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Power Prices Hit $9,000/MWh as Texas Grid Declares First Supply Emergency Since 2014

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The Electric Reliability Council of Texas (ERCOT) issued its first emergency alert since January 2014, after record demand driven by a summer heat wave last week pushed electricity prices above $9,000 per megawatt-hour and reduced the sprawling state’s electricity reserves from at least 3,000 to less than 2,300 MW.

The Level One alert, the lowest on ERCOT’s three-point scale, meant reserves had fallen below 2,300 MW and weren’t expected to recover within 30 minutes, KXAN news reports [1]. That was the trigger for grid operators to “call on all available power supplies, including power from other grids, if available,” and to ask customers to conserve electricity rather than cranking up the AC, needlessly using heavy appliances, or running pool pumps during the day when they could be scheduled for off-peak times.

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“ERCOT officials had forecast a tight supply-demand balance heading into the summer, and in March said there was a growing chance it would need to utilize emergency alerts during times of high demand,” Utility Dive reports. Last Monday between 4:00 and 5:00 PM, the grid hit an all-time peak demand record of 74,531 MW, made all the more acute by a delay in bringing 1,700 MW of new natural gas capacity online.

“The ERCOT market needs a tremendous amount of investment to just simply maintain the low reserve margin it currently has,” NRG CEO Mauricio Gutierrez told Utility Dive. With the state expecting electricity demand to grow by 3% per year, KXAN says, “ERCOT is adding more power sources, particularly wind and solar.”

“Heading into summer, ERCOT said the planning reserve margin was 8.6%, but expected it to rise in 2020 and 2021 as new wind and solar projects in the interconnection queue come online,” Utility Dive adds.

At week’s end, E.ON announced a new 440-MW onshore wind farm in Texas’ Willacy, Cameron, and Hidalgo counties, backed by a 12-year power purchase agreement with Austin Energy. The Institute for Energy Economics and Financial Analysis (IEEFA) says [3] it’s the biggest single-phase project the German electric utility has ever undertaken. E.ON has another 370 MW of wind capacity coming online in Texas by the end of this year.

“We’re thrilled to partner with another renewable energy leader in Texas in Austin Energy, especially with one of our main U.S. offices based in the city,” said Silvis Ortin, E.ON’s chief operating officer for North America. “E.ON and Austin Energy both have a long track record of investing in renewables in Texas, and we look forward to that continued growth in the state.”