Revamping forecasts, NERC concedes it underestimated demand

After declining for a number of years, North America's electric generating capacity is expected to rebound in the next 5 years, says the North American Electric Reliability Council (NERC), although shortages are expected to persist in California. At the same time, the nonprofit organization, formed by utilities after blackouts in 1965, concedes it has substantially underestimated demand in the past and is revamping its methods for forecasting 'to keep pace with the evolving market.'


North American generation will be adequate, says the North American Electric Reliability Council (NERC), but concedes it has also underestimated demand in the past and will revamp its forecasting method to keep 'pace with the evolving market.'

After declining for a number of years, North America's electric generating capacity is expected to rebound in the next 5 years, according to the most recent NERC assessment, although shortages are expected to persist in California.

NERC attributed the turnaround to announced plans to build more than 190,000 Mw of new generation by 2004, while the organization is projecting overall demand to rise by 60,500 Mw.

If just half the announced capacity is actually built, capacity margins will range from 15% to as much as 27% in some parts of the US, NERC said. Even though overall capacity will be adequate to serve demand, NERC said, transmission limitations could prevent delivery of energy to some demand centers.

At the same time, the nonprofit organization, formed by utilities after blackouts in 1965, concedes it has substantially underestimated demand in the past and is revamping its methods for forecasting electricity use. Some merchant energy companies are expected demand to grow at a rate of 3%/year or better for the next 3-5 years, but NERC is projecting annual peak demand and energy use to grow at a modest 1.9%/year for the next 10 years.

"Both projections are substantially below the actual growth rates experienced over the last 10 years as demand continues to be driven by extreme weather at peak times and a strong economy," NERC said.

Currently, NERC is projecting demand in the Eastern Interconnection will grow about 1.7%/year, well below the 3% growth experienced during the last 10 years. Margins are expected to climb to about 17% in 2004, up from about 14% this year, thanks to projected construction of a number of merchant power plants in the region. However, NERC said, if all the plants that have been announced are actually built, margins could soar to 28% by 2004.

Location of new generating capacity will be a key issue for the Western Interconnect, NERC suggests, because large demand centers are separated by long transmission lines. The report predicts California will continue to experience operating emergencies and power alerts for the next 5 years and possibly longer.

Peak demand in the region is expected to grow about 2.1%/year, down slightly from the 2.4%/year average growth for the past decade. Capacity margins in the Western Interconnection are expected to grow to about 25% by the end of 2004, up from 20% today. But NERC also warns margins could rise as high as 26%, if all reported power plant projects are built.

Within the Electric Reliability Council of Texas (ERCOT) Interconnection, demand is expected to rise about 2.8%/year, down from the 3.2%/year average growth rate of the past 10 years. NERC is betting weather patterns will become more normal, noting record-breaking summer temperatures helped boost demand above expectations.

ERCOT capacity margins are projected to decrease to about 20% in 2004, down from about 22% in 2000. Compared to other regions, projected margins reported by ERCOT include only capacity additions that are presently under construction. Should all the announced merchant generation get built, capacity margins could exceed 36% by 2004, NERC says.

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