Summer’s sizzling heat spurs surge in Texas September forwards
Siva Josyula, energy and utilities expert at PA Consulting, is quoted in S&P Global’s Megawatt Daily discussing September price hikes in Texas’ ERCOT power market.
The article notes that weeks of triple-digit high temperatures across the Electric Reliability Council of Texas footprint with no end in sight, regularly setting peakload records, may have prompted power traders to hedge the risk of September price spikes, as power forwards have strengthened significantly, even as natural gas forwards have moved little.
CustomWeather reports that ERCOT had population-weighted average high temperatures at or above 100 degrees Fahrenheit for 22 of the 71 days from June 1 through Aug. 10. In CustomWeather’s records for this statistic since 2015, no other summer comes close, with 2022 having the second-largest total at 15.
CustomWeather’s forecast for Dallas, the state’s northernmost major metro area, shows daily highs of 103 F or higher through Aug. 19. CustomWeather’s latest forecast for September indicates temperatures likely to remain 1-3 F above normal for the state.
Tumbling peakload records
ERCOT first exceeded its 80-GW peakload record, set July 20, 2022, on June 26 with 80.1 GW. Since then, new records have been set nine more times, most recently on Aug. 9, which as of this writing was forecast to be broken Aug. 10.
Despite the extreme circumstances, ERCOT has avoided having to request conservation or declare an energy emergency alert.
However, strong renewable output and substantially weaker natural gas prices in comparison with 2022 have generally kept day-ahead on-peak locational marginal prices at reasonable levels. For example, July’s prices averaging about $73/MWh across ERCOT’s four major hubs represent a 25% drop from June averages of around $97.50/MWh and about half of July 2022 averages around $154/MWh, S&P Global data shows.
Meanwhile, spot natural gas at the Houston Ship Channel averaged $2.438/MMBtu in July, up 16.8% from $2.087/MMBtu in June, but down almost 64% from $6.761/MMBtu July 2022.
Siva said: “Forced outage rates for thermal generation, particularly steam turbine generators are a concern in late summer,” with systems being worked so hard. "While generation owners optimize to operate to capture premium summer period prices, some of the older steam turbine units are not set up for cycling, which puts increased wear and tear on turbines and auxiliary equipment at these plants.”
ERCOT has relatively little ability to import power from adjacent systems and almost no hydroelectric capacity.