![]() And these price spikes lead to higher trading values, especially for shorter term wholesale electricity contracts. Real time price spikes are now more likely to occur. However, this change has impacted how prices move in real time. Now, one would think that is a good thing. One of these changes moved the market cap of wholesale electricity markets from $9,000/MWh to $5,000/MWh. Regulatory ChangesĪfter Winter Storm Uri in February 2021, there were numerous regulatory changes. If less solar and wind projects come online in Texas, that further’s our reliance on natural gas power plants. Many of these utility-scale solar panels are manufactured in China, Malaysia, the Philippines and Taiwan. And some of those may be hampered due to supply issues. Investors have numerous utility-scale solar projects planned in Texas for 2022-2025. Russia’s war against Ukraine has had an impact on natural gas prices internationally as European nations seek new sources of gas. With Liquified Natural Gas (LNG), gas can be transported around the world. Natural gas is increasingly a global market. We first started seeing natural gas prices increase in 2020, but prices started ramping as manufacturing processes restarted. You can see how closely the two are correlated by comparing these two graphs. Because of this, the wholesale price of power ties closely to natural gas. Over 40% of Texas’ electricity is generated with natural gas-fired power plants. Here are four reasons why Texas electricity rates are so high right now. ![]() Plus you also pay for delivery on top of that. In addition to this cost, your retail electricity provider adds risk factors, ancillary services, overhead and their profit. This graph is the underlying cost of the 12 month electricity rate that you purchase. As you can see from the graph, we have not had prices this high in 10 years. The wholesale prices are currently 2X that, hitting $83/MWh (8.3 cents per kWh) in early May 2022. Over the past 10 years, this has averaged between $40-$60 per MWh (4-6 cents per kWh), with some lower prices in 2015-2018. The graph below shows the history of a 12-month wholesale electricity contract in the Houston area. And these are some of the highest spring rates we have historically seen. But in Spring 2022 electricity prices have been all over the place. Summer was always the worst time to sign an electricity contract. In the past, Texas electricity prices have been fairly predictable.Įlectricity rates were always lower in the spring and fall. Why Texas Electricity Prices are on the Rise (2022 Recap)
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