This week’s price spikes also underscore how dependent the region’s power grid has become on wind farms, which now make up about a quarter of the generation capacity in Texas. Lackluster breezes contributed to the higher prices, said Flannan Hehir, a power analyst at energy data provider Genscape.

“We are seeing the coal fleet retirement hasn’t been replaced with a lot of large gas plants,” said Campbell Faulkner, chief data analyst for commodities broker OTC Global Holdings. “We are changing the generation mix and that is what this is caused by.”

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I cranked up my thermostat... and it actually feels better in the house.  jh

I have SWEPCO (AEP)  and my wind generated electricity is just fine.  And cheap.  :-)

Summer price spikes are a feature of Texas' power market, not a bug

Aug 15, 2019

Demand for air conditioning across Texas helped drive wholesale electricity prices to the market cap of $9,000/MWh earlier this week, testing both the grid's capacity and the public's response to price spikes under the state's wholesale electricity market.

The big picture: ERCOT, the grid operator for most of Texas, operates an “energy-only” market that pays power plants only when they produce energy, and not merely for being available to do so. Many ERCOT plants thus rely on high-priced scarcity events to stay profitable in the otherwise low-cost grid, where prices are kept down by cheap natural gas prices and, to a lesser extent, renewables.

How it works: ERCOT boosts the wholesale market price when reserves are low, sending a market message that capacity is valuable. But this process has been criticized for not providing enough scarcity pricing to drive new investment across the electricity system.

  • The Public Utilities Commission of Texas responded this summer by accelerating the rate of price increases during high demand. Undesirable as they may appear, these high seasonal prices are a crucial part of how energy-only electricity markets work.

Flashback: ERCOT has seen this situation before. For the past two summers, its grid has had a lower reserve margin (power plant capacity beyond projected peak demand) than is considered economically optimal (8.6% this year vs. 10.25% optimal).

Where it stands: The grid has so far survived summer with no real damage, and the weather forecast promises near-term relief.

  • Some emergency response services were deployed, but there was still plenty of room in the system to maneuver.
  • Demand response has played an increasingly important role in the market: When prices spiked, demand dropped, helping the system keep lights on and air conditioners humming.

What they're saying: Some groups have tried to attribute higher prices to changes in Texas' electricity mix — including greater reliance on wind power, which this year could surpass coal in the #2 energy generation spot, behind natural gas.

  • Yes, but: Low natural gas prices have a bigger effect than renewables. And over the course of the year, a few high-priced days provide needed revenues in an otherwise efficient market.

The bottom line: Texas' energy-only market is still a relatively new concept. Some refinements may be needed, but the recent high electricity prices are a feature of the system, not a bug.

Wind power prices now lower than the cost of natural gas

In the US, it's cheaper to build and operate wind farms than buy fossil fuels.

John Timmer - 8/17/2019, 7:45 AM

Skip:  I'm just curious about your "wind power" service.  SWEPCO owns a partial interest in the lignite fired power plant in DeSoto Parish.  Are you able to specify "wind only" with SWEPCO?

Not claiming "wind only".  SWEPCO not only publicizes that they source portion of their electricity from wind but has attempted to add more.  The company wanted to invest in the Oklahoma wind farm, Wind Catcher, but the O&G lobby effectively blocked the project from approval by Texas regulators after it was approved by the other participating states. SWEPCO promotes adding additional wind capacity to its generating mix and makes a strong case for the low cost.

I want to say something snarky, but its too early to tell the cause of this:

dbob, I'm sure you will update us when the cause is known.  Maybe today?

Still investigating.  And most likely wasn't wind, solar, or other generation, but appears to be a problem in a major substation near the Eastman facility.  But they are saying that Eastman was not the cause.  


Initial reports show the first high-voltage power line came into contact with vegetation that had grown into it, causing a fault on the electric system around 4 p.m. Sunday. Heat and high customer load caused a second high-voltage power line to sag into vegetation growing below it, resulting in a second fault around 4:15 p.m. SWEPCO implemented an emergency procedure of controlled outages to avoid further overloading of the system. The total outages peaked at approximately 85,000 customers around 7 p.m.

SWEPCO just finished major tree trimming in my block.  This follows an unusually prolonged outage a couple of weeks back that lasted over 36 hours from line contact with a tree limb.  But, "high customer load" causes lines to sag?  Really?  Who knew?  Thanks, dbob.


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