Hotter temperatures in Texas are expected to lead to new all-time highs for energy use in May, sending electricity prices higher.
The state’s grid operator, the Electric Reliability Council of Texas (ERCOT), expects demand to jump from 57,486 MW on Friday to 71,893 MW on Monday, 72,725 MW on Tuesday, and 74,346 MW on May 24, according to Reuters.
Next week could see demand topple the current May record of 71,645MW set in 2022, while still lagging the all-time high of 85,508MW set on 10 August 2023.
That’s because weather forecasts for major cities like Houston and Dallas have set temperatures in the high 90s, above seasonal norms, which means more Texans will be running their air conditioners.
Expectations of a recent surge in demand have boosted electricity prices in the spot market, with next-day prices at ERCOT’s North Hub rising to $120 per MWh on Friday from $40 on Thursday, according to LSEG pricing data cited by LSEG. Reuters.
For about one hour late Friday, the previous day’s prices on ERCOT’s website jumped to $688 per megawatt hour, representing an increase of more than 1,600% compared to the previous day.
Texas’s energy market was deregulated and it was on its own power grid. But the actual price consumers pay depends on the type of contract they have with their service provider. Since February 2021, energy providers have been prohibited from passing on full wholesale electricity prices to their residential customers.
Extreme heat waves during recent summers have shattered energy demand records, leading to sharp and sudden fluctuations in spot prices. In September, energy prices in Texas rose as much as 20,000%.
Meanwhile, Texas has seen an influx of residents since the pandemic as people fled states like California and New York, where the cost of living is higher, meaning more customers are connected to the grid.
Texas has also become a hotbed for Bitcoin mining, increasing demand for electricity, as the state’s deregulated energy market and abundance of cheap natural gas become attractive to the energy-intensive sector. The proliferation of data centers and the rise of artificial intelligence technology have also increased demand.