Texas is experiencing an unrelenting heat wave that has pushed energy prices to record highs. On Wednesday night, the cost of electricity in the area market reached $5,000 per megawatt-hour, representing a staggering 20,000% increase since that morning.
A “spot” energy market is a platform or system where energy (such as electricity) is bought and sold for immediate delivery, or in the short term. The word “spot” refers to “spot” or “on the spot” transactions.
ERCOT on alert
Faced with this alarming scenario, the Electric Reliability Council of Texas (ERCOT), which oversees the state’s electrical grid, issued an “Energy Emergency 2.” This alert is the second highest in its scale, and indicates the seriousness of the situation. Despite the initial concern, ERCOT reported a few hours later that conditions had returned to normal. However, this fact highlights the vulnerability of the system, as it is the first time since the severe freeze of 2021 that an alert of this level has been issued.
Unstable prices and emergency actions
The volatility doesn’t end there. The next day, electricity prices remained high, topping $4,000 per megawatt-hour for more than an hour. Because of this energy crisis, the Biden administration declared an electricity emergency in Texas on Thursday, allowing a temporary waiver of some air pollution rules so that the state’s generators can produce a lot of electricity.
A summer of extremes
Heat waves are not exclusive to Texas. This summer, the United States and Europe and other regions of the Northern Hemisphere experienced extremely high temperatures. In Texas, energy prices have seen alarming fluctuations, with a 6,000% increase in the past month and a double increase in June.
Texas: A market
Unlike other states, Texas has a deregulated energy market and its own electrical grid. Despite the high demand experienced this summer, the supply resisted. One reason behind this is the remarkable development of renewable energy. According to ERCOT, Texas got nearly 40% of its power from natural gas last year, while wind contributed 25% and solar also played a significant part.
