Week Ending August 16, 2019

ERCOT Dealing With Record Demand, Generator Outages, High Prices

This Article Appears as Published in Foster Report No 3262

The power market in most of Texas responded to record demand and unplanned generation outages as many would expect and several predicted, with calls for conservation and high wholesale power prices during peak demand periods.

Wholesale prices in the Electricity Reliability Council of Texas (ERCOT) climbed to $9,000/MWh a few times during the heat wave and high demand periods that started August 10. ERCOT made two different calls for consumers to reduce their power usage, through an Energy Emergency Alert, but did not resort to rotating blackouts, as it has in the past.

The emergency alerts, at level one, were called on August 13 and August 15, when the grid operator was experiencing tight supply reserves, asking utility customers to conserve electricity through the early evening hours. In the evenings on both nights, ERCOT returned to normal operations but said conservation was still encouraged.

The two events marked the first time ERCOT declared an emergency alert since 2014, though the North American Electric Reliability Corp. and others have predicted that generation retirements and lower power supplies would stress the ERCOT grid during summer peak demand periods.

In its summer reliability assessment issued in June, NERC said ERCOT anticipates that alerts may be needed to address resource shortfalls during peak demand hours because its summer reserve margin remains low and has dropped from 10.9% in 2018 to 8.5% in 2019.

Some media reports were focusing on wind generation being lower than expected during high demand periods, though ERCOT data showed numerous types of generation went down unexpectedly, including fossil fuel power plants that burn coal and natural gas. Wind power capacity is substantial in ERCOT, and the grid operator has been dealing with the intermittent nature and forecasts of availability being off for some time.

ERCOT officials also held a media call August 15, noting that about 5,200 MW of generation was in forced outage, with numerous fossil fuel units included in that figure. Almost all types of generation – coal, natural gas, solar, and wind — have been offline at different points during the previous four or five days, said Dan Woodfin, senior director of system operations at ERCOT.

ERCOT’s level one alerts involve seeking all types of available generation, importing power from nearby regions and engaging demand response. A level two alert is called when generation reserves fall below 1,750 MW, with large consumers under prearranged contracts cutting their load to reduce demand, and a level three alert, with utilities directed to use rotating blackouts, is called if reserves fall below 1,000 MW.

ERCOT issued the level one alert due to operating reserves going below 2,300 MW. During normal grid conditions, ERCOT’s operating reserves are at or above 3,000 MW, it said.

Generation reserves dipped to about 2,100 MW on the afternoon of August 15, due to high demand and roughly 5,000 MW being in forced outage on short notice, Woodfin said. Reserves went back above 2,500 MW later in the day, and wind power output was expected to ramp up into the evening and coming days, he said.

Real-time prices in ERCOT hit $9,000/MWh twice during the week, including August 13 for 15-minute intervals at several points during the day. That price is the offer cap – or price limit – in ERCOT’s energy-only market. Unlike a capacity market designed to send price signals for long-term investments, the energy-only market pays generators when they produce power, allowing them to reap rewards during peak demand periods, compared with the low-cost environment stemming from low natural gas prices and growing renewable resources.

ERCOT set an all-time peak demand record August 12, when demand reached 74,531 MW in the hour leading up to 5:00 p.m. Central Time.

“Extreme heat across the state resulted in high usage today,” ERCOT President and CEO Bill Magness said in a statement. Declaring the level one alert “allowed us to access tools to maintain reliability, and we appreciate everyone’s response to the conservation appeal,” he said.

By Tom Tiernan ttiernan@fosterreport.com

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