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Bloomberg: Texas makes a case for new plants

Bloomberg is reporting that Texas’ generators had a profitable week as intense heat sent electricity prices shot up to unprecedented levels, briefly surpassing a US$9000 a MWh ceiling. That put producers more than three quarters of the way toward profits that the state’s power market monitor says could touch off a power plant build-out. And the region’s only halfway into the cooling season.

“We need these kinds of days” to demonstrate that the state is ripe for new plants, Scott Burger, an energy research fellow at the Massachusetts Institute of Technology, said.

An expansion in Texas would contrast the dearth of generation nationwide. The US has become so abundant with cheap natural gas and renewable power resources in recent years that in some places, electricity prices have plunged below zero. This supply excess has forced massive, ageing coal-fired power plants to retire, leaving a vacuum that wind farms were largely expected to make up for in Texas.

The state is facing record electricity demand, especially in the west where shale drillers are exploring for oil and gas. Winds also were not strong enough to help the region as Dallas baked in 39°C weather. Generation from turbines has plunged for 4 days in a row.

Campbell Faulkner, chief data analyst for commodities broker OTC Global Holdings said: “I like renewables and having our grid have a lot of wind in the mix”. However, he emphasised the need to keep the system running as Texas needs other power generation resources.

The last gas-fired plant that came into service in the region was an old one that NRG Energy Inc. revived in May 2019 to recoup on the gain in power demand. According to grid operator Electric Reliability Council of Texas, in the last 6 months of 2018, three gas-fuelled projects and five wind projects were cancelled. Another 2485 MW of gas, wind and solar projects were delayed.

Faulkner interprets the recent price spikes as a wake-up call for Texas. “They are going to either have to move to a capacity-market style or you are going to see some weird things happen in the summer time,” he said.

On 12 August, wholesale power jumped 36 000% to average as much as US$6 537.45 a MWh across the Texas grid. It grew more than 49 000% on Tuesday to hit the US$9000 price limit that Ercot set to avoid runaway prices under extreme circumstances. Other markets rode that surge, too. Futures prices for power next July and August also jumped to the highest in 5 months, and the Ercot North daily price settled at a record US$1400 a MWh Tuesday on the Intercontinental Exchange..

Read full article at Energy Global