After two summer seasons where scarcity concerns drove ERCOT market forwards higher, real-time LMPs exploded in August 2019.  With intense heat across the region for much of the month, ERCOT met its $9,000 ceiling on two separate occasions. Clients riding the market saw dramatic price increases during this period as a result of these increased energy costs.

Scarcity pricing occurs when supply and demand dynamics tighten to the point where there are concerns about system reliability. This situation has become more of a concern the past two summer seasons as a result of plant retirements and slowing generation growth.

Despite these recent price spikes, this has not been enough to incentivize generators to continue to enter the marketplace. According to S&P Platts, 15 projects were canceled in September. This means end-users will likely be facing the same situation next season. For more information on how to manage costs going forward, reach out to an Atlas advisor today.

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