Tucson Electric Power Co. says it’s got plenty of power to meet expected higher demand peaks and keep air conditioners humming this summer.
But planning to avoid blackouts is getting trickier amid a shift from coal-fired power plants to solar and wind resources, more extreme summer temperatures and a tight market for power in the West, TEP and other utilities told state regulators last week.
And by 2025, utilities across the Southwest won’t be able to meet growing power demand if all their planned renewable-energy projects are not completed on schedule, according to a new study sponsored by TEP and other Southwest utilities.
In an annual summer preparedness workshop last week at the Arizona Corporation Commission, officials of TEP and sister rural utility UniSource Energy Services said they have sufficient generating capacity to meet summer demand peaks expected to rise above 2021 levels.
“Our energy supplies are adequate and we feel as well-prepared as we can be for the high temperatures and high energy demands of summer,” TEP spokesman Joe Barrios said. “However, we’ll keep a close eye on the weather and our regional energy market, and we have contingency plans in case any emergencies arrive.”
Arizona Public Service Co., the state’s biggest power company, the self-governed Salt River Project and Arizona Electric Power Cooperative, which supplies the state’s rural electric co-ops, also told regulators they’ve lined up enough power to meet expected summer demand.
Summertime reliability has become a major concern since August 2020, when power shortages during a historic heat wave across the West prompted California’s transmission system operator to impose rolling blackouts to avoid a collapse of the whole system.
Arizona managed to avoid blackouts, partly through measures including demand-response programs and customer conservation efforts, but the state’s ratepayers bore the cost of spiking regional power prices during the crisis.
Regionwide, resource planning has become more difficult amid extreme summer temperatures and drought, constraints on power imports from California, and supply-chain and other factors affecting solar and storage projects, Lee Alter, resource planning director for TEP and UES, told regulators.
TEP and UES together are forecasting a 2.4% increase in summer peak demand, to 3,038 megawatts.
The utilities are going into the summer with a combined reserve margin — generating capacity beyond the forecast demand — of 16%, based on demand reflecting average summer temperatures, Alter said.
Reserve margins give utilities a cushion against higher than expected demand caused by extreme weather and disruptions to supplies like an unscheduled power-plant shutdown or wildfire damage to transmission lines.
The Western Electricity Coordinating Council said that for 2021, an annual reserve margin of 16% was needed to maintain adequate resources in the Desert Southwest region including Arizona.
Arizona Public Service Co. is forecasting a nearly 4% increase in peak demand, to 7,881 MW, and has planned a reserve margin of about 15%.
Alter said that amid the West’s tight power market, it’s harder to find enough supplemental energy resources, like firm contracts for future power deliveries, to expand reserve margins.
“In the past, there was enough capacity in the region that if you wanted more, you’d go get more, but the market has really tightened up,” Alter told the Corporation Commission.
Alter also cited growing concerns that prolonged drought in the Colorado River Basin may halt hydroelectric production from the Glen Canyon Dam or Hoover Dam, while California’s grid operator has continued a policy adopted last year to limit power exports during emergency conditions.
Barrios said TEP and UES don’t rely on hydro power from the Colorado River dams, but a loss of those resources would mean less available power capacity in the region and drive up scarcity and prices.
On the plus side, TEP last week began participating in the Western Energy Imbalance Market, a real-time wholesale power market of about 20 utilities managed by the California Independent System Operator.
While not adding generating capacity, Alter said the market will help TEP balance intermittent resources like solar and wind, prevent grid instability and improve system reliability.
TEP and other Southwest utilities are facing major challenges in meeting peak power demand as they transition away from coal-fired generation in the next few years, Alter said, citing a recent a study by Environmental + Energy Economics (E3).
“Load growth and resource retirements are creating a significant and urgent need for new resources in the Southwest region,” E3 said a report commissioned by TEP, Arizona Public Service Co., the Salt River Project, Arizona Electric Power Cooperative, El Paso Electric Co. and Public Service Co. of New Mexico.
“Maintaining regional reliability will hinge on whether utilities can add new resources quickly enough to meet this growing need and will require a pace of development largely unprecedented for the region,” the study concluded.
Regionwide by 2025, the utilities face a shortfall of nearly 4 gigawatts of generating capacity with existing resources and plants now under development. A gigawatt, or 1,000 megawatts, of installed solar generating capacity is enough to power about 200,000 to 250,000 homes in TEP territory.
The Southwest utilities have prepared for the higher demand, with commitments for about 5 gigawatts of new generation and plans to add another 14.4 gigawatts by 2025, the report said.
But there’s a real risk that any delays to the utilities’ buildout plans could lead to power shortages in the future, potentially elevating system reliability risks for a decade or more, the E3 report said.
“While this risk might seem remote in normal times, supply chain disruptions, materials shortages and a tight labor market are already impacting project timelines across the country,” the study said.
In 2021, TEP added 449 megawatts of new wind and solar resources, allowing the company to provide about 30% of its power from renewable resources.
TEP has one solar project under construction, the 15 MW Raptor Ridge photovoltaic solar project near East Valencia Road and Interstate 10, which is expected to go online later this year to supply power through a customer solar-subscription program, GoSolar Home.
In early April, TEP announced an all-sources request for proposals for up to 250MW of renewable and energy-efficiency resources, including solar and wind and demand-response programs that reduce usage during periods of high demand. TEP also is seeking up to 300MW of “firm capacity” resources, including energy storage systems providing at least four hours of power daily during the summer, or demand-response programs.
UES issued a call for bids for up to 170MW of renewable and energy efficiency resources and up to 150MW of firm-capacity resources.
TEP and UES want the new resources to go into service preferably by May 2024, but no later than May 2025.
TEP needs to move fast amid looming coal-plant retirements, including the planned June shutdown of the 170MW Unit 1 generator at the San Juan Generating Station in northwest New Mexico.
Barrios said maintaining adequate generating capacity is always a concern, but TEP is faring better than some of its regional neighbors.
He cited Public Service Co. of New Mexico, which told regulators it didn’t have any capacity reserve margin for July or August.
Public Service Co. of New Mexico in February decided to keep the other remaining coal-fired generating unit at San Juan running until September, three months past its planned retirement date, to boost its summer reserve margin.
TEP has no current plans to delay any coal-plant retirements, Barrios said.
TEP also is working on demand-response programs, in which customers allow the utility to cut their power usage during peak periods to avoid shortages, Barrios said.
The utility currently can now work with commercial and industrial customers to quickly reduce demand by up to 40MW, Barrios said, and has a new pilot program to allow some apartment dwellers to earn a $10 quarterly bill credit to shift their water-heater usage away from peak periods.
The utility is also working with Tucson Water on a new “Beat the Peak” campaign to urge customers to reduce energy usage during peak periods, typically from 3 to 7 p.m. in the summer, Barrios said.
The campaign will include messaging on social media and video, inviting customers to explore pricing plans and energy-efficiency options to help reduce usage during peak hours, he said.