(August 7, 2020)
Texas began this summer with a larger electricity reserve than last year. At 10.6 percent, it was almost 2 percentage points higher than in 2019, when a combination of high energy demand and lower than expected output from wind generators caused energy prices to spike. However, observers are worried that an unusually large part of the reserve is made up of facilities that were only due to come online in late July.
Research firm S&P Global Platts estimated in June that 2.2 percent of the Electric Reliability Council of Texas’ (ERCOT) electricity reserve was yet to come online. This compared with less than 1 percent of the reserve at the same stage during the past two summers. Analysts warn that delays on the delivery of solar panels caused by the coronavirus pandemic, as well as restrictions on work, could push back the completion of some facilities.
Any delays could have an impact on energy prices, especially because the Public Utilities Commission lifted the energy price cap of $9,000. “There is a very real possibility you will see price spikes as a result,” comments Manan Ahuja, manager for North American power analytics at S&P Global Platts. “But it will likely not reach the level that we saw in summer 2019 because we had a very hot August and tighter reserve margins.”
In August 2019, average energy prices were $162 per megawatt hour, substantially higher than the $38 per megawatt hour in August 2018. On two occasions, August 12 and 14, these prices rose briefly to the maximum of $9,000 per megawatt hour. Most residential customers are locked in to lower prices on their energy contracts, meaning they did not have to pay such high prices. But the price spikes did have an impact on the rates offered on new electricity contracts in Texas, and the same could happen if demand increases sharply. Enter your ZIP above to make sure your rates are in line with what’s currently on the market.