US POWER TRACKER: Harsh weather, costly natural gas boost Texas power prices

Higher Houston Ship Channel natural gas prices and heavier loads driven by harsher weather pushed Electric Reliability Council of Texas wholesale power prices higher in December on the month and year.

February power forwards followed gas forwards lower on the month but was substantially higher on the year.

And while combined wind and solar output in December was down on the month and year, the prices they were able to capture when they did produce were up significantly.

Average day-ahead on-peak locational marginal prices—ranging from the mid-$60s/MWh to low $70s/MWh, were up between 33.7% and 56.3% across ERCOT's four main generation hubs compared with November, and up by 99.4% and 149.3% in comparison with December 2021 averages, according to S&P Global Commodity Insights data.

At the Houston Ship Channel, spot gas averaged $4.42/MMBtu in December, up 8.7% from November's $4.065/MMBtu and up 25.8% from December 2021's $3.514/MMBtu.

However, at the West Texas Waha pricing point, gas prices were down both on the month and year, averaging $2.869/MMBtu in December, down 24.1% from November's $3.782/MMBtu and down 12.3% from $3.272/MMBtu in December 2021.

Combined population-weighted average cooling and heating degree days in December were up 20.7% from November and up 73.1% from December 2021, according to CustomWeather data. Population-weighted temperatures averaged 51.7 degrees Fahrenheit in December, down 7% from 55.6 F in November and down almost 16% from 61.5 F in December 2021.

Forward markets

S&P Global's M2MS forward curves showed ERCOT North Hub February on-peak power averaging almost $83.80/MWh in December, down from $89.62/MWh in November but up almost 47% from the $57.03/MWh that February 2022 power averaged in December 2021.

Houston Ship Channel February gas averaged $5.676/MMBtu in December, down 17.6% from $6.885/MMBtu in November, but up more than 40% from the $4.052/MMBtu that February 2022 gas averaged in December 2021, before Russia's invasion of Ukraine disrupted global energy markets.

Waha February gas averaged $5.444/MMBtu in December, down 5.6% from $5.766/MMBtu in November but up 39.6% from the $3.899/MMBtu that February 2022 gas averaged in December 2021.

Given S&P Global's forecast of gas-fired generation averaging 316.6 GWh/day in February and heat rates similar to February 2022, the power burn is likely to fall to an average of 2.6 Bcf/d in February from December's 3.7 Bcf/d and 3.5 Bcf/d in February 2021.

The National Weather Service's forecast for January, February, and March weather, released Dec. 15, indicated enhanced chances—33% to 50% —for above-normal temperatures across all regions except the Panhandle and the Oklahoma state line, where only slight chances for above- or below-normal temperatures prevail.

Generation mix

Amid December's mixed spot gas market and with much harsher weather, the share of gas-fired generation surged to 43.5% in December from November's 38.8% and 33.5% in December 2021, an S&P Global analysis of ERCOT data shows.

ERCOT data shows its gas fleet averaged 474.4 GWh/d in December, up from November's 403.6 GWh/d and 325.8 GWh/d in December 2021. The gas fleet's power burn was similarly strong, averaging 3.7 Bcf/d in December, compared with November's 3.4 Bcf/d and 3.1 Bcf/d in December 2021.

In contrast with the strong performance of gas-fired generation, ERCOT's wind fleet share diminished to 25.4% in December from November's 28.9% and 31.8% in December 2021.

Coal-fired generation's share also declined to 16.2% in December from 17.7% in November and 18.6% in December 2021.

The ERCOT nuclear power fleet's share was 11.2% in December, up from 10.6% in November but down from 12.6% in December 2021.

Solar power's share was 3.5% in December, flat with December 2021 but down from 4.2% in November.

Renewable indexes

On-peak renewable capture price indexes at the ERCOT North Hub, the market's most liquid location, rose substantially on the month and year, but systemwide renewable penetration indexes were generally down.

Renewable capture price and penetration indexes reflected the price-taking nature of solar and wind resources in the ERCOT market. A renewable resource's capture price index is the price of electricity sold by a renewable resource at the time it is sold, which varies greatly in real-time.

The ERCOT North Hub average wind capture price index in December averaged $47.90/MWh, up 37.4% from November's $34.87/MWh and up 157.4% from the $18.61/MWh that prevailed during December 2021's relatively light weather-driven power demand. The ERCOT wind fleet's systemwide renewable penetration index, at 21.6%, was down from November's 23.7% and 25.2% in December 2021.

The ERCOT North Hub average solar capture price index in December averaged $44.14/MWh, up 7.4% from November's $41.11/MWh and up almost 49% from $29.66/MWh in December 2021. Solar's systemwide on-peak renewable penetration index, at 4.6% of total generation, was down from the 5.3% that prevailed in November but up from December 2021's 4.4%.