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June 13, 2012
Brattle Report on ERCOT Resource Adequacy and Reliability Cited in The Wall Street Journal

A recent study by economists at The Brattle Group was cited in a Wall Street Journal article on expected power shortages in Texas. Brattle’s study analyzed resource adequacy concerns and identified options for better aligning market design and reliability objectives in the Electric Reliability Council of Texas (ERCOT) electricity market. ERCOT sponsored the study in response to concerns that investment has stalled and reserve margins are projected to fall below 10% by 2014 and lower thereafter, which is substantially less than ERCOT's current reserve margin target of 13.75%. To inform ERCOT and the Public Utility Commission of Texas' (PUCT) ongoing efforts to maintain resource adequacy, the study: (1) characterizes the factors influencing generation investment decisions; (2) evaluates the market outlook for supporting investment and resource adequacy at the target level; and (3) lays out options to enhance long-term resource adequacy while maintaining market efficiency in ERCOT. The authors of the study addressed these issues by interviewing a broad spectrum of stakeholders and conducting forward-looking analyses of prices, investment costs, and reliability. They make a number of recommendations on how to better align the market design and investment incentives with reliability objectives. The Wall Street Journal article, “Power Shortage Vexes Texas,” discusses the fact that Texas, the second most populous state in the United States, is expected to have a 2,500 megawatt shortfall in generating capacity by as early as 2014. The Brattle report is available for download below.