Electricity prices in Texas soared this week, with spot prices breaking above $10,000 per megawatt hour (MWh), as utilities scrambled for power supplies to meet surging heating demand amid a brutal cold wave over the state.
Millions of Texans are without power after grid operator The Electric Reliability Council of Texas (ERCOT) instituted rolling blackouts as electric heating demand caused by the historic winter storm overwhelmed generation, some of which was knocked offline by the extreme weather.
The electricity shortfall caused prices to spike as utilities seek any power they can find.
Next-day power for Wednesday at the ERCOT North hub, which includes the cities of Dallas and Fort Worth, spiked to a record of $8,800 per MWh, a nearly six-fold jump from $1,489.75 on the previous day.
ERCOT’s website showed wholesale power prices deliverable over the next five minutes broke above $10,000 per MWh earlier this week.
Real time prices were less than $50 per MWh before the cold blast hit Texas. ERCOT’s average real time settlement price was around $9,000 per MWh late on Tuesday.
“The surge in prices is due to the simultaneous constriction in supply due to freeze-offs and a surge in demand for heating,” said Marshall Steeves, energy markets analyst at IEG Vantage, adding that the price spike is affecting residential and commercial users.
“Homeowners who depend on power for home heating will be particularly impacted while businesses and manufacturers will face a spike in rates.”
Extreme weather has forced about 34,000 megawatts (MW) of generation off the system, ERCOT said on Monday, or 40% of roughly 82,000 MW of expected capacity.
Around 3.2 million customers were still without power in Texas, according to local power companies.
“There isn’t a massive impact to the futures curve which tells me that this event is short lived and of course highly dependent on the current weather pattern,” said Robert DiDona of Energy Ventures Analysis.
Temperatures are expected to rise after mid-week which should help the market balances normalize, he added.
Reporting by Swati Verma in Bengaluru; Editing by Christian Schmollinger