This article was published by the US Energy Information Administration on July 26, 2023.
By M. Tyson Brown
An extreme heat wave in late June and July led to record-breaking demand for electricity in Texas as homes and businesses turned up their air-conditioning, fans, and other cooling equipment to cope with the heat. Power plants in the Electric Reliability Council of Texas (ERCOT)—the grid operator for most of the state—increased output to meet elevated demand.
Note: Values shown are the maximum hourly reported demand for the day, which may differ from an instantaneous peak in demand.
Previously, ERCOT’s record for hourly demand was 79,830 megawatthours (MWh) on July 20, 2022. The previous record was broken every day from June 26 to June 29 of this year; the highest demand hour for each of those days was more than 80,000 MWh. Continued high temperatures drove new demand records on July 12, 13, and 17. Those records were all topped on July 18, when demand peaked at 82,579 MWh in the 6:00 p.m. hour, central time (CT). Maximum temperatures were over 100°F in demand centers in Houston, Dallas, and San Antonio for several days during the weeks-long heat wave.
The type of resources used to meet demand has shifted in ERCOT in recent years, especially compared with heat waves in previous years. Natural gas remained the most common source of electricity generation in most hours. Non-fossil fuel sources—wind, solar, and nuclear—also contributed significantly during the high-demand days of June 28 and June 29, driven by increased wind generation during evening peak demand. Non-fossil fuel resources contributed as much as 55 per cent of total generation on June 28 and 29 and between 43 per cent–47 per cent in the evening peak load hours of 4:00–8:00 p.m. CT, enough to keep the share generated by natural gas below 50 per cent of the fuel mix during those hours. In prior periods of high demand, such as in August 2019 and August 2022, non-fossil fuel resources never reached more than 50 per cent of total generation in ERCOT.
Note: Hydro’s share of electricity generation is too small to graph.
Wind and solar power have no fuel costs, and nuclear and many hydropower plants only have small variable operating costs that are often not included in their bids to produce wholesale electricity. The increase in generation from low- or zero-marginal cost resources, along with lower natural gas prices compared with last summer, led to smaller increases in the wholesale price of electricity than would be expected for demand levels this high. On days when wind generation continued to be high through the afternoon—when demand for cooling is still high but solar generation drops off—electricity prices were elevated but were much lower than the $500/MWh and above levels in prior heat waves in August 2019 and August 2022.
In August 2019, for example, day-ahead wholesale electricity prices in ERCOT’s Houston zone averaged $172/MWh during daylight hours (6:00 a.m. to 9:00 p.m. CT) for the entire month and $112/MWh in August 2022. In comparison, average prices during daylight hours for the recent heat wave were $79/MWh, much closer to the average July price of $64/MWh in Houston for 2019 to 2022, when demand was elevated but below record highs. This year’s record-breaking demand in June and July surpassed peak loads from prior Augusts, which tends to be hotter than June or July.
The fuel mix in ERCOT has rapidly changed; more than 4,000 megawatts (MW) of wind and solar capacity was added between September 2022 and May 2023. This changing fuel mix came at a time of continued population growth, which increased electricity demand, and concerns about whether or not dispatchable generation could meet electric demand in ERCOT during heat waves, especially when wind resources are unavailable.
Adding to the pressure, ERCOT depends more on its own generation resources than other power grids. By design, ERCOT has limited ability to import power from neighbouring systems because it only has four relatively small transmission connections to other grids.