Texas’ Power Market Reaps the Wind (and Sun)
The growing efficiency of renewables is a challenge for providers used to scarcity pricing.
Wind turbines south of Kingsville, Texas.
Photographer: Bloomberg/BloombergThe Texas power market is a gamble. Generators seeking the occasional windfall from price spikes weigh the odds on temperature, wind-speed, the economy and, crucially, how much capacity their rivals are starting up or shutting down.
Regarding the latter, they get some guidance from the state grid operator every six months in the form of projections of how much power Texas will need and how much capacity will be there to meet it. One closely watched figure is the reserve margin, or the buffer of spare capacity. The Electric Reliability Council of Texas, or ERCOT, targets 13.75% of peak demand, but plant closures (and some record heatwaves) have pushed it well below that. A tighter margin makes it more likely that scarcity pricing kicks in, generating windfalls for power plants. This is great for merchant generators such as NRG Energy Inc. and Vistra Energy Corp.