Texas gas demand from power hits 11-year low on high gas prices, wind generation

Gas-fired power burn in the Lone Star State has averaged its lowest level in more than a decade this spring, which is a trend that could continue as high prices and record wind speeds keep downward pressure on the fuel.

From March 1 to date, gas-fired power burn in Texas has averaged just under 3 Bcf/d to trend at its lowest for the six-week period since 2011, data from S&P Global Commodity Insights shows.

Temperature data, which often explains variation in power burn, doesn't appear to account for the trend. Over the past six weeks, population-weighted temperatures across Texas have averaged just over 62 degrees Fahrenheit, which compares with an average 63.3 F last spring and 64.6 F in 2020. In both years, power burn was actually higher, despite fewer heating-degree days. Over the past 11 years, colder and even roughly similar population-weighted temperatures in Texas have all been associated with higher gas demand from power generation across the state.

With annual temperatures fluctuations unable to offer a simple, straight-forward explanation for this year's record low power burn, high gas prices and rising wind speeds emerge as likely culprits.

Beginning last September, as spot gas prices in Texas tested new highs in the $5/MMBtu area, generators across the state began switching away from the fuel. After losing its market dominance in ERCOT late last year, gas faced stiff competition from coal throughout much of this past winter.

Since early February, coal has emerged as ERCOT's leading fuel – more recently challenged only by wind.

Over the past six weeks, blustery conditions across ERCOT have propelled wind generation to record highs with the fuel capturing daily market share as high as 50% to 60% of total generation in the primary Texas power market, data from ERCOT and S&P Global shows.

With benchmark Henry Hub 2022 futures prices settling at startling highs over $7/MMBtu recently, it appears that high gas prices are likely here to stay, keeping downward pressure on gas generation at least though the upcoming summer months and potentially for longer.

This shoulder season, wind could also remain a critical factor. According to energy markets consultancy EnergyGPS, wild temperature fluctuations in ERCOT this April are a key driver behind high wind speeds. As the northern hemisphere continues transitioning into spring, abrupt shifts in temperature could continue to fuel windy conditions across ERCOT.