August 1, 2018 Read More →

Little summer impact on Texas grid after closure of three coal plants

Bloomberg News:

Texas’ power grid had all the right elements to create an electricity price surge in mid-July — record usage and temperatures and a supply curtailment from the shutdown of three major coal plants. But aside from a few hours here and there, not much happened. And that may prove costly for traders sitting on bets that prices will soar in August, when demand typically peaks.

“It was all a bit hyped up,” said Will Nelson, an analyst at Bloomberg NEF.

One thing mitigating the price has been the amount of wind generation this summer. The grid operator — the Electric Reliability Council of Texas Inc. — used a conservative estimate that has been literally blown away.

Back in May, the forward contract for August delivery soared to more than $239 a megawatt-hour, or almost eight times more than the daily average in day-ahead markets for the past year. That’s an average for 24 hours of power. Utilities could lock in a portion of supply at that monthly price, or wait until August arrives and buy the supplies in day-ahead and hour-ahead markets.

Short-duration markets — day-ahead and hour-ahead trading — don’t look any stronger so far this year than they have for the past six years, even though demand is higher and coal-fueled capacity is lower.

Vistra Energy Corp., the biggest supplier in Texas, was forecast to get an extra $750 million in revenue for power supplies on the hottest of the dog days of summer, based on the futures rally. Shortages were going to bust family budgets with soaring utility bills and cause some oil producers to ease off until the heat waves passed. Now, halfway into Texas’ blistering summer, the grid’s doing fine and lofty August futures prices have retreated back to pre-shutdown days.

So what happened? Ercot went into summer estimating that wind power would average 4.1 gigawatts a day over the cooling season, yet it’s reached 6.6 gigawatts for July, through Friday.

More: Most Exciting U.S. Power Market This Year Looks More Like a Bust

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