Energy Efficiency, Executive Insight, Generation, Natural Gas, Renewable Energy

Natural gas, renewable energy to dominate ERCOT in coming decades

Natural gas and renewable energy will continue to dominate the Texas electric supply additions over the next 20 years, while adoption of expanded energy efficiency and demand response programs could reduce 40 to 50 percent of projected peak demand growth across the system, economists with The Brattle Group find in a new report prepared for the Texas Clean Energy Coalition.

Natural gas and renewables dominate the supply additions across all scenarios. Natural gas and renewable power additions dominate the supply picture, with gas providing both low-cost base load energy and ancillary services that integrate wind and solar energy.

The original forms of complementarity discussed in prior reports for the TCEC continue to occur, albeit in a more nuanced manner with the introduction of the increased options of energy efficiency, demand response and combined heat and power.

Energy efficiency and demand response provide substantial opportunities to displace future capacity additions and lower overall electricity costs. The program portfolio was designed to be moderate in size and use well-established approaches primarily driven by ERCOT energy prices. Nonetheless, 3 GW of peak reduction could be achieved by new energy efficiency programs and 2 to 4 GW of new DR programs are identified as economically achievable in the report’s modeling scenarios.

Large CHP units are very economical, but not small CHP units. New large CHP installations at petrochemical facilities are very economical and the simulation indicates that the full potential of these opportunities will be realized by 2032 in all scenarios. However, the high capital costs and rapid payback required of smaller CHP units prevent any further CHP adoptions in the scenarios.

Real energy prices remain within the band of prices actually experienced in ERCOT between 2010 and 2012. The highest annual average price for a converged year is about $67/MWh for the Strong Federal Carbon Policy/high gas price scenario. However, even this extreme scenario price is $3/MWh lower than its counterpart scenario in the Phase II study.

Carbon emissions are slightly reduced by the addition of demand response and energy efficiency. The combined effects of higher gas prices, lower load growth, enhanced demand response and CHP installations lower carbon dioxide emissions about 4 percent by 2032 versus the Phase II Reference Case, or about 143 million metric tons.

This is the equivalent of closing one 600 MW coal plant for 30 years. The energy efficiency programs alone reduce carbon dioxide emissions by 10 million metric tons/year by 2032.  These lower emissions are the net effect of reduced sales (including from energy efficiency programs) and higher renewables penetration, offset by reduced retirements of inefficient older capacity.