ERCOT sets winter demand record, pushing prices above $2K/MWh
- Texas electricity consumers set a record Wednesday morning for winter power use, according to a release from the state's grid operator, pushing up power market prices and increasing plant output.
- Peak demand for the market managed by the Electric Reliability Council of Texas (ERCOT) reached 65,731 MW between 7 a.m. and 8 a.m. on Jan. 17, the grid operator said, besting the previous winter record of 62,855 MW set earlier in the month. Power market prices briefly reached above $2,200/MWh.
- At least five coal and natural gas plants increased generation in response to higher prices, Bloomberg notes, but expected growth in renewable resources, particularly solar, could curtail such peak pricing events in the future, squeezing plant economics.
A blast of arctic air had Texas turning up the heat this week, but the state's grid operator said electric reliability was never in question.
ERCOT's system use typically peaks in the summer, when air conditioning use is high, so the state had more than enough generation to meet the winter record. While demand reached above 65,000 MW on Wednesday, ERCOT's all-time demand record is above 71,000 MW, set in Aug. 2016.
The demand record was welcome news for power plant owners. Unlike other electricity markets, ERCOT does not have a capacity market, which auctions generation capacity years in advance. That means many plants rely on critical peak pricing events brought on by high demand to cover their operating costs.
But as more solar power comes onto the system, the frequency and intensity of those peak pricing events could decrease. A new Bloomberg New Energy Finance report estimates that every gigawatt of solar added to the Texas grid could decrease average wholesale power prices by $2.56/MWh during summer demand peaks.
BNEF estimates 1.8 GW of solar in ERCOT by 2020, a number that could grow to 15 GW in later years as prices decline further. Because solar tends to generate during peak Texas demand hours in the summer, 5 GW of solar capacity could be "enough to squash ERCOT’s peaky average price profile," analyst Joshua Danial wrote, according to Bloomberg.
Low wholesale prices — brought on not just by solar, but also wind and natural gas — are already challenging plant economics. In fall 2017 alone, ERCOT generators announced 4,000 MW of planned generation retirements, pushing the grid operator to lower its reserve margin forecast for summer 2018 to 9.3%. The retirements included three large Luminant coal plants and the trend has even affected modern gas-fired units like the Panda Temple Power plant.
Power market prices are also driving consolidation in the generation sector. In October, generator Vistra announced plans to buy Dynegy, a plant owner with many assets in ERCOT. The merger would create the largest integrated power company in the U.S.
This post has been updated to specify that solar typically generates during summer peak demand hours in ERCOT.
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