For Power Grid, Slower Economic Growth Could Be Beneficial

A report published Monday forecasts that the Texas power grid will be a little shakier next summer than previously projected, but that it will be a little less shaky in 2014 and beyond.

The state's chief grid operator, the Electric Reliability Council of Texas, or ERCOT, prepared the report and hailed it as showing an improvement in the future power outlook. But the changes from a report in May largely derive from projections of slower economic growth for Texas.

The Texas power grid, which covers 85 percent of the state's population, is under strain. It is caught between a rapidly growing population and low natural gas prices, which limit operators’ incentives to build new power plants. 

Warren Lasher, the director of system planning for ERCOT, said the “outlook for every year after 2013 has improved” for the power grid’s stability since the May report.

The report projects that Texas’ reserve margin, which is the percentage by which the state’s power-plant capacity exceeds the expected peak power demand, will be 13.2 percent next summer, which is below the state’s goal of 13.75 percent. The earlier May report had projected a somewhat beefier 2013 reserve margin of 14.3 percent. The new report projects stronger demand next summer and also fewer power supplies than the earlier report.

In 2014, the new report anticipates a 10.9 percent reserve margin, shrinking to 2.8 percent in 2022. These figures are a cause for concern, even though they are rosier than the May report, which projected that the demand for power would be higher than supplies by 2022. The main reason for the rosier 2014-to-2022 projections is that ERCOT picked a "low" economic growth scenario from Moody's, its consultant. Under the "low" scenario that ERCOT used, economic growth in the 2012-17 timeframe will average less than 2.5 percent per year. Lasher said that this low forecast seemed most accurate, given the grid operator’s analysis of the Texas economy in recent months.

Separately Monday, a ratepayer advocacy group called the Texas Coalition for Affordable Power released a 98-page report on electric deregulation in Texas. Power prices in Texas have averaged 8.5 percent above the national average in the decade since deregulation occurred in 2002, the report said. In the 1990s, however, Texas power prices were consistently below the national average.

Thanks largely to cheap natural gas, Texas power prices seem to be dipping below the national average again in 2012, the report's data analysis shows.