Texas Electricity Prices Soared on Fears of a Shortage

Wholesale electricity prices in Texas briefly surged to four figures after ERCOT issued a warning about potential generation shortfalls on Wednesday.

The spot price topped $3,000 per megawatt-hour at one point in the late afternoon of Wednesday, from about $32 per MWh on Tuesday, Bloomberg reported. The ERCOT warning had been for the time between 7 and 9 pm.

The price surge is not unprecedented—prices on the spot market experienced another of these in April when ERCOT warned again about the possibility of a supply shortfall. In this case, the drivers of the increase were greater cooling demand and lower wind power generation.

Some analysts are warning, however, that higher prices could be a mark of the summer in Texas. According to a Reuters report from this week, the combination of hotter weather and higher demand for electricity will drive these prices. The additional demand is seen coming from data centers and bitcoin mining operations, analysts are saying. The intermittency of wind and solar generation will also contribute to higher prices.

"With the growth of renewables, the retirement of base load fossil-fired generation and the dependence on renewables, on days renewables are not showing up, it's going to be very pricey," Sean Kelly, chief executive of energy analytics services provider Amperon, told Reuters.

Bloomberg reported last month that August electricity prices in Texas are the highest in five years, at $168.70 per megawatt-hour, which was also an 82% increase on the year, as traders anticipate higher demand and lower supply.

“That’s a lot of scarcity priced in,” an executive from AES Corp.’s renewable energy division told Bloomberg. “Uncertainty is always a driver,” Terry Embury also said.

“If we get a summer like last summer, I think we are underpriced,” a Mercuria trade executive warned in comments made to Bloomberg.

By Irina Slav for Oilprice.com

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