Some Good News for the Lack of Generation in Texas

Some Good News for the Lack of Generation in Texas

Panda Power Funds, an organization built to develop and invest in natural gas power generation and solar energy projects, announced Tuesday, September 18 it would immediately begin building a power plant in Sherman, Texas. The 758-megawatt (MW) plant will be fueled by natural gas.

Panda began construction of a similar 1,000 MW plant in Temple, Texas in July. Bill Pentak, spokesman for Panda, says both plants will be producing electricity by the end of 2014 and once operational, the Sherman power plant will supply power to the needs of about 750,000 homes.

The Texas Electric Reliability Council of Texas (ERCOT) continuously warns that Texas will face electricity shortages unless new generating plants are built or consumers cut back on usage. The announcement of these plants comes at a good time for the ERCOT grid, which faces declining reserve margins each day.

The Texas Public Utility Commission (PUCT) voted to increase the system wide offer cap in June from $3,000 to $4,500 per megawatt hour (MWH). In lay perspective, that equates to $4.50 per kilowatt hour (kWh) during high peak demand periods.  Further increases to the price cap are pending with the anticipated goal of spurring investment into new generation facilities.

More generation would lead to an increased reserve margin and fewer struggles to meet demand during extreme weather situations coupled with Texas’s continuous population growth. However, increases to the price cap will also mean higher prices for consumers.

Please see the chart below for the coming years’ forecasted reserve margin (courtesy of ERCOT).

The red dashed line represents the ERCOT grid’s projected reserve margin over the next 10 years. Note that near the middle of 2014, the reserve margin will not be met and after 2015, the margin steadily decreases again.

/ Energy Buzz, Texas

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