Texas power prices briefly soar to $9,000/MWh as heat wave bakes state

(Reuters) - Spot power prices in Texas for Wednesday almost tripled after electricity demand hit record highs earlier this week and real-time prices briefly soared to $9,000 per megawatt hour as consumers cranked up air conditioners to escape a brutal heat wave.

High temperatures in Houston, the state’s biggest city, hit 100 degrees Fahrenheit (38 Celsius) for the past seven days but were expected to reach 99 F on Wednesday as thunderstorms bring a little relief, according to AccuWeather forecasts.

Still, the U.S. National Weather Service issued heat advisories for the Southeast from Texas to Georgia and the combination of heat and humidity will make it feel more like 111 F in Houston this afternoon.

The weather is expected to return to normal levels on Thursday with a high in Houston of around 96 F.

With less heat expected, the Electric Reliability Council of Texas (ERCOT), grid operator for much of the state, projected demand would only reach around 71,800 megawatts (MW) Wednesday.

That compares with 74,181 MW on Tuesday and a record high 74,531 MW on Monday. One megawatt can power about 1,000 U.S. homes on average, but as few as 200 during periods of peak demand.

Despite lower demand projected for Wednesday, next-day power prices at the ERCOT North hub soared from $114.25 per megawatt hour (MWh) for Tuesday to $315.00 for Wednesday, their highest since July 2018.

Traders said that was because real-time prices soared to ERCOT’s $9,000/MWh offer cap for several 15-minute intervals on Tuesday. Before this week, ERCOT said prices only hit that cap twice.

The spot price is the price during 16 peak hours the following day, while real-time is the current price, regularly updated in 15-minute intervals.

Demand on Tuesday was lower than Monday in part because the grid operator urged consumers to conserve energy and issued an energy emergency alert for the first time since January 2014.

ERCOT has more than 78,000 MW of generating capacity to meet demand this summer, but warned low reserves could force it to issue alerts.

ERCOT said Tuesday’s alert allowed it to call on all available power supplies, including power from other grids.

ERCOT has said its planning reserve margin for this summer was a historically low 7.4% because several generators have retired even as demand rises.

Generators are retiring because power prices have declined in recent years as growing supplies of cheap natural gas from shale formations, like the Permian in West Texas, flood the market. Gas produces a little less than half the electricity in Texas.

Reporting by Scott DiSavino; Editing by Bernadette Baum