Texas heat wave breaks, but weaker wind output forecast boosts early July power prices

The heat wave that spread triple-digit high temperatures across the Electric Reliability Council of Texas footprint since mid-June has dissipated, slackening power demand forecasts for the first week of July, but substantially weaker wind forecasts have boosted day-ahead prices for July 3 delivery.

CustomWeather forecast highs to average 96 degrees F July 3-7 for the Dallas metro area, up about 1.5 degrees from normal for those dates but down about 2.5 degrees from the National Weather Service's average highs June 26-30.

ERCOT's 2:30 pm CT load forecast shows peakloads averaging 76.3 GW July 3-7, down 4.7% from the July 26-30 average of about 80 GW.

However, day-ahead trading June 30 on the Intercontinental Exchange showed ERCOT North Hub day-ahead on-peak power averaging more than $147/MWh for July 3 delivery, followed by a dip to $56/MWh (based on the midpoint of bids and offers) for July 4 delivery and $79.50/MWh for the balance-of-week package.

In comparison, ERCOT North Hub day-ahead on-peak LMPs averaged almost $455/MWh for June 26 delivery but had prices averaging less than $45/MWh for the remainder of the week. ERCOT on June 26 matched its existing record peakload of 80.1 GW, which was topped on June 26 with a new record of 80.8 GW.

A forecast at 1:30 pm CT June 29 indicated the ERCOT system would set a record peak of 81.1 GW on June 30, but later forecasts indicated the system would likely peak at a level less than 77.7 GW.

Waning wind output

A steep decrease in forecast wind output during the peak hour ending at 5 pm on July 3 likely is a big factor in that day's price spike. ERCOT forecast its wind fleet to be producing at a level of less than 4.7 GW at that hour on July 3, compared with an average of almost 16.7 GW for the week of June 26-30.

For July 4-6, the latest date in ERCOT's forecast, the system's wind fleet was forecast to be producing around 6.8 GW at peak hour.

The base scenario in ERCOT's summer 2023 Seasonal Assessment of Resource Adequacy assumed the system's wind fleet would be producing 10.4 GW during the seasonal peak of 83.4 GW, whenever that might occur.

Natural gas prices flat

ERCOT's natural gas-fired generation fleet typically sets the marginal price, but spot gas prices have shown little change during the two-week heat wave, and in ICE trading June 30, Houston Ship Channel spot gas was trading flat at about $2.40 for delivery through July 5.

S&P Global Commodity Insights is not publishing new power and gas prices on July 3 because of the Independence Day holiday.

ERCOT's solar forecast also shows some decrease from the previous week, with the solar fleet forecast to produce at an average level of about 9.6 GW at peak hour July 3-6, compared with about 10.6 GW for the peak hour June 26-30.

ERCOT's 2023 SARA assumed the system's solar fleet would be producing at around 12.3 GW during the seasonal peak of 83.4 GW.