How lower oil pricing may affect load in ERCOT
With oil prices plummeting over the past few weeks, and knowing that a considerable amount of commercial & industrial (C&I) load in Texas is tied to the oil industry, this would leave one to believe that C&I and overall system load would fall off as a result.
For this analysis, we'll look to see if there is a correlation between low oil pricing and its effect on electricity demand in ERCOT. Since ERCOT does not have a report that shows C&I load over time, we'll be looking at load in the Far West region to interpolate if industrial load is coming offline. Far West load is the least statistically related to temperature, due to oil/gas exploration and production in the area. This makes it the best region to interpolate industrial demand falling off.
After examining load through the month of March, overall system demand has increased which we believed to be a result of warmer weather. However, when looking at demand in the Far West, there is a downward trend going through the month. This may suggest that industrial load in the area is beginning to fall off in response to lower oil prices.
Josh Danial from BloombergNEF showed that while load in other coronavirus stricken areas had a clear drop-off due to the virus, he did not see the same trend in Texas. Danial attributes this to laxer travel restrictions than in other regions and the increased use of data centers. In regards to the recent drop in oil prices, Danial says “we expect the load in Texas will drop off a cliff.”
In this graph, you'll see that ERCOT July 2020 - August 2020 futures pricing has plummeted by almost $50/mWh over the past month.