Texas' planned coal retirements could depress ERCOT reserve margin

Dive Brief:

A spate of announced coal retirements are primarily to blame for possibly pushing down reserve margins in the Electric Reliability Council of Texas, according to a Platts report based on the grid operator's board meeting this week.
Luminant announced three large Texas coal plant retirements this month, which totals about 4,200 MW of capacity. In addition, Talen Energy plans to retire a 300 MW gas-fired unit.
ERCOT has a reserve margin target of 13.75% but according to Platts, the retirements could lower margins to about 12.5% for next summer and 10.5% in 2022.

Dive Insight:

Cheap natural gas and the rise of wind power is changing the Texas power market, and could mean the Lone Star State will need reliability must-run contracts to ensure sufficient capacity. An analysis will be completed before ERCOT's next board meeting in December.

But as coal plants are forced offline, wind generation is stepping in to fill the gap, says research at the University of Texas.

Some 4,000 MW of wind capacity is expected to come online by 2018, according to Joshua Rhodes, research fellow at the University of Texas Austin’s Energy Institute. And while the coal and wind have very different capacity factors, he added that "it’s conceivable that energy generation from wind could possibly overtake coal in the near future."

Earlier this month, Luminant revealed plans to shutter its Sandow and Big Brown power plants in early 2018, due to low wholesale power prices and difficulty competing with cheap gas-fired and renewable power. The company also plans to retire its coal-fired Monticello power plant in Titus County, Texas, in January.

According to Rhodes, Texas will have almost 24 GW of wind capacity next year, compared with 20.3 GW of coal capacity.

The coal retirements come despite efforts by the Trump administration to stem the decline. U.S. Environmental Protection Agency head Scott Pruitt is working to rescind the Obama administration's Clean Power Plan, which sought to cut emissions from power plants. Energy Secretary Rick Perry is also pushing for cost recovery for baseload generation in wholesale markets — though it would not impact the Electric Reliability Council of Texas markets, which are exempt from federal regulation.