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ERCOT Tracker: Shoulder season, cheap gas cut wholesale power prices in November

Highlights

Wind tops coal for second month

Winter forwards up on month, down on year

Houston — Wholesale power prices in the Electric Reliability Council of Texas market fell in November both month on month and year on year, as shoulder season took hold, wind output surged and natural gas prices weakened.

With the cooler weather came higher expectations for power demand in the winter months, which caused winter power forwards to climb, in comparison with their averages in October, but they remained substantially lower than what the December and January on-peak forwards averaged last November.

Day-ahead on-peak locational marginal prices across the four major hubs included in the S&P Global Platts Power Trackers each month averaged in the mid-$20s/MWh this November, down from the low to mid-$30s/MWh this October and last November.

Peakloads averaged 43.4 GW this November, down from October's 49.3 GW but up from last November's 42.8 GW, reflecting similar changes in the weather. Population-weighted average daily temperatures in November averaged 54.4 degrees Fahrenheit this November, down from October's 66.7 degrees F but up from last November's 53.8 degrees F.

During Tuesday's ERCOT board of directors meeting, Bill Magness, ERCOT's president and CEO, noted that October featured unusual weather in Texas, with 11 days of highs at 95 degrees F or higher in Austin, eight such days in San Antonio and three in Dallas. At the other extreme, Amarillo, Texas, recorded 5.5 inches of snow October 24; Amarillo's first snow usually is in December.

Heating-degree days averaged 10.7 this November, about 2.8 times the October's average, but slightly less than November 2018's 11.3 HDDs.

While weather-driven loads may account for much of the month-to-month decrease, gas prices provided the main impetus for the year-to-year decrease.

At the Houston Ship Channel, spot gas averaged $2.455/MMBtu this November, up from October's $2.184/MMBtu, but down sharply from November 2018's $4.113/MMBtu.

At the Waha pricing point, which is important for generators in Central and West Texas, spot gas averaged $1.355/MMBtu this November, up from October's 84.5 cents/MMBtu, but down from November 2018's $1.664/MMBtu.

GENERATION MIX

Output from ERCOT's massive and growing wind fleet also contributed to lower prices in comparison with last November.

For the second month in a row, wind output exceeded coal-fired generation output both in absolute terms -- 6.4 TWh vs. 5.7 TWh -- and in wind's share of total output -- 22.9% vs. 20.4%.

While this November's 6.4-TWh wind output was down from October's 6.9 TWh, wind's share was up from this October's 22.3% and last November's 20.6%.

Coal-fired generation this November was down from October's 6.4 TWh and last November's 7.7 TWh. Coal's share this November, at 20.4%, was down from this October's 20.7% and last November's 28.4%.

With gas prices that were up month on month but down year on year, gas-fired generation's output naturally followed a correspondingly opposite pattern, providing 11.8 TWh, or 42.6% of the mix this November, down from October's 14.1 TWh and 46% but up from November 2018's 10.1 TWh and 37.2%.

FORWARD MARKETS

Looking forward, on-peak December and January packages were up this November, in comparison with their October averages, but down in comparison with the December 2018 and January 2019 forwards' averages in November 2018, reflecting patterns in gas forwards and mild weather forecasts.

ERCOT North December on-peak averaged around $25.60/MWh this November, up from October's average of about $24.50/MWh, but down sharply from the $38.75/MWh that December 2018 forwards averaged last November.

ERCOT North January 2020 on-peak averaged around $31.10/MWh this November, up from October's average of $24.15/MWh, but down from the $46.10/MWh that January 2019 forwards averaged last November.

Houston Ship Channel December spot gas averaged $2.543/MMBtu this November, up from October's $2.404/MMBtu, but down from the $4.122/MMBtu that December 2018 spot gas averaged last November.

Houston Ship Channel January 2020 spot gas averaged $2.618/MMBtu this November, up from October's $2.527/MMBtu, but down from the $4.257/MMBtu that January 2019 forwards averaged last November.

The National Weather Service's December forecast, issued November 30, and its December-through-February forecast, issued November 21, show a strong probability of above-normal temperatures across Texas.

-- Mark Watson, markham.watson@spglobal.com

-- Edited by Bill Montgomery, newsdesk@spglobal.com