Texas grid avoids summer power outages with $1 billion in extra spending

  • Soaring natural gas prices have added to pressures on electricity prices
  • ERCOT broke demand records 11 times this summer
  • Line congestion issues weigh $2.1 billion on producer costs

Aug 25 (Reuters) – The Texas electric grid operator fueled record demand this summer by paying more to keep higher reserves and rewarding industrial consumers for reducing consumption, a combination that added more a billion dollars in electricity costs.

The Electric Reliability Council of Texas (ERCOT) set new demand records 11 times this summer and twice asked consumers to turn up their thermostats during a season when demand approached 80,000 megawatts (MW ). He had forecast peak summer demand earlier this year from 77,733 MW in January.

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Avoiding a blackout has become a priority after a February 2021 cold snap killed more than 200 people, left millions of Texas homes and businesses without heat or power, and drove up wholesale prices.

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The measures also reflect the political danger of another blackout. Gov. Greg Abbott, who appoints the public service commissioners, faces his toughest re-election challenge in years this fall.

The network operator, which oversees the supply of electricity to more than 26 million customers, has revised its approach of increasing the prices paid for electricity as demand approaches the limit of available reserves. This year, it added 50% to what it keeps as a safety margin, driving up costs.

The state’s Independent Market Monitor (IMM), which audits ERCOT’s operations, recently estimated that the higher level of security reserves cost $1 billion in the first seven months of 2022.

“ERCOT has brought generators online to reach reserves that the current market does not support or to provide electricity at times of higher demand when predicted renewable energy was not available,” said Michele Richmond, executive director of Texas Competitive Power Advocates, an association representing energy. companies.

“When these generators are needed for reliability and are called online through conservative operations, the higher fuel costs are ultimately paid for by consumers without retail electricity providers or large sophisticated consumers being able to cover the costs.”

A side effect of the higher safety margin is that the costs of running generators when not fully needed are reflected in service costs passed on to all suppliers. These ancillary service costs amounted to $350 million in the first five months of this year.

ERCOT defends the higher headroom needed to meet projected demand and says ancillary service charges are paid by companies using its management services, not consumers.

“ERCOT does not determine how and when adjustments are made to ratepayers,” ERCOT spokeswoman Trudi Webster said.

Grid costs this year have also increased the mismatch between where electricity in the state is plentiful and where it is most needed and expensive supplies. Earlier this year, Houston suppliers were paying $4,000 per megawatt hour, against negative prices at 241 km. Read more

Those congestion costs were $2.1 billion through July, compared to $2.1 billion for all of last year, the state’s IMM estimated.

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Growth in state renewable generation in areas lacking sufficient transmission capacity and rising gas prices paid by thermal power plans are largely responsible for rising congestion costs, a said Morris Greenberg, senior director, North America Energy Analytics, S&P Global Commodity Insights.

ERCOT relies primarily on higher cost natural gas for its power generation and soaring fuel prices, up more than 150% so far this year, have added to price pressures.

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Reporting by Swati Verma in Bangalore; edited by Gary McWilliams and Nick Zieminski

Our standards: The Thomson Reuters Trust Principles.

Edward N. Arrington