ERCOT expects sufficient resources for the coming winter and spring

Houston — The Electric Reliability Council of Texas anticipates adequate capacity to meet a forecast winter peak demand of 57.699 GW with the grid operator expecting to reach more than 30 GW of wind capacity by the end of the year, according to the final Winter 2020 Seasonal Assessment of Resource Adequacy report released Nov. 5.

Nearly 83 GW of resource capacity is expected to be available for the winter peak, including 963 MW of planned winter-rated resource capacity consisting of wind and utility-scale solar projects, according to an ERCOT statement. The winter season runs December through February.

"With these planned resources expected to be commercially operable by winter, ERCOT is on track to add the largest amount of new installed wind capacity in any given year (more than 5,000 MW) and utility-scale solar would more than double since the end of last year," according to ERCOT.

ERCOT, which manages the flow of electricity for about 90% of Texas, currently has 24.976 GW of wind capacity, according to grid operator data. There is another 4,344 MW of wind in the synchronization phase or testing phase prior to commercial operation, and projects totaling 1,475 MW have signed interconnection agreements and have posted financial security.

Although the Southwest Power Pool recently took over the top wind spot in the nation when it announced last week it had 27.4 GW of installed wind capacity, Platts Analytics forecasts ERCOT will reclaim the top spot and hold it for quite a while.

Price impact

"We don't expect much in the way of price upside given the very substantial reserve margins," said Travis Whalen, a power market analyst at S&P Global Platts Analytics, adding the wind build out is helping to keep prices very low during higher reserve margin periods like this winter.

ERCOT North Hub on-peak January is currently in the low $30s/MWh, about 2% higher than where the 2020 package averaged a year ago, according to S&P Global Platts data. The February package is also in the low $30s/MWh, nearly 5% higher than its 2020 counterpart last year.

The three-month outlook indicates greater probability for above-normal temperatures across the ERCOT footprint for winter and spring months, according to the US National Weather Service.

"In the winter, we're dealing with morning and evening peaks and sometimes extreme volatility in the weather," ERCOT Manager of Resource Adequacy Pete Warnken said in a statement. "We studied a range of potential risks under both normal and extreme conditions, and believe there is sufficient generation to adequately serve our customers."

The winter SARA includes a unit outage forecast of 8.616 GW based on historical winter outage data compiled since 2017.

ERCOT's all-time winter peak demand record of 65.915 GW was set between 7 and 8 am CT Jan. 17, 2018.

Spring outlook

ERCOT also expects to have sufficient generation available to meet spring demand. Based on expected spring peak weather conditions, the preliminary spring SARA report anticipates a seasonal peak demand of 64.548 GW.

"This is this first spring assessment that includes a low wind output scenario, and even under this particular scenario, ERCOT anticipates there will be sufficient generation to meet the forecasted demand," according to ERCOT.

An additional 4.262 GW of planned spring-rated resource capacity, comprised of gas-fired units, wind and utility-scale solar, is expected to be available to meet the spring peak demand, according to the preliminary assessment.

The final spring SARA report will be released in early March 2021, along with the preliminary summer SARA.

Currently, ERCOT North Hub on-peak July 2021 is in the upper $50s/MWh, 47% lower than where the 2020 package averaged a year ago, while on-peak August 2021 is around $105/MWh, 44% below where its 2020 counterpart averaged last year at this time, according to Plats data.

"The 2021 reserve margin is expected to jump again from this past summer, which featured notably soft prices despite the fact that loads had significantly recovered by the peak months," Whalen said. "While we expect that reserve margins will ultimately be lower than what ERCOT's initial [Capacity, Demand and Reserves report] had suggested, it certainly isn't likely to fall. The increased penetration of intermittent generation raises the possibility of price spikes even with reserve margins high, but it seems likely we'll have more weak pricing ahead."