AUSTIN — An ERCOT program designed to shore up electricity storage has increased electricity bills for Texas utilities by an estimated $8 billion in just two and a half months.
While peak electricity prices have fallen in other parts of the country, Texas is the only state where electricity prices have nearly tripled year-over-year, likely due to “artificial” electricity shortages, according to ERCOT's independent market monitor. That's what it means.
Increasing power storage limits the amount of power available for daily transactions, and although sufficient power is still available, power has been on the bench during an intense heat wave. , power prices have soared, and the power grid has broken new records for power demand 10 times this year.
The grid's latest power reserve program will account for a quarter of the cost of all electricity purchased in Texas in 2022 since it began on June 10, according to an analysis by ERCOT's independent market monitor. This indicates that prices have skyrocketed.
“An economic assessment by an independent market watchdog raises, at the very least, an important question: Will this be the cost of a reliable power grid going forward?” said Sen. Nathan Johnson of Dallas.
Costs typically increase when the available power supply is limited. Texas now has a capable fleet of power plants ready to start up in the event of high demand or sudden supply shortages. Participating power generation companies are paid to prepare, but in many cases do not generate electricity.
The total cost of power reserve programs, known in industry parlance as “auxiliary services,” can increase. Although the Monitor's analysis did not include early September, the power grid on Sept. 6 experienced its most severe emergency since 2021's deadly winter storm, which killed more than 200 Texans. .
The introduction of a new power reserve program, ERCOT Emergency Reserve Service, comes as state regulators and ERCOT have been pushing for the grid to hold more power in reserve.
Grid regulators argue that the increased costs are the price of a more reliable power grid following the 2021 power outages. But the staggering $8 billion cost raises questions about its efficiency and whether it would raise prices too much for consumers and threaten the state's continued economic growth.
After the winter storm, the Public Utilities Commission and ERCOT took a more “conservative” stance on grid resiliency. This has led to a significant increase in the amount of electricity generation held in reserve, which has more than doubled since 2020.
Experts say that as reserves increase, they are creating the illusion of scarcity.
“When you have so many power plants not producing energy but holding back energy to put it on these reserve markets, it looks like we don’t have enough power plants.” said investigator Joshua D. Rose. Scientist at the Webber Energy Group at the University of Texas at Austin.
He added: “Even if there are a lot of power plants, the market pricing mechanism will respond by raising prices.”
According to S&P Global, average peak electricity prices on the ERCOT grid nearly tripled year-over-year in the two months following the contingency program. Price increases were limited to Texas. Elsewhere in the U.S., cheap natural gas has reduced peak electricity prices by 20% to 75%.
While residential consumers and small businesses may not be immediately affected by rising costs, their electricity rates will eventually have a trickle-down effect on their monthly energy bills. However, large industrial users, who often negotiate electricity rates directly with their providers, can experience significantly higher operating costs.
“Energy costs and competitive markets have historically been a big part of Texas' economic development potential,” said Katie Coleman, energy advisor for the Texas Manufacturers Association. “That advantage is being significantly eroded,” she added.
ERCOT officials issued a written statement regarding the report, which says ERCOT's energy and auxiliary energy storage markets are linked and “co-optimized.”
“This is desirable and intentional,” the statement said. “This joint optimization ensures that the market finds the most effective way to meet both needs: both the need to meet demand and the planning of ancillary services.”
The Public Utilities Commission is scheduled to review the monitor's report on the power reserve program in October. A statement from PUC officials defended the program.
The program is “an important reliability tool that helps balance supply and demand on the power grid and alleviate real-time operational challenges,” the program said, adding: ” the PUC statement read.
