With Coal Plans Cut Back, Texas Faces Energy Gap
Texas, as everyone knows, does everything big. Its giant oil and gas fields dominate America’s energy patch. It is now the nation’s largest wind power 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 country’s second-most-populous state 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 the TXU Corporation, the state’s biggest utility, scrapped plans for 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 must figure out how to replace the 6,000 megawatts that TXU’s former plan would have added 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.
The decisions Texas makes are likely to have national repercussions given that the state’s economy is the second largest, after California. 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 B. Medlock III, a fellow in energy studies at the James A. Baker III 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 might not have received regulatory approval of the eight plants in the first place, but the cancellation of the plants has 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. Mr. Patterson said an additional 2,000 megawatts would come online by 2009. Most of the production now occurs in the blustery Panhandle, but two offshore farms are in the planning stages and should be online by the beginning of the next decade.
Still, few experts think enough renewable power can be developed quickly enough, given the lack of transmission capacity and high costs. 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.
In the 1990s, cheap natural gas replaced coal as the favorite choice of Texas utilities. But as natural gas prices rose in recent years, utilities turned to coal, which now provides about 37 percent of the state’s power.
Texas still produces more natural gas than it consumes, although it cannot consume too much of it without affecting supplies and perhaps even utility prices in much of the rest of the country.
”If Texas is going to consume more gas, that means we export less to other states,” said Charles Reimer, president of Freeport LNG.
Permits have been granted for a string of liquefied natural gas terminals, rejected in other parts of the country for environmental and security reasons, and they are being built on the Texas and Louisiana coasts. They will help replace some of the lost coal power with imported gas.
Investors are drawing up plans to add to the state’s two nuclear power plants, which now supply about 13 percent of its electricity. Nuclear represents a full third of the power that could be produced in power generation projects currently being reviewed by the Electric Reliability Council of Texas, or Ercot, the industry organization that administers most of the state power grid.
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 III, former chairman of both the Public Utility Commission of Texas and the Federal Energy Regulatory Commission.
Texas utilities will be forced to be more creative. TXU says it will reopen several mothballed natural gas plants to increase production. It plans to more than double its current purchases of wind power, to more than 1,500 megawatts, as part of the deal in its buyout, and will invest $400 million in various conservation programs and incentives for consumers to lower use during peak hours.
Even without the eight proposed coal-fired plants that TXU jettisoned, other new coal plants are still in the planning stages. TXU has three coal plants waiting for regulatory approval, and at least six more are 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, 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.”