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More generation capacity next summer will ease tight conditions

By: L.M. Sixel |

Electricity contracts for residential customers in Texas have become more expensive as high wholesale power prices during the hot weather this summer work their way down to the retail level, boosting the energy portion of one-year fixed-rate plans at least 20 percent compared to what they were a year ago, according to electricity shopping sites.

But an increase in new generation scheduled to come on-line next summer  is expected to ease some of the supply constraints and perhaps, some of the high prices.

Market dynamics are already shifting for next summer, reflecting the anticipated addition of 2,000 megawatts of new wind projects, 1,500 megawatts of new natural-gas fueled generation and 600 megawatts of new solar energy,  according to the research firm S&P Global Platts.

The new supplies should give Texas more cushion next summer, said Manan Ahuja, manager of North America power analytics for S&P Global Platts. The state’s grid manager the Electric Reliability Council of Texas predicts next summer’s reserve margin will be 10.5 percent, up from last summer’s near record low of 8.6 percent.

“The market will stay tight but not as tight as it was last summer,” said Ahuja.

Prices on the futures market for next summer are already moving lower, reflecting the anticipation of new power supplies, he said. And 2021 power prices are expected to fall even further as the market anticipates even more solar and wind projects coming online.