ERCOT Summer Outlook

Summer is officially here. While June was expected to be a hotter than usual month, prices on the wholesale market averaged 7.1¢/kWh – which is one of the lower rates we’ve seen in a while. It’s hard to predict what will happen for the rest of the summer, but here is what we do know.

The peak load forecast for ERCOT is 75,200 MW – which is higher than ERCOT’s all-time peak demand record of 74,820 MW set last summer – with a reserve margin of 12.6%. ERCOT anticipates being able to keep up with demand under normal market conditions, however record-breaking temperatures combined with weak wind forecasts are expected. If the extreme weather does occur, the grid operators might need to declare Energy Emergency Alerts to incentivize lowering usage. 

Future Impact of COVID 19

COVID-19 is suppressing price signals that would have otherwise incentivized new build outs of natural gas generation. There is a large risk that this lack of capacity development will have large pricing implications in the next few years.

Although the direct effects of COVID-19 are supposed to dwindle, it is expected to have long-lasting implications. The economic ramifications of COVID-19 are expected to last at least until 2024, due to its impact on load.

Even with COVID 19 lowering overall load, record-breaking temperatures combined with dismal wind forecasts are expected. This may very well lead to similar pricing from August 2019.

Far West

The Far West load is expected to remain low even if restrictions are removed due to limited oil market demand. Average peaks of 4GW and greater are unlikely to occur heading into 2021 if oil markets remain steady.

Here are other LZ_West pricing factors:

  • Oil well shut-in (limiting the flow of output from oil wells)
  • Halted economic activity (workers moving out of the area)
  • 30% reduction in oil flows
  • New transmission upgrades have eliminated major transmission constraints common in LZ West

Solar

No large effect from COVID-19 on the rollout of new solar capacity. 1300 MWs of new solar capacity expected to be added by August 2020. The total solar fleet will now be more than 4,000 MW of solar capacity.


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