Extreme wind, cold, swings Texas power prices from negative to almost triple 2020-24 averages

Extremely windy conditions pushed real-time locational marginal prices in the Electric Reliability Council of Texas deep into negative territory Jan. 5, but extreme cold boosted real-time prices Jan. 6, and continued sub-freezing low temperatures across much of the state kept on-peak LMPs well above 2019-24 averages Jan. 6-10.

Extreme cold also had an impact elsewhere across the South, boosting expected loads, bilateral power and natural gas indexes.

ERCOT has reported its wind fleet produced almost 537.7 GWh of electricity on Jan. 5, more than double the 2019-2024 average of 223.5/GWh for that date, according to US Energy Information Administration data collected by S&P Global Commodity Insights.

Systemwide hub real-time around-the-clock prices spent 17 hours in negative territory on Jan. 5 and averaged minus $10.98/MWh for the day, after spending 11.5 hours in negative territory on Jan. 4, averaging just $2.08/MWh for the day, ERCOT data shows.

Weather watch issued

But after the extreme wind, extreme cold moved into the ERCOT footprint, plunging CustomWeather's reported systemwide population-weighted low Jan. 6 to 23.1 degrees Fahrenheit, compared with the long-term average of 39.1 F. The National Weather Service forecast lows at Austin, near the center of Texas, at or below freezing through Jan. 9 and just 33 F on Jan. 10.

ERCOT on Jan. 5 issued a weather watch for Jan. 6-10 "due to forecast cold weather across the ERCOT region, higher electrical demand, and the potential for lower reserves."

"Grid conditions are expected to be normal during an ERCOT Weather Watch," ERCOT said. "ERCOT is monitoring conditions closely and will deploy all available tools to manage the grid, continuing a reliability-first approach to operations."

Such low temperatures have boosted ERCOT's peakloads well above systemwide averages, which the independent system operator forecast to approach 73.5 GW on Jan. 7, up more than 51% from the 2020-24 average of 48.5 GW for that date.

Commodity Insights has estimated a big surge in power burn amid the cold weather. The Jan. 5 power burn topped 5.1 Bcf, up more than 51% from the 2020-24 average of less than 3.4 Bcf for that date. The jump is estimated to be even bigger for Jan. 6, almost 6.3 Bcf, up almost 80% from the 2020-24 average of less than 3.5 Bcf for that date.

Energy prices have followed suit Jan. 6-10 for power and Jan. 6-7 for natural gas.

ERCOT reported that its North Hub day-ahead on-peak LMPs averaged $44.50/MWh for Jan. 6 delivery, up from $9.46 for Jan. 5. On Jan. 6, trading on the Intercontinental Exchange for delivery Jan. 7 had ERCOT North Hub on-peak at $53.25/MWh and, for Jan. 8-10, at $82.75/MWh. ERCOT North day-ahead on-peak LMPs averaged $24.25/MWh Jan. 6-10 for the years 2020-24.

Platts assessed Houston Ship Channel gas at $2.99/MMBtu for delivery Jan. 4-6, but the price jumped to $3.82/MMBtu for Jan. 7 delivery. Houston Ship Channel spot gas averaged about $2.66/MMBtu Jan. 6-10 for the years 2020-24. Platts is part of Commodity Insights.

Midcontinent markets

Meanwhile, neighboring Southwest Power Pool and Midcontinent Independent System Operator both remain under weather-related advisories.

SPP's resource advisory is in effect through noon CT Jan. 8, and MISO's cold weather alert for its service territory and conservative operations declaration for its South region will both last through 11:59 pm ET Jan. 9. MISO on Jan. 5 also issued a severe weather alert for its Central and North regions, ending 10 am Jan. 6, because of expected weather that included "ice storm, freezing rain, heavy snow [and] some blizzard conditions," according to MISO's release.

MISO Indiana Hub on-peak day-ahead power for Jan. 7 delivery priced on the Intercontinental Exchange near $57.25/MWh, up about $5 from the previous settlement, while the balance-of-the-week contract for Jan. 8-10 delivery priced near $70.50/MWh, down from the previous settlement near $75.25/MWh. In contrast, the SPP South Hub on-peak day-ahead contract for Jan. 7 delivery was down about $6.25 to price near $60/MWh.

SPP forecast peakload to average about 42.5 GW Jan. 6-8, up about 6% from 40.1 GW Jan. 5. Population-weighted temperatures for the SPP footprint were forecast to average 15.8 F Jan. 6-8, CustomerWeather data shows, compared with an average of 33.1 F so far this month.

MISO forecast peakload to average 94.2 GW Jan. 6-9, around 10% higher than 85.5 GW Jan. 5. Population-weighted temperatures for the MISO footprint were forecast to average 16.7 F Jan. 6-9, CustomerWeather data shows, compared with an average of 24.1 F so far this month.

Southeast markets

Elsewhere in the South, cold weather boosted power and gas demand and prices.

CustomWeather forecast low temperatures in Atlanta, which lies near the center of the North American Electric Reliability Corporation's SERC region, to remain below freezing Jan. 6-10, compared with a long-term average of 35 F. SERC is formerly known as the Southeast Electric Reliability Council.

CustomWeather also forecast low temperatures in Tallahassee in the Florida Reliability Coordinating Council footprint to range from the 20s to mid-30s F Jan. 6-10, compared with a long-term average of 38 F.

Commodity Insights forecast SERC peakload to jump 13.3% from 106.7 GW Jan. 6 to 120.8 GW Jan. 7, then another 4.5% to 126.3 GW Jan. 8.

Into Southern day-ahead on-peak hub saw ICE bid activity at $50/MWh for Jan. 7 delivery, up about $2 from its previous Platts price of $48/MWh. Similar trends were seen for Into GTC day-ahead on-peak, which had bid activity at $52/MWh, up $1 from its day before Platts price.

Bigger gains were seen in the off-peak contracts, with Into SOCO and Into GTC day-ahead contracts up $21 and $18 respectively from their prior Platts assessments to be bid at $64/MWh for Jan. 7 delivery.

Natural gas in the Southeast strengthened, with the Transco Zone 5 South hub up $5.28 to trade in the double digits at $10.90/MMBtu for Jan. 7 flows. For Jan. 6-7 in the years 2020-24, Transco Zone 5 South averaged $4.988/MMBtu, but those numbers are skewed by extreme circumstances in 2022, when the price averaged more than $12.90/MMBtu. Excluding those dates, that location would average less than $3/MMBtu.

Platts on Jan. 6 assessed Henry Hub spot at $4.085/MMBtu for Jan. 7 delivery, up from $3.465/MMBtu for Jan. 4-6 delivery. For Jan. 6-7 in the years 2020-24, Henry Hub spot averaged barely $2.99.