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Texas doldrum: weather variability in ERCOT market prices

The Electricity Reliability Council of Texas (ERCOT) covers 90% of the electric load in Texas, including key demand areas in Houston and Dallas, and high wind and solar resource areas in the West and Panhandle regions.

The weather has caused ERCOT market prices to vary considerably in recent years. There is a strong correlation between temperature and power demand due to cooling requirements, and regional power prices are also directly impacted by expected wind and solar output due to the rapid expansion of these resources.

The summers of 2019 and 2020 provide two contrasting case studies. In 2019, a heat wave and lower than average wind output led to record prices, but in 2020, cooler weather and higher than average wind and solar output led to depressed prices.

In a webinar on 24 September, Stuart Murray and Tom Williams discuss how recent weather-driven variability and price risk is likely to remain a key feature in Texas’ largest electricity market, including:

  • a look back at the Texan summers of 2019 and 2020 to unravel the key climatic and structural drivers of prices;
  • a look forward to 2021-2024 – what is ‘expected’ and how the evolving climate could affect those expectations;
  • a consideration of the long term – whether the price volatility will continue, or whether technological developments will reduce variability; and
  • lessons to learn from other markets that have dealt with extreme weather exposure for over 100 years.

The slide pack and recording are available on External link, opens in new window. or in our Insights - exclusive to AIM report clients.

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