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Today in Energy

August 8, 2011

High temperatures drove record electricity demand and very high wholesale prices in Texas

graph of electricity demand and high temperatures in Texas August 1-5, 2011, as described in the article text
Source: U.S. Energy Information Administration based on ERCOT (demand) and NOAA (temperatures) data.
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Sustained 100°-plus daily high temperatures in Texas last week led to new electric power demand records three days in a row. ERCOT, the electric system operator for most of Texas, set demand records Monday, Tuesday, and Wednesday last week (August 1 - 3, 2011), exceeding the prior record set August 23, 2010 by 2,518 megawatts (MW) (3.8%). On Thursday (August 4, 2011), ERCOT did not break another all-time record, but probably only because they shed 1,500 MW of interruptible demand. To help lower demand, ERCOT also made a number of public appeals for conservation during the week.

A scarcity of generating capacity sent wholesale prices to record levels. Peak hourly day-ahead prices climbed higher each day reaching $2,500 per megawatt hour, more than 50 times the average daily on-peak wholesale prices in ERCOT for the first half of 2011, between 3:00 and 4:00 p.m. on Friday (August 5, 2011) (see chart below). Day-ahead prices are set on the previous day and reflect expected market conditions for the next day. Therefore, the high prices for Friday were set on Thursday when ERCOT had called a supply emergency and temperatures were expected to remain high on Friday.

graph of ERCOT day-ahead prices August 1-5, 2011, as described in the article text
Source: U.S. Energy Information Administration based on ERCOT data.
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Almost all wholesale electricity sold in ERCOT is sold in the day-ahead market. So almost all wholesale power sold between 3:00 and 4:00 p.m. on Friday was sold at a $2,500/MWh price. The exposure of retail customers to this price depends on whatever hedging arrangements retail suppliers may have in place.