Spring Outlook: Texas Electricity Prices
Temperatures are expected to be warmer than average during the spring this year. That plus planned maintenance outages for these shoulder months could mean more volatility than what we saw during the winter.
Check out how outages, renewable generation and LZ West will affect wholesale rates this spring.
Outage totals are expected to drop as more plants than usual were out during the winter. The total number of outages for March and April is trending lower than normal, with May seeing a regular number of outages. Units will mostly be offline or run weak during March through early April and then the strongest unit availability will be in May.
Two key outages to watch are the STP Unit 1 and Comanche Peak Unit 2 outages. Both of these plants are nuclear power plants that provide baseload generation with constant output. STP Unit 1 will go offline in March, necessitating natural gas generation to pick up the slack. Commanche Peak Unit 2 will be out in April requiring natural gas and steam generation to pick up its slack.
There will be more pricing volatility during this period due to short spans of decline in renewable generation. So while wind generation is expected to be strong, it may drop off suddenly. When this generation drops out, quick ramp thermal generators are put online but become exhausted due to their constrained ramp rate. Even though there are sufficient generators available in these times, price spikes tend to occur when they are forced to ramp up quickly.
In 2019, LZ West was 20% more expensive than the other load zones, with its pricing averaging at 4.7¢/kWh and the rest of the state at 3.7¢/kWh. The main factors driving this price premium is congestion from high load levels due to the expanding gas/oil industry in West Texas, low renewable energy output, and low output from the Permian Basin GT plant.
The Dollar Hide – Notrees Switch which has been a constant constraint in LZ West, is currently undergoing some significant upgrades. The bulk of these upgrades are due to be completed by early May and are expected to have a tremendous impact on reducing congestion and ultimately pricing. (Yay!) Transmission capacity is anticipated to double from this as a result.
Average Projected Price (energy-only): 1.6¢/kWh*
By the end of March, we can expect the heating demand from the winter months to drop off and ACs to kick in as temperatures get warmer. Low natural gas pricing should contribute to low pricing as well. Gas prices at Katy Hub are looking to be around $1.80/MMBtu, compared to last year around $2/MMBtu (10% lower in price).
Average Projected Price (energy-only): 1.7¢/kWh*
April is expected to be warmer than most years and might see the most demand volatility for the spring. There will be higher AC demand especially when dew point temperatures exceed 65°. But generation is anticipated to be the strongest during this time with a robust wind outlook. Expect demand to peak toward the afternoon.
Average Projected Price (energy-only): 2.2¢/kWh*
It looks like May will be seeing warmer and wetter conditions that might lead to some demand volatility. Cooling related demand will begin to increase but so will wind generation. Peak spring load is anticipated for May at 63,000 MW.
*This is the projected price for all of Texas. Your individual rate may vary depending on your location, usage and time of use.