(Reuters) - Spot power prices in Texas almost doubled for Wednesday on forecasts demand for electricity would hit record levels next week as consumers crank up their air conditioners to escape a heat wave baking much of the state.
High temperatures in Houston, the biggest city in the Lone Star State, were expected to near 100 degrees Fahrenheit (38 Celsius) every day through Aug. 13, according to AccuWeather meteorologists. The normal high in Houston at this time of year is 96 degrees.
The Electric Reliability Council of Texas (ERCOT), grid operator for much of the state, forecast that heat would push peak demand to more than 74,200 megawatts (MW) on Aug. 12, which would top the current all-time high of 73,473 MW set on July 19, 2018.
One megawatt can power about 1,000 U.S. homes on average, but much less during the peak summer cooling and winter heating seasons.
Next-day power prices at the ERCOT North hub soared to $209.25 per megawatt hour (MWh) for Wednesday from $115.50 for Tuesday. That was their highest since hitting $300/MWh on July 18, 2018, the day before demand set the current record.
ERCOT has said it expects to have about 78,154 MW of generating capacity to meet demand this summer, but warned there was an increased chance that low reserves would force it to issue more alerts urging customers to conserve energy than last year. [nL1N20S0PR]
When ERCOT declares an alert, it can take advantage of additional resources only available during scarcity conditions, including power imports from neighboring regions and demand response programs that pay consumers to curtail power use when needed.
ERCOT has said its planning reserve margin for this summer was a historically low 7.4% because several generators have retired even though demand is rising.
The reserve margin is the difference between total generation available and forecast peak demand, with the difference expressed as a percentage of peak demand.
Generators are retiring because power prices have dropped due to a decline in gas prices after years of record and growing production from shale formations, like the Permian in West Texas. Gas powers about half of the state’s electricity.
Lower power prices make it difficult for generators, like those operating old coal-fired plants, to make money selling electricity.
Ercot North prices have fallen to an average of $33.87/MWh over the past five years (2014-2018) compares with $41.37 during 2009-2013 and $59.19 during 2004-2008.
Reporting by Scott DiSavino; Editing by Bernadette Baum