ERCOT spot power spikes amid heat advisories, conservation alerts

Power prices in the Electric Reliability Council of Texas saw rises across the aboard as temperatures across Texas were forecast to trend in the 90s Fahrenheit, prompting the US National Weather Service to issue heat advisories for June 14.

Real-time locational marginal prices across major ERCOT zones topped $1,000/MWh around 1:30 pm CT, and reached almost $2,000/MWh around 2:15 pm CT, the current systemwide cap. North Hub real-time LMP traded around $1,997/MWh. Real-time prices fell below $1,000/MWh around 3 pm CT and had fallen below $200/MWh as of 4:30 pm CT.

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ERCOT issued a Conservation Alert in response to many forced generation outages along with "potential record electric use" for June, asking the market to limit its electric use through June 18.

Generation outages

ERCOT spokeswoman Leslie Sopko said during a media call that as of 2:30 pm CT, the total capacity offline in forced outage was 12,178 MW offline, of which 9,066 MW was for thermal resources, while the remainder was for renewable resources. The total offline is three to four times what would typically be on forced outage during summer peak hours.

During that call, Warren Lasher, ERCOT senior director of system planning, said, "it's unclear why we are seeing so many unplanned outages right now." Less than 500 MW of the generation on outage is out for long-term maintenance issues, he said.

Some of the lost capacity appears related to derating — meaning generation is producing less than its nameplate capacity due to weather, mechanical, or fuel issues — but Lasher said he had heard of no problems with fuel delivery associated with this event.

As of 2:30 pm CT, wind and solar output was about 3,395 MW and 5,370 MW, respectively, Sopko said, and Lasher said these numbers were less than expected.

"At this time, it appears unlikely we will have to enter an Energy Emergency Alert," Lasher said. "We currently are seeing some flattening of customer demand across the peak hours."

North Hub day-ahead on-peak for June 15 delivery saw a triple-digit rise on the Intercontinental Exchange from its previous settlement, up about $394.50/MWh on the day to price at $462.50/MWh amid Dallas high-temperature forecasts of 97 F. The North Hub real-time on-peak contract followed suit, rising $342.50 to price around $410/MWh.

North Hub real-time on-peak balance of the week strip for June 16-18 also saw spikes, rising from its previous settlement of $61/MWh to trade around $218/MWh; the real-time off-peak weekend contract for June 19 and June 20 delivery jumped alongside the other contracts to price around $101.75/MWh.

Fundamentals trend bullish

Peakload demand was forecast to reach 74.37 GW on June 14 and 72.64 GW on June 15. If June 14 forecast is reached, this would be the highest level recorded in June. The current system-wide June record was set on June 27, 2018, at 69.123 GW, according to ERCOT data.

Demand was forecast to ease later in the week but expected to stay above 70 GW, according to ERCOT data.

So far in June, peakload averaged about 2% lower year on year at 59.66 GW, compared with 60.64 GW, according to S&P Global Platts Analytics data.

Wind generation also played a notable role in helping to push prices up, with average wind generation for June 15 predicted to tumble 28.8% to 3.5 GWh from about 4.9 GWh forecast for April 14. Despite the lower wind forecast, "wind output is expected to increase as the week goes on," according to ERCOT.

ERCOT summer forwards rise double digits

Forwards also rallied on ICE, with ERCOT North Hub July-August on-peak jumping more than $40 on the day to trade at $133/MWh. July and August contracts rose similarly to price at $125/MWh and $144/MWh, respectively.

In comparison, July-August averaged $75/MWh over the first nine trading sessions in June, about 18% lower from where it averaged in June 2020. The July contract traded about 10% lower year on year, averaging about $63.47/MWh, while August averaged about 23% lower at around $86.81/MWh.

ERCOT North Hub July-August 2022 on-peak traded just slightly below $100/MWh, up from the previous settlement of $76/MWh.

Natural gas prices, demand rise

Natural gas prices trended higher across the board in June 14 trading, with the Houston Ship Channel up 8 cents on the day at $3.27/MMBtu and Katy rising 10 cents to $3.30/MMBtu for next-day flow.

Month-to-date, both locations nearly doubled year on year at $2.99/MMBtu for the ship channel and $3.01/MMBtu for Katy, up from an average of $1.56/MMBtu for both hubs.

Total gas demand in the region stood around 40.79 Bcf June 14, about 3% above the month-to-date average and almost 19% above the June 2020 average, according to Platts Analytics data.