ERCOT Forecasts 2014 Reserve Margin Above Target, More Evidence of Working Energy-Only Market

ERCOT's May 2013 Capacity, Demand and Reserves (CDR) report shows an increase in the forecast reserve margin in 2014 to above-target levels as the delivery period approaches, which is the market behavior that is expected in an energy-only market.

Specifically, the new CDR shows a planning reserve margin of 13.8 percent for summer 2014, up from 10.9 percent when the last report was released in December.

While the peak electric demand forecast for summer 2014 remains just under 67,600 MW, assuming historical average summer weather, the total amount of anticipated generation resources has increased to nearly 77,600 MW from slightly less than 75,000 MW in the previous report.

Despite forecasts of generation shortages in out-years, the energy-only market has consistently brought adequate new capacity online for the prompt year, which is the rational and efficient behavior expected in a well-functioning market.

The CDR shows reserve margins declining below the target in 2015, as is the typical forecast and consistent with the lead-time for new peaking generation.

For 2013, ERCOT does expect a tight summer, and said that, "it is likely that ERCOT will initiate conservation alerts or power watches on some days"

ERCOT expects power demand this summer to peak at 68,383 MW, slightly above the 68,305 MW all-time record set Aug. 3, 2011. The amount of generation available to serve peak electric needs is forecast at 74,438 MW.

More extreme scenarios could result in more generation outages than the forecast includes or an increase in demand of as much as 2,529 MW, if weather patterns similar to summer 2011 return, ERCOT said.

"If generation outages exceed expected conditions during peak demand periods, or if we see a return of record-breaking conditions like those in 2011, ERCOT also may need to implement Energy Emergency Alert actions, with the possibility of rotating outages if needed to protect the grid," ERCOT said.

Links:

May 2013 CDR Report

Seasonal Assessment of Resource Adequacy