US POWER TRACKER: Natural gas, weather push Texas prices lower on month, up on year

For access to all regions of the monthly US Power Tracker series, subscribe to Platts Dimensions Pro.

Natural gas market gyrations, increased renewables output and shifts in weather-driven load pushed Electric Reliability Council of Texas wholesale power prices down in November, compared with October, but up from November 2021, and January on-peak forwards followed a similar pattern.

Day-ahead on-peak locational marginal prices in November averaged in the low $40s/MWh in the sparsely populated West Hub to almost $53/MWh in the high-demand Houston Hub, S&P Global Commodity Insights data shows. These compare with October averages from about $49/MWh to more than $57.50/MWh, and November 2021 averages in the low to mid-$40s/Mwh.

Spot natural gas prices showed year-on-year decreases of more than 15% at the Houston Ship Channel and Waha pricing points, and the Houston Ship Channel November average of $4.065/MMBtu was also down almost 16% compared with October.

However, Waha's November average of $3.782/MMBtu was up by more than 22% from the extraordinarily low October average of $3.098/MMBtu, which was suppressed by a lack of off-take availability due to a pipeline constraint.

Generation mix

Relatively cheap gas helped the ERCOT gas-fired fleet to retain its No. 1 market share, producing 38.8% of the grid's power in November, down from October's 43.7%, but up from November 2021's 35.3%, according to ERCOT data.

The gas fleet burned an average of 3.4 Bcf/d, producing 403.6 GWh/d in November, according to S&P Global data. In October, the ERCOT gas fleet burned almost 3.8 Bcf/d, generating about 453.5 GWh/d. In November 2021, ERCOT's gas fleet burned less than 3 Bcf/d to generate 329 GWh/d.

In contrast with the gas fleet's weaker output, ERCOT wind farms produced more power both on the month and year: 300.5 GWh/d in November, 237.9 GWh/d in October and 284.8 GWh/d in November 2021, according to ERCOT data.

In terms of market share, the wind fleet produced almost 29% of ERCOT's energy in November, up from less than 23% in October but down from 30.5% in November 2021.

The coal fleet came in third place, producing almost 184 GWh/d, or 17.7%, of ERCOT's power in November, compared with 181.7 GWh/d, or 17.5%, in October and 176.7 GWh/d, or 18.9%, in November 2021.

As the days grew shorter, solar power's output waned to 43.4 GWh/d, a 4.2% share, in November, compared with 66.9 GWh/d, a 6.4% share, in October and 40.5 GWh/d, a 4.3% share, in November 2021, S&P Global data shows.

Solar, wind indexes

Renewable capture price and penetration indexes reflected the price-taking nature of solar and wind resources in the ERCOT market. A renewable resource's capture price index is the price of electricity sold by a renewable resource at the time it is sold, which varies greatly in real time.

The ERCOT North Hub average solar capture price index in November was virtually flat with November 2021, at $41.11/MWh, but down from October's $48.66/MWh, S&P Global data shows. The ERCOT systemwide on-peak solar renewable penetration index was 5.3% in November, essentially flat with November 2021 but down from October's 8.1%.

The ERCOT North Hub average wind capture price index in November was down both on the month and year: $34.87/MWh in November, $39.75/MWh in October and $36.18/MWh in November 2021. However, the systemwide on-peak wind renewable penetration index was up on both the month and year: 23.7% in November, 17.6% in October and 23.4% in November 2021.

Turning from the market's supply to demand side, loads averaged 48.2 GW in November, down from October's 51.8 GW but up from November 2021's 43.2 GW.

Texas weather was a factor in these load numbers, with combined population-weighted average cooling- and heating-degree days up 72.2% from October and 64% from November 2021, CustomWeather data shows. ERCOTs population-weighted temperatures averaged 55.6 F in November, down 19.2% from October's 68.8 F and down 5.3% from November 2021's 58.7 F.

Forward markets

The weather may be exerting downward pressure on ERCOT forwards, even as natural gas prices exerted upward pressure.

The National Weather Service's Nov. 17 forecast calls for enhanced chances – 33%-50% – for above-normal temperatures across almost all of the state for December, January and February.

ERCOT North Hub on-peak January forwards averaged less than $81/MWh in November, down 6.7% from the October average of about $86.75/MWh, but up 3.4% from the $78.25/MWh that January 2022 forwards averaged in November 2021, S&P Global data shows.

At the Houston Ship Channel, January gas averaged $6.988/MMBtu in November, almost flat with October's $6.934/MMBtu but up 23.7% from the $5.647/MMBtu that January 2022 gas averaged in November 2021.

Waha January gas averaged $5.971/MMBtu in November, up 5.8% from October's $5.642/MMBtu and up 10% from the $5.428/MMBtu that January 2022 gas averaged in November 2021.

Based on S&P Global estimates and January 2022 heat rates, ERCOT's gas-fired generation could burn about 3.1 Bcf/day, producing about 378.3 GWh/d in January 2023.