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Texas agency puzzled by summer power use that didn't materialize
September 13, 2013 / 7:58 PM / 4 years ago

Texas agency puzzled by summer power use that didn't materialize

HOUSTON, Sept 13 (Reuters) - Calls for electric conservation and rolling outages failed to materialize in Texas this summer, despite warnings from the grid operator, as electric supplies were ample to keep air conditioners and refineries running smoothly even during heat waves.

Lack of drama on the electric front made life simpler for Texas grid officials but has puzzled utility regulators and may complicate efforts to rewrite market rules to attract new generation to serve the state’s $29 billion deregulated power market.

Power demand “used to be pretty close, with an almost algorithmic connection between growth in economic activity and load growth,” said Ken Anderson, a member of the Texas Public Utility Commission (PUC). “That’s disconnected: it’s just not there anymore,” Anderson said at a recent public meeting.

Texas produces and consumes more power than any other state and grid officials with the Electric Reliability Council of Texas (ERCOT) feared strong economic growth might lead to a repeat of the summer of 2011 when they were forced to cut power to industrial companies on several record hot days.

Anderson said it may be a combination of factors that kept summer power demand from reaching the 68,383-megawatt level forecast by ERCOT even without public appeals for conservation or extremely high power prices.

Power demand this summer peaked on Aug. 8 at 67,180 megawatts, the third highest in history, but nearly 2 percent below ERCOT’s forecast.

While Texas homes typically use twice as much power as the average U.S. home due to air conditioning, a growing number of informal and voluntary programs that curb power use during peak afternoon hours and costlier wholesale market caps may be behind 2012’s missing summer demand.

Brookfield Office Properties, which owns 8 million square feet of office space in Houston, offers one example of an informal conservation program.

Brookfield voluntarily curbed power use on at least 10 days this summer when prompted by its retail electric supplier about the potential for high heat and power demand.

“We do what we can by dimming the lobby lights and turning off non-essential loads, such as fountains and decorative lighting,” said Wayne Harner, Brookfield’s vice president of technical services in Houston.

CHANGING BEHAVIOR

The widespread installation of smart meters across the state and devices that can control home appliances remotely are allowing more customers to take advantage of programs that offer incentives to shift use of power-hungry appliances to off-peak hours when prices are lower, electric retailers said.

A program from TXU Energy offering customers free electricity on nights or weekends has attracted 100,000 residential customers, beating the company’s expectations, said Jennifer Pulliam, a TXU Energy product director.

“This has been the single most popular product family we have launched in the competitive market to date,” she said.

The company could not disclose how much electric demand has been shifted to lower-cost hours.

“I believe we are seeing some degree of shift,” Pulliam said. “What we don’t know is if it’s a sustained shift.”

CPS, San Antonio’s municipal utility, said voluntary programs that curb electric use during extreme weather cut 120 MW from what the utility would have expected in early August.

One megawatt can serve about 200 average Texas homes in the summer when air conditioners run for extended hours.

“Our objective is to reduce load on the hottest days of the year,” said Rick Luna, manager of demand management analysis at CPS. Expanding the program may allow the fast-growing utility to delay construction of future power plants.

LAGGING POWER USE

While the Texas economy is expanding faster than other states, the correlation between growth and electric use has become harder to forecast since the 2008 recession.

In the 1980s, power demand grew at twice the rate of U.S. gross domestic product (GDP), but over the past decade the economy has become less electric intensive due to more energy-efficient building codes and new lighting and appliance standards, according to the U.S. Energy Information Administration.

“Over this decade, we expect the relationship to evolve to around 0.5 to 0.6 percent for every 1 percent increase in GDP,” said Kristian Bodek, a director for North American power at IHS CERA. “For the 2020s, we expect it to drop to 0.4 percent.”

ERCOT will update its demand forecast model by December to better reflect this changing relationship between population and economic expansion on power use, said Warren Lasher, ERCOT’s director of system planning.

Anderson said ERCOT must improve its ability to forecast Texas short and long-term power needs because billions of dollars are at stake.

An uneventful summer should not be viewed by regulators as a reason to delay action to solve the thorny market design issues, said Mike Pickens, associate director for IHS CERA.

“The challenge is that it could give them a false sense of breathing room, but the fact still remains that ERCOT needs to build another 10,000 megawatts by the end of the decade,” said Pickens, who focuses on ERCOT power market fundamentals.

Power companies in Texas include TXU Energy and Luminant, both units of Energy Future Holdings, which is owned by Kohlberg Kravis Roberts & Co LLP and other private equity firms; NRG Energy ; Calpine Corp ; CenterPoint Energy and Exelon Corp.

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