Monday, August 06, 2018

Did higher prices keep the power grid going during the recent heat wave?

By L.M. Sixel of The Houston Chronicle. The higher prices might have encouraged generators to increase their quantity supplied. If demand increases and prices don't rise, then we get shortages, which would be power outages in this case. Excerpts:
"ERCOT (Electric Reliability Council of Texas) said it expected extreme temperatures and took steps to ensure it had enough supply by restricting planned transmission outages during the summer months and conferred with pipeline companies to ensure that natural gas needed to generate electricity made it to power plants.

Generators also responded to the higher prices, which peaked at $2,172.70 per megawatt hour during the hottest days — compared to last year’s average of $28 per megawatt hour — cranking up power plants during the peak demand periods, said ERCOT spokeswoman Leslie Sopko. Consequently, with supplies sufficient to meet demand, ERCOT didn’t have to issue pleas to consumers and businesses to conserve power."

"Power use hit 72,192 megawatts on July 18, surpassing the previous 2016 record. The following day Texas set another all-time, system-wide peak demand record, topping out at 73,259 megawatts between 4 p.m. and 5 p.m. One megawatt can power about 200 homes during a hot summer day in Texas."

"One former power trader said it appears ERCOT encouraged generators to operate their plants at maximum capacity and sell the power on what’s known as the “day ahead market,” a financially-binding forward energy market where generators agree to sell their power at a contracted price on the following day."

"That caused day-ahead prices to rise, which in turn spurred generators to produce more electricity"

"the price per megawatt hour in the day ahead market hovered between $1,400 and $2,000 during the hottest afternoons last month, compared to typical prices of $100 to $200."

"The soaring wholesale prices in the day-ahead market will likely filter down to retail customers in the form of higher rates, as would spikes in spot market prices"
Retail electricity companies did ask customers to conserve to avoid the higher spot prices.
"Typically, retail companies buy futures contracts to secure electricity for their customers and set prices for their power plans. But when temperatures spike and demand soars, retail companies must often turn to the spot market to acquire additional supplies."

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