George Given

George Given, senior project manager with Henwood Energy Services, said gas demand for electric generation is expected to double in the next decade in the US, growing by as much as 9% annually.

"We are already seeing large price differentials between ERCOT's four congestion zones, all of which are modeled by Henwood and forecasted to 2027," stated George Given, Senior Project Manager for Henwood."The ERCOT grid is becoming more congested every day.Both short-term bilateral markets and ERCOT's balancing energy market are exhibiting significant differentials.Market participants have put a $75 million hedge against congestion costs at recent auctions of transmission congestion rights (TCRs), but the question still remains, will this be enough to cover their exposure?"

Another major challenge that directly affects developers in ERCOT is the significant capacity overbuild, which will continue to get worse in some congestion zones before it gets better as more capacity comes online in 2002-04.However, accounting for market price volatility can significantly improve the picture for many operators, and Henwood's analysis suggests that including real option value will add a much-needed boost to their bottom line.

"We are already seeing large price differentials between ERCOT's four congestion zones, all of which are modeled by Henwood and forecasted to 2027," stated George Given, Senior Project Manager for Henwood."The ERCOT grid is becoming more congested every day.Both short-term bilateral markets and ERCOT's balancing energy market are exhibiting significant differentials.Market participants have put a $75 million hedge against congestion costs at recent auctions of transmission congestion rights (TCRs), but the question still remains, will this be enough to cover their exposure?"

Another major challenge that directly affects developers in ERCOT is the significant capacity overbuild, which will continue to get worse in some congestion zones before it gets better as more capacity comes online in 2002-04.However, accounting for market price volatility can significantly improve the picture for many operators, and Henwood's analysis suggests that including real option value will add a much-needed boost to their bottom line.

Having too much generation will weigh on ERCOT prices "for a number of years," said George Given of Henwood Energy Services, who wrote a study of the Texas market for the firm.

The report said 4,500 megawatts of new generation that is scheduled to go into service in the state before the end of 2004 will keep wholesale power prices low through 2007.The Sacramento, Calif., company projects thatERCOT prices will stay in a range of $28 to $47 in that period.

Texas has become one of the most oversupplied U.S. power markets since it opened its wholesale market to competition in 1995.Access to natural gas and a streamlined regulatory environment led to construction of 55 power plants that can produce nearly 21,000 megawatts, according to Texas regulators.

"The results clearly indicate the viability of new coal capacity across a number of markets," explained George Given, Senior Manager, Power Market Analysis with Henwood.

George Given, Director ERCOT Analysis, Henwood Energy Consulting