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30 Jun 2020 | 22:14 UTC — Houston
By Mark Watson
Highlights
Surge in demand unlikely this summer
Average wind output up 38.3% on year
Weak power demand likely linked to the novel coronavirus pandemic combined with stronger wind output to push Electric Reliability Council of Texas real-time prices down by almost half this June, compared with June 2019.
In light of the market's performance so far, industry observers expressed doubt that prices will recover or exceed 2019 levels the rest of this summer.
Through June 28, ERCOT Hub real-time on-peak locational marginal prices averaged just $16.78/MWh, down from $32.23/MWh in all of June 2019, according to S&P Global Platts' price database.
And average daily peakloads this June have been virtually flat with 2020, ERCOT data shows, despite a 7.7% increase in population-weighted cooling-degree days, according to CustomWeather.
"While there have been a few hot days, for the most part the last bit of demand that causes the hard march up the dispatch stack does not appear likely in summer 2020," said Campbell Faulkner, senior vice president and chief data analyst at OTC Global Holdings, an interdealer commodity broker,
"That is doubly true if the second wave of infections continues and appears to be evident in the voluntary semi-self-quarantining occurring in the main Texas load centers (consequently, infection hot spots)," Faulkner said in a June 30 email. "Only if there is a hard change in sentiment or reduced infection rates will Texas come close to blowing past 78-80 thousand megawatts peak demand."
On the supply side, the continued build-out of ERCOT's wind fleet resulted in a surge in daily wind output, averaging 266.1 GWh through June 28, versus an average of 192.4 GWh in June 2019 – a 38.3% jump, according to S&P Global Platts Analytics models.
"Despite substantially lower [natural] gas prices [year on year] at Carthage, Houston Ship Channel, and Agua Dulce, gas-fired generation for June still fell 9% as wind and solar continued to claim more market share within the ERCOT generation stack," Platts Analytics said in its June 25 North American Electricity Short-Term Forecast. "Wind generation alone climbed to a new monthly high [average] of 11.6 GW, an increase of 3.6 aGW or 45% Y/Y."
Weather-adjusted load fell in April and May, "indicating Texas may be experiencing greater impacts due to oil production declines and COVID-19 related demand loss," Platts Analytics said, and more regions of the state may show WAL declines when the June data becomes available.
Neil McAndrews, principal of Austin-based Enterprise Risk Consulting, said, "COVID-19 and the large amount of unemployment is a large factor" in weak power demand and prices.
"Given the demand destruction and even with some economic recovery electric demand should remain low this year and next," McAndrews said in a June 30 email. "Natural gas prices were about 33% lower than 2019. So it looks like lower gas coupled with lower demand were the main factors in this year's lower June prices."
In a June 24 Platts Insight blog post, analysts Manan Ahuja and Travis Whalen said ERCOT faces "more limited risk" of record high wholesale power prices this summer, due to "more generation and uncertainty around peakloads due to [a] stuttering economy."