Energy Insider Blog

ERCOT PRELIMINARY SUMMER RESOURCE ADEQUACY ASSESSMENT

On March 1, Electric Reliability Council of Texas (ERCOT) issued its preliminary assessment of Resource Adequacy for summer 2013.  According to the published numbers reserve margins (excess capacity over projected peak demand) will be 8.4%, well below that of last summer.  The report suggested that it is very likely that ERCOT will need to declare Emergency Energy Alerts (EEAs).  Depending on which level of EEA is declared, ERCOT will take the following corresponding actions until supply and demand are brought back in to balance:

In April 2012, Cheniere Energy received final regulatory approvals to build a major liquefied natural gas (LNG) export terminal at Sabine Pass in Louisiana.  This event rippled through the energy world, with concern growing that export natural gas would lead to higher domestic prices. Currently, natural gas prices in Asia are 3-4 times higher than those in the U.S. while prices in Europe are 2-3 times higher. In light of these spreads, industrial gas producers are urging the Department of Energy to approve LNG exports. However, the export of LNG is unlikely to have significant impact on natural gas prices in the next 3-5 years.  Rather, other factors, such as new environmental regulations, are likely to be more significant drivers of natural gas prices.

A critical element of effective energy risk management is an understanding of all of the cost components behind a retail electric bill and what causes these components to move.  Recently, capacity costs, which are determined by PJM’s Reliability Pricing Model, or RPM, have followed a bell shaped curve across multiple utilities in the Eastern Mid-Atlantic Region, including the Public Service Electric & Gas (PSEG) area in New Jersey.[1] 

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