Hotter temperatures in Texas are expected to set new all-time highs for energy use in the month of May, sending electricity prices spiking higher.
The state's grid operator, the Electric Reliability Council of Texas (ERCOT), predicted demand would jump from 57,486 megawatts on Friday to 71,893 MW on Monday, 72,725 MW on Tuesday, and 74,346 MW on May 24, according to Reuters.
The coming week could see demand topple the current record for May of 71,645 MW set in 2022, while still trailing the all-time high of 85,508 MW set on Aug. 10, 2023.
That's as weather forecasts for top cities like Houston and Dallas have put high temperatures in the 90s, above seasonal norms, meaning more Texans will crank up their air conditioning.
Expectations for the latest demand surge boosted electricity prices in the spot market, with next-day prices in ERCOT's north hub soaring to $120 per megawatt hour MWh for Friday from $40 for Thursday, according to LSEG pricing data cited by Reuters.
And for about one hour late Friday, day-ahead prices on ERCOT's website jumped as high as $688 per MWh, representing an increase of more than 1,600% compared to the prior day.
The Texas power market is deregulated and on its own electricity grid. But the actual price that consumers pay depends on the type of contract they have with their provider. And since February 2021, energy providers have been barred from fully passing along wholesale electricity prices to their residential customers.
Brutal heat waves over recent summers have shattered records for power demand, sending spot prices on wild, sudden swings. In September, Texas power prices surged as much as 20,000%.
Meanwhile, Texas has seen an influx of residents since the pandemic as people fled states like California and New York, where the cost of living is higher, meaning more customers are plugged into the grid.
Texas has also become a hotbed for bitcoin mining, adding to electricity demand, as the state's deregulated power market and abundance of cheap natural gas became attractive to the energy-intensive sector. The proliferation of data centers and the rise of artificial intelligence technology has also boosted demand.
