ERCOT soars to new demand peaks, but avoids prolonged high prices
Electricity demand in Texas is growing rapidly. With a new peak demand record of 85,559 MW being set on Tuesday 20th August, the expectation was for the familiar high price/ low reserve events – common in 2023 – to rear their head. After all, this new peak represents a whopping increase from just three years ago – with this figure being over 10,000 MW (or 12%) higher than in 20211.
ERCOT managed to weather the ‘storm’, with temperatures rising to over 110°F (43°C). While energy prices did top out at or near the $5,000/MWh cap from 7.30 pm – 8.30 pm on Tuesday, reserves remained firm, never dipping below 4,000MW – well above the emergency conditions required to deploy reserve services.
So, what makes the difference between 2023’s extreme price events and 2024’s somewhat muted peaks? Two key factors were at play during last week’s heat wave. On the day of the event, at the ERCOT board of directors meeting, CEO Pablo Vegas attributed the lack of scarcity to less severe heat and our evolving generation resource mix.
- The lack of a ‘Heat Dome’ – In 2023, Texas experienced a prolonged high-pressure system or ‘Heat Dome’ which stalled over the state for weeks bringing multiple days of 100+ degree heat. This prolonged event caused reserves to dwindle leading to higher pricing for energy and ancillary services.
- The growth in Intermittent Renewable Sources – The longer term, much more promising, the factor is that ERCOT’s demand growth is being met with an enormous expansion of its renewable energy resources, especially solar energy. This trend, ongoing for some years now, has rapidly taken off since 2021, with solar output share increasing from 5.6% in 2022 to 7.3% in 20232. In the past 12 months alone, 8,000MW of solar capacity has been added to the grid, now peaking at 26% output share2. Wind is also achieving all-time highs, with 27GW output in June 2024, representing over 40% of the generation mix at the time.
These figures show just how fast renewable energy is being deployed in ERCOT, giving the system operators the confidence during these peak demand times.
However, both these factors rely on an element of chance, as well as nature. The ‘heat dome’ could have easily come in, leaving Texas in a prolonged spell of high temperatures, matched with low wind. Solar, as we know, is effective for daytime hours, but the well-documented duck curve highlights its short falls. Storage, as highlighted above, becomes less effective the longer a period goes on for, as recharge hours become expensive and arbitrage opportunities fall away.
These potential downsides demonstrate the need for a diverse reserve provider pool. Load Resources, often comprising industrial and commercial end users, can consistently provide load-shedding capability during peak hours as a result of their operations. This can be especially effective during evening hours when solar generation is falling, yet demand remains high.
In our next blog, we will explore the potential for Load Resources providing Reserve Services, and the implication of rising demand and renewable energy generation for these services.
Author info: VIOTAS Texas
VIOTAS Texas is a demand response provider now offering services in the ERCOT market, committed to helping businesses achieve their sustainability goals while saving on energy costs and generating extra revenue. By leveraging innovative smart grid technologies and strategies, we offer a comprehensive approach to virtual power plants (VPPs) that benefit both the environment and the bottom line.
