The news is full of stories about Calpine and the difficulty merchant generation players face from the uncertainty and volatility of power markets. Now is a good time to review key measures of...
What's Happening In the WECC?
High reserve margins and blackout risk are part of the extended forecast.
The Western Electricity Coordinating Council (WECC) continues to experience a glut of generation and historically high levels of generating reserve margins. Global Energy Decisions recently completed its fall 2005 analysis of changing WECC regional power and gas market fundamentals, 1 and we expect high reserve margins driven by the addition of new power plants to preclude widespread power shortfalls for the next several years.
Generation additions between 2001 and 2007—including plants currently under construction—add up to almost 52,000 MW. When added to a base quantified in 2000 of 160,000 MW, significantly more generation than needed will cover a WECC load forecast expected to peak at almost 150,00 MW in 2007.
Despite some retirements of older, inefficient power plants, planning reserve margins are running around 41 percent on a WECC-wide basis. Global Energy’s current forecast shows that 2,300 MW more of gas-fired generation will be built in the next couple of years than forecast six months ago. These additional plants generally are being built near load centers by (or under contract to) utilities ( see Figure 1 ).
Despite these reserve margins, state and federal regulators are asserting that all is not well, and that rolling blackouts may return. This past summer, the California ISO did in fact order rolling blackouts in Southern California in response to the loss of a 3,000-MW transmission line from the Northwest during a period of high temperatures and peak demand.
Whether California is at risk for rolling blackouts may depend on how conservative the import capability rating is. 2 Global Energy’s analysis also suggests that the risk of blackouts is a very local issue for load pockets in the San Diego and Los Angeles areas. The issues of import capabilities and reliability are gaining more traction, and entities such as the Northwest Power and Conservation Council are addressing the issue of economic versus physical reliability, by establishing a Northwest Resource Adequacy Forum. 3 In addition, the ISO’s comprehensive market redesign will incorporate locational marginal pricing (LMP). This should help deal with the issue of load pockets and the concerns of intra-zonal congestion.
Although the WECC as a whole is a summer peaking region, the Pacific Northwest is a winter peaking region. All or major portions of Oregon, Washington, Idaho, Montana, Wyoming, Nevada, and Utah, along with the Canadian provinces of British Columbia and Alberta, comprise this area. More than 60 percent of the area’s resource capability is from hydro generation. Oregon, Washington, and western Montana coordinate the operation of their hydro resources to serve load. WECC hydro resources equate to an approximate average of 11,000 MW of firm energy when reservoirs start full.
Global Energy’s representation of energy production from hydro facilities located in the WECC region largely is tied to the hydro energy production in the Pacific Northwest, Canada, and California. In total, these areas account for more than 90 percent of the hydro generation in