An extreme heat that propelled electricity demand in Texas to an all-time high and sent power prices surging to a record on Monday afternoon is threatening to do it all over again Tuesday.
Electricity prices surged 36,000% on Monday afternoon to average as much as $6,537.45 a megawatt-hour across the Texas power grid, a record in data compiled by Bloomberg. Prices for some power contracts traded on the Intercontinental Exchange also spiked, with one hub in Texas jumping to $675 a megawatt-hour, David Hoy, a trader at Dynasty Power, said in an interview.
“This is blowing up,” he said. “That should be the highest price of the year so far.”
The unprecedented rally highlights how volatile the Texas power market has become as coal-fired power plants, which have seen their profits squeezed by cheap natural gas and renewable energy resources, continue to shutter. Texas’s grid operator has been warning for months that plant retirements and increasing electricity demand has left it with slim supply margins.
Temperatures were expected to hit 101 degrees Fahrenheit in Dallas on Monday (38 Celsius) and were forecast to climb even higher on Tuesday afternoon before cooling off. The combination of heat and humidity will make temperatures feel closer to 107 in Dallas and even hotter in Houston. The National Weather Service has issued a heat advisory until 8 p.m. local time Tuesday.
Electricity demand hit an all-time high of 74,531 megawatts as people blasted their air conditioners on Monday afternoon, according to grid operator Electric Reliability Council of Texas.
“There will be little to no change in the overall weather pattern through early week, so dry, hot and generally sunny weather will prevail,” AccuWeather meteorologist Isaac Longley said in a report.
Monday’s price spike also underscores 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 over the past several days have contributed to higher prices, said Flannan Hehir, a power market analyst at Genscape.
Wind power generation in the region slid by almost 50% Monday, grid data compiled by Bloomberg show.