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USA: Texas power use surges 5 percent

Published at: Jan 11, 2012
source: Houston Chronicle
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Last year's blazing heat helped push up electricity use in Texas by 5 percent, the state's main grid operator reports, and growing power demand will continue to put pressure on supplies this year.

Last year's blazing heat helped push up electricity use in Texas by 5 percent, the state's main grid operator reports, and growing power demand will continue to put pressure on supplies this year.

The Electric Reliability Council of Texas, which manages the grid for most of Texas, said in a study out this week that April and July had the highest year-over-year energy increases - 14.4 percent in April and 12.2 percent in July compared with 2010.

Generators continued to split reliance on natural gas and coal fuel in 2011, with gas providing 40.4 percent of the state's electricity and coal providing 39 percent. In 2010, the figures were 38.2 percent for natural gas and 39.5 percent for coal.

Increasing electricity demand will put additional pressure on already strained grid resources. In a December report on its 10-year outlook, ERCOT estimated that it could drop below its 13.75 percent reserve margin by next summer if severe weather persists.

"We are expecting to be a little bit tight in 2012, particularly if we have extreme temperatures like we did last year, and if we have a lot of outages," said Dottie Roark, a spokeswoman for ERCOT.

Dallas-based Luminant Generation had said it would shut two coal-fired plants to comply with a new Environmental Protection Agency rule governing emissions that cross state lines, but it put off the shutdowns after a three-judge federal panel put a temporary stay on the rule. The Monticello coal units provide 1,130 megawatts of power.

Roark said energy from the two coal plants should help keep ERCOT just above its margins.

"If we have a stay in hot weather, we will be very close on reserve capacity," Roark said. "The two coal plants should help a little bit."

The EPA has indicated that the new rule may go into effect sometime in 2012, at which time alternative electricity-supply strategies will be needed.

One option is to provide customers with incentives to reduce electricity usage during extreme conditions, such as last summer's extended heat wave.

"Further development of demand-side resources - essentially paying electricity consumers not to consume when there is an emergency - would help things a bit," said Dr. Metin Celebi, a principal with the Brattle Group, a consulting firm that has studied the costs of the new EPA rule.

Role for retired plants?

Another short-term option is to focus on maintaining the capability of existing power plants and look at possibly reviving older plants that have been retired.

ERCOT and the Public Utility Commission of Texas proposed that approach to avoid rotating blackouts in response to last summer's heat wave.

One reason plants aren't available to come on line when demand approaches capacity, power officials have said, is that wholesale electric prices in the Texas market aren't sensitive enough to increased demand.

"Where you run into pricing signals that are not as accurate as they should be is when you need power to avoid rolling outages," said Terry Hadley, a spokesman for the Public Utility Commission of Texas. "No one wants to have the consequences and added cost of rolling outages. Those outages did not happen last summer, but it did point out some flaws in the pricing points."

Rules on price changes

The PUC is working on rule changes on pricing for electricity during times of shortage, to encourage construction of additional generation capacity for extreme conditions, according to testimony Wednesday before the Texas Senate Committee on Business and Commerce.

"From an economic standpoint, during times of scarce supply, prices should rise to incent generators to bring their units online and to encourage electricity users to reduce their consumption," PUC Chair Donna Nelson testified during a hearing on the effect of the drought.

Hadley said one such change would be to introduce a floor price for electricity during extreme conditions, so suppliers would get a high enough price to warrant the investment.

In the longer term, industry experts are looking to natural gas to meet higher demand for energy.

"I don't think there is any question that any future generation, at least for the foreseeable future, is going to be natural gas," said John Fainter, president and CEO of the Association of Electric Companies of Texas. "There is a strong consensus that the price of natural gas is going to stay pretty flat. I don't see anything but natural gas being built for the foreseeable future."

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