Milder weather, weakening natural gas prices and stronger renewable output brought a steep month-to-month drop the Electric Reliability Council of Texas’s September power prices, but they remained much higher than September 2021. Judging by forwards, power traders perceive little risk of prices spiking in November.
As a share of September’s substantially lighter peakloads – down 7.8% from August and up just 2.1% from September 2021 – coal, wind, nuclear and solar generation gained on gas generation’s wide lead, ERCOT data shows. Peakloads averaged less than 65GW in September, compared with August’s 70.4 GW and September 2021’s 63.6 GW.
Renewables‘ gains in market share were generally reflected in S&P Global Commodity Insights’ higher capture price indexes and solar’s deeper renewable penetration indexes, but curtailments likely forestalled deeper penetration by ERCOT’s massive wind fleet – 30.9 GW commercially operating and another 4.9 GW synchronized and supplying the grid as of the end of September.
Day-ahead on-peak locational marginal prices averaged near $80/MWh across ERCOT’s four main generation hubs, down from the mid- to high $110s/MWh in August but up from September 2021 averages in the mid-$30s/MWh to low $40s/MWh, according to ERCOT data collected by S&P Global.
Population-weighted cooling-degree days in September fell almost 24.8% in September from August, but were up about 4.8% from September 2021, CustomWeather data shows. Population-weighted temperatures averaged 80.2 F in September, down 5.7% from August’s 85 F but up slightly from September 2021’s 79.5 F.
At the Houston Ship Channel, spot gas averaged $7.045/MMBtu in September, down 14.3% from August’s $8.222/MMBtu but up 41.7% from September 2021’s $4.971/MMBtu, S&P Global data shows.
Gas prices plunged faster in the Waha region, averaging $5.959/MMBtu in September, down 21.5% from August’s $7.591/MMBtu but up 28.2% from September 2021’s $4.648/MMBtu.
Gas-fired generation nevertheless held onto its large lead in ERCOT’s generation mix, according to ERCOT data, which kept power burn stronger on the year, but higher prices bode ill for November power burn, assuming heat rates similar to November 2021.
Power burn
Gas supplied 51.3% of ERCOT’s average daily generation in September, down from 54.3% in August but up from 47.1% in September 2021.
Power burn fell to less than 4.9 Bcf/day in September from almost 5.7 Bcf/d in August, but the latest numbers were up from about 4.2 Bcf/d in September 2021, S&P Global data shows.
Assuming heat rates similar to November 2021 and using S&P Global’s forecast for ERCOT gas generation to produce less than 245.6 GWh/day, power burn would barely top 2.2 Bcf/d this November, down from almost 3 Bcf/d in November 2021.
ERCOT data shows its coal fleet supplied almost 17% of the system’s power in September, up from less than 16% in August but down from 18.8% in September 2021.
ERCOT’s wind fleet produced about 15.4% of system power in September, up from August’s 14.6% but down from 18.5% in September 2021.
Nuclear generators supplied almost 9% of ERCOT’s power in September, up from 8.6% in August but down from 9.8% in September 2021.
Renewable indexes
Solar power was the only category to show an increase both on the month and the year, as solar capacity kept rising – topping 8.9 GW installed plus 4.4 GW synchronized at the end of September, up from 8.3 GW installed at the end of 2021.
Solar’s share approached 7% in September, up from 5.6% in August and 4.8% in September 2021.
Renewable capture price indexes assessed by S&P Global were down on the month but up on the year. The capture price index is the price of electricity sold by a renewable resource at the time it is sold, which varies greatly in real time.
At the ERCOT North Hub, the system’s most liquid location, solar capture prices averaged less than $82/MWh in September, down 36% from August’s average near $128/MWh, but up 42.6% from September 2021’s $57.35/MWh.
Solar’s renewable penetration index also strengthened, both on the month and the year, indicating enhanced profitability for solar resources. As a share of all ERCOT generation during peak hours, solar RPI averaged 8.4% in September, up from 7% in August and less than 6% in September 2021.
In contrast, ERCOT’s wind on-peak RPIs averaged just 11% in September, down from 11.4% in August and 13.2% in September 2021.
However, ERCOT’s overall power price strength contributed to wind CPIs for ERCOT North Zone averaging about $54.75/MWh in September, down from about $75.60/MWh in August but up from $40.20/MWh in September 2021.
Forward markets
In forward markets, November on-peak power packages moderated in September and have continued to do so in October, likely on expectations of milder weather and weaker gas prices.
ERCOT North on-peak November power averaged about $79.35/MWh in September, down 33.4% from August’s $119.10/MWh but up 55.8% from the $50.90/MWh average for November 2021 power in September 2021, S&P Global data shows.
The National Weather Service forecast for November, December and January indicate enhanced chances – 40% to 50% — for above-normal temperatures across almost all of Texas. The forecast was issued Sept. 15.
At the Houston Ship Channel, November gas averaged $7.19/MMBtu in September and has averaged $6.047/MMBtu so far in October, S&P Global data shows. November gas averaged $8.262/MMBtu in August, and November 2021 gas averaged $5.214/MMBtu in September 2021.
Waha November gas averaged $5.959/MMBtu in September and has averaged $3.328/MMBtu so far in October. November gas averaged $6.976/MMBtu in August, and November 2021 gas averaged $4.905/MMBtu in September 2021.
