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ERCOT expects below-target 8.1% planning reserve margin in summer 2019

Ryan Hardy, energy markets expert at PA Consulting, comments on The Electric Reliability Council of Texas’ forecast planning reserve margin for the summer of 2019.

The article notes that the Electric Reliability Council of Texas announced a record-low forecast planning reserve margin of 8.1% for the summer of 2019, well below last summer's reserve margin of about 11% and the system's 13.75% target reserve margin.

ERCOT coped with summer 2018's tight supply conditions by reducing generation and system outages and anticipates the same type of focus on system performance as we head into another year with tight reserves.  

On Intercontinental Exchange, summer 2019 on-peak forwards rose $2 to about $142/MWh in morning trading and stayed in that vicinity most of the day. ERCOT's target reserve margin, 13.75%, is designed to ensure that firm load shedding occurs no more than one day in 10 years.

The Public Utility Commission of Texas in 2016 ordered ERCOT to develop a new reserve margin standard based on the concept of an economically optimal reserve margin and a market equilibrium reserve margin. In October, ERCOT released a study showing ERCOT's EORM at 9% and MERM at 10.25%.

Ryan said that the probability of rolling blackouts is "hard to pinpoint exactly, but it is more likely to happen than last summer."

He adds: "It will depend heavily on three fundamental factors: hot weather, wind generation during peak periods and the ERCOT ISO's ability to deploy demand response during peak loads."

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