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[Markets] "This Is Blowing Up:" Texas Energy Costs Hit Record High Monday As Heatwave Strikes

Power demand in Texas hit a record high on Monday as consumers turned up their air conditioners to escape a heatwave that is boiling much of the southern Plains over the next 7-10 days.

"A large ridge of high pressure has anchored itself across the southern Plains over the last 7-10 days, promoting significant heat across Texas. As of Tuesday morning, Dallas has reached 100°F each of the last 4 days, while Houston's Intercontinental Airport has hit 101°F each of the past 5 days. Generally speaking, warmer than normal temperatures will continue for the foreseeable future across Texas," said Meteorologist and owner of Empire Weather LLC., Ed Vallee.

According to the Electric Reliability Council of Texas (ERCOT), who operates the electric grid and supplies energy to more than 25 million customers, representing 90% of the state's electrical load, reported that demand surged to 74,531 megawatts (MW) at 5 p.m. CDT on Monday and could reach 75,000 MW on Tuesday. Reuters notes that the all-time high was 73,473 MW on July 19, 2018.

ERCOT has 78,000 MW of generating capacity. As demand continues to reach critical levels, the grid operator could issue warnings to customers advising them to reduce energy.

ERCOT Houston MW-hour jumped from $25 to $603 on August 12, a +2,237% move in 1,440 minutes.

"This is blowing up, David Hoy, a trader at Dynasty Power, told Bloomberg, "That should be the highest price of the year so far."

Meteorologist Vallee said air temperature and humidity across the region could make temperatures feel closer to 110 through the week.

In comparison to other grid operators across the country, ERCOT Houston is experiencing the most significant spikes in energy costs this week. 

The jump in energy costs shows just how unpredictable the Texas power market has become as coal-fired generators are retired for cheaper natural gas and renewable energy sources.

ERCOT said its reserve margin, which is the spread between total generation available and forecast peak demand, with the difference shown as a percentage of peak demand, is at an all-time low of 7.4% because several coal-fired power plants have been retired as of recent.

Monday's price spike also shows how renewable energy, which makes up about 25% of Texas' energy generation, had difficulty generating enough power to handle the demand surge.

Grid data from Bloomberg showed wind power generation in the region slid by 50% Monday, with most of the energy generation coming from fossil fuel power stations. 

Published:8/13/2019 3:38:07 PM
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