NEW YORK – Extreme heat and rising electricity demand are expected to drive up power prices in Texas this summer, while the rest of the U.S. power markets are broadly pricing lower, according to analysts and data this week.
WHY IT’S IMPORTANT
Imbalances in U.S. power supply and demand, along with extreme weather, can lead to wholesale power price spikes that can eventually be passed down to businesses and households.
BY THE NUMBERS
Spot wholesale electricity prices in the Texas power trading hub for August have consistently traded above $175 a megawatt-hour (MWh) so far this month, compared to an average of $90.18 per MWh for August last year, data from S&P Global shows.
Rising heat, which hikes up demand for cooling systems, coupled with computing-intensive businesses like data centers and bitcoin mining, are expected to propel prices in the summer months, said Sean Kelly, CEO of energy analytics and forecasting company Amperon.
In contrast, power prices for August in the California market traded at around $80 a megawatt hour, or about 30% below last year’s average for the month, S&P Global said.
California is expected to benefit from an abundance of hydropower, according to an Amperon analysis.
Other major markets were also trading lower or close to actual summer 2023 averages.
KEY QUOTE
“With the growth of renewables, the retirement of base load fossil-fired generation and the dependence on renewables, on days renewables are not showing up, it’s going to be very pricey,” said Amperon CEO Kelly.
CONTEXT
U.S. electrical grids are under pressure from rising demand tied to electrifying transportation and businesses like data centers that support generative artificial intelligence, while adding more power generation often takes years.
The addition of wind and solar helps bolster the grid, but their power output is weather dependent.
