Energy In-Demand, ERCOT Edition
by Elliot Sorkin
In today’s environment, the need for an experienced energy advisor is greater than ever. How businesses use an energy advisor to guide through the procurement process has changed. The current market requires a team with extensive experience in energy programs, contracts, demand response, and relationships with the right resources.
Energy markets are complex and have risks, which were highlighted recently in the monthly settlement of four ERCOT Zones, priced in Location Marginal Price (LMP).
In 2022, LMP prices have increased on average by:
- Houston Zone + 117%
- North Zone + 89%
- South Zone + 78%
- West Zone + 100%
Additional risk results from the cost of fuel used to produce power generation. ERCOT uses natural gas to fuel about 50% of power generation. Natural gas cost is a driving factor in the increased cost for electricity.
Beginning January 3, 2022, NYMEX Natural Gas (Henry Hub, Spot Price in Dollars per Million Btu) settled at $ 3.74, 44% higher than in January 2021 ($ 2.60). As September begins, the percentage year-to-date increase is greater than 140%.
In 2022, energy demand continues to grow in ERCOT. Daily peak demand has grown outside of the traditional heavy demand months (June-Sep), shown above. In addition, peak demand has exceeded forecasts as shown in the chart above.
Most notably, in July 2022, ERCOT produced historic demand averaging 75,836 MW per day, more than August 2019 previous record of 74,820 MW.
- July 20, 2022, ERCOT surpassed 80,000 MW for the first time, setting a new Max All Time Demand at 80,038 MW.
The ERCOT market continues to adjust from lessons learned during the Freeze of 2021 (Uri) and implement needed changes to protect the delivery of electricity during emergency situations.
There are three notable changes for the ERCOT market:
- Deeming natural gas infrastructure as critical thereby reducing the risk of shutting off natural gas supply in an emergency, announced November 2021.
- Electricity Supply Chain Map for communication and emergencies, announced April 2022.
- Final Rule to Weatherize Natural Gas Supply for Emergencies, announced August 2022.
No two clients are the same. Understanding the options available for any client is where Atlas begins. What feels like an uphill battle requires, at the core, an energy partner that offers “transparency” in a complex process.
Atlas continues to mitigate risk and reduce energy expense for clients, even in a rising market. Please contact an energy advisor at 281.932.2330 or 978.855.2827 to gain a thorough understanding of options available to your business.