A Texas-sized hole in electricity production? 

Texas, as everyone knows, does everything big. Its giant oil and natural gas fields dominate the U.S. energy patch. It is now the country’s largest wind producer, with more than 2,000 turbines gathering some of the country’s strongest currents. It gets the booby prize for being the biggest producer of greenhouse gases.

And now Texas faces a big hole in its electricity production, since the state, the country’s second-most-populous one after California, also happens to be one of the fastest growing, because of immigration and the rise in riches from the recent increase in oil and gas prices.

That hole just got bigger as TXU, the state’s biggest utility, scrapped eight new coal-fired plants under a deal it has agreed to with potential new owners. The deal has delighted many environmentalists, but it has also stoked one Texas-sized problem.

Unless new generation is built quickly from some source, Texas energy production in 2009 will fall below reserves recommended by the state operator of the power transmission grid for guaranteeing smooth operations during peak periods of high heat.

Texas officials now face the task of figuring out how to replace TXU’s formerly planned addition of more than 6,000 megawatts of generation to the grid, equivalent to about 10 percent of the state’s current installed capacity. This comes as the state’s population is expected to grow by 20 percent to nearly 30 million people over the next decade due to an expanding economy and immigration.

The decisions Texas makes are likely to have national repercussions given the size of the state’s economy. Texas is a national trendsetter, and the choices it makes on how to use its natural gas and coal are likely to have an impact on electricity rates far beyond its borders.

“It’s a moment when Texas energy markets will need to experiment with many different alternative energy options,” said Kenneth Medlock 3rd, a fellow in energy studies at the James Baker 3rd Institute for Public Policy at Rice University. “The cancellation of the eight plants will solidify the leadership role Texas takes in developing energy supply for the entire country.”

TXU may not have received regulatory approval of the eight plants in the first place, but the plants’ final demise have investors in natural gas, nuclear and renewable energy sources poised for new opportunities.

Environmentalists and some state officials see an opening for renewable energy in a state that is already the national pacesetter in wind energy production. About 4 percent of the state’s power is now produced by wind and other renewable sources, and state officials say they expect a quadrupling of wind power generation in the next 20 years.

“Wind has the potential to help fill the shortfall,” said Jerry Patterson, the Texas land commissioner, whose responsibilities include leasing state lands for wind energy development. “Every day that passes, renewables make more economic sense.”

Texas now produces 2,800 megawatts of energy a year from wind, enough to serve 500,000 homes. Patterson said an additional 2,000 megawatts would come on line by 2009. Most of the production now occurs in the blustery Panhandle, but two offshore farms are now in the planning stages and should be online by the beginning of the next decade.

Yet few experts think enough renewable power can be developed quickly enough due to the lack of transmission capacity and high costs. In the meantime, natural gas, which provides nearly half the state’s electricity, is set for another surge because gas plants can generally be built faster than nuclear or coal facilities.

Still, investors are drawing up plans to add to the state’s two nuclear power plants, which now supply about 13 percent of the state’s electricity.

Although there is no telling how much of that will ever make it off the drawing board, most analysts see a bright future for nuclear in the state.

“There is nowhere for nuclear to go but up in Texas,” said Pat Wood 3rd, former chairman of both the Public Utility Commission of Texas and the Federal Energy Regulatory Commission.

Even without the eight proposed coal-fired plants that TXU jettisoned, other new coal plants are still in the planning stages. TXU has three more coal plants waiting for regulatory approval, and at least six more are being proposed by several private and municipal power companies.

Energy officials say they believe state regulators will approve many of them to avert an energy crisis.

“We’ve got to have renewable energy, more conservation and more plants,” said John Fainter Jr., president and chief executive of the Association of Electric Companies of Texas, a trade group “There are no silver bullets. We are going to have a lot of construction well into the future.”

By Clifford Krauss
International Herald Tribune

iht.com

7 March 2007