The most efficient way for the state’s largest electricity grid to combat predicted power shortages in coming years is through a system, used in other deregulated markets, that encourages generators to build new supply by bidding for power several years in the future, a consultant hired to examine the issue reported today.
Other options include allowing higher prices during peak demand periods, arranging "backstop" measures for curtailing use to certain users during emergency situations, and encouraging additional ways to reduce demand during peak periods. The Brattle Group study was performed for the Electric Reliability Council of Texas, which serves about 75 percent of the state, and the Public Utility Commission of Texas.Brattle’s recommendation to use what is called a "forward capacity market" would inject a new role for regulators and is somewhat at odds with the state’s so-called “energy only” deregulated market. Currently, price alone drives generators’ decisions whether to build additional supply or not for the ERCOT market.Brattle said the forward capacity market has been used in the Northeast, and Texas could learn from those experiences if it adopts this model.The report also concludes that because unusually low natural gas prices have kept down wholesale electricity prices, “ERCOT’S current energy-only market is not likely to support sufficient investment to meet” its goal of a 13.75 percent reserve in excess of projected peak demand. It suggests examining whether that reserve margin could reasonably be set at a lower level.Trip Doggett, CEO of ERCOT, said that while ERCOT and the PUC have made several moves to maintain adequate capacity, “this report highlights that there is more work to be done.”The Lone Star Chapter of the Sierra Club issued a statement faulting Brattle for not adequately considering the benefits of higher state energy-efficiency standards and mandates for more renewable electricity sources, such as solar.Twitter: @jimfuquayJim Fuquay, 817-390-7552
