The ERCOT region remains a living example of how to make a successful transition to restructured wholesale and retail markets for electricity. At the same time, the market continues to witness...
What's Happening In the WECC?
High reserve margins and blackout risk are part of the extended forecast.
• Load Forecast. In our fall 2005 market analysis, Global Energy raised its peak load forecast for 2005 to almost 150,000 MW. We forecasted peak load to grow on average at a rate of 1.96 percent per year throughout the forecast horizon, slightly higher than the 1.9 percent growth rate reflected in our spring 2005 forecast. Load forecasts reflect new data provided by load-serving entities and reported to FERC.
• Retirements. Cumulative retirements of existing resources over the 25-year study period are forecast to be 25,532 MW, little changed from the 25,261 MW retirements in our spring 2005 forecast. This reflects retirements announced during the past six months. This forecast does not assume that the Mohave coal plant or any nuclear plant retires in the next 25 years. 4
• Generation Under Construction. We include 11,121 MW of new generation currently under construction. In addition, we assume that additional renewable generation will be constructed in an effort to meet targets established for energy produced from renewable resources. This new generation construction, coupled with plants brought on line in the last six months, results in about 4,600 MW of new capacity not included in the spring 2005 forecast.
• Other New Resources. Over the study period, we assume that new, efficient, combined-cycle generation will be built in response to market signals, and combustion turbines will be built to provide adequate operating reserves. In this forecast, which evaluates the economics of new combined-cycle generation based on a deterministic analysis, new generic combined-cycle and peaking capacity start to enter the forecast in 2010—one year earlier than in our spring 2005 forecast. We also include about 14,000 MW of new coal-fired capacity added in the latter half of the forecast. In addition to the coal build-out, more than 16,000 MW of nameplate-wind capacity has been added throughout the forecast period in market areas where wind likely is to be built. After the market absorbs capacity already under development, long-term regional reserve margins in the WECC region will be about 18 percent.
• Natural Gas Prices. Natural-gas prices are forecast to remain high for the next few years. Over the 2006-2010 period, prices in real dollars are expected to decline, reaching a low of $4.54/MMBtu in 2009 at the Henry Hub and staying within a $4.35-$4.90/MMBtu range for the remainder of the forecast. During the period 2009 through 2029, Henry Hub prices gradually rise by about 0.4 percent annually in real dollars, on average.
Figure 2 shows announced power plants in WECC and their construction status since 2000. Since the spring 2005 report, the completed and under construction capacity has increased by about 13 percent.
Regulatory events play a big role in the WECC, which still has only two regional transmission operators—Alberta’s Electric System Operator and California’s Independent System Operator (ISO). Proposals for additional RTOs have met different fates—Grid West and Transmission Improvements Group (TIG), both representing different market redesigns in the Northwest, still are being actively pursued.
In December 2004, Grid West filed articles of incorporation officially to become a membership organization, and it set a