperatures associated with October and November inTexas, the grid operator expects to have sufficient capacity to meet peakdemand, even with the season's higher rate of both planned and forced outages.

ERCOT circumspect aboutlong-term reliability outlook

Accordingto the grid operator's latest capacity, demand and reserves report released May3, summer planning reserve margins remain above 15.9% through 2026, but with amajor caveat.

"Wecontinue to see sufficient planning reserve margins in the 10-year outlook,beginning in 2017," Lasher said. "However, this report also includesgeneration resources that could be affected by environmental regulations, andfuture decisions by resource owners may impact these projected planning reservemargins."

Thegrid operator said expected generation capacity for 2017 had fallen 1,700 MWsince the last report was released in December 2015, but the report continuesto show strong growth in gas-fired capacity.

"Basedon current planning criteria, the report includes nearly 6,200 MW in newgas-fired generation by summer 2018, topping 7,400 MW in new capacity in 2020,"ERCOT said. "Some of these anticipated additions could be offset byadditional unit retirements that are not currently reflected in the planninghorizon."

Ananalysis of the Clean Power Plan that ERCOT released in October 2015 found that the new regulationscould drive 4,000 MW of coal-fired capacity from the region's power market, butthe latest capacity, demand and reserves report shows only 600 MW of coal-firedcapacity exiting the market from 2017 through 2026.