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."
3 comments:
This sounds a bit confusing. So, if the power plants are allowed to charge mega prices, then the plants will not go down from being overwhelmed? I would think they would go down on the account of not being able to meet demand. Ensuring natural gas makes it to the plants and day ahead pricing fixed the issue of over consumption? Please help me clear this up as it seem that higher prices kept the plant from being overwhelmed by consumers which does not seem logical.
I think it is a case of allowing the price to rise to where supply and demand intersect when there is a rightward shift in demand. Allowing a higher price lets the companies move up along their supply curve instead of getting a shortage as a result of a price ceiling
i like that explanation, the rightward shift in demand makes all the sense in the world. Price ceilings would prove to be a disaster in the heat of the summer in south Texas. One concerning part is the possibility of passing those outrageous prices per KwH down to the consumer. I guess someone has to pay for it though.
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