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Extreme cold brings arctic air as far south as the Gulf of Mexico. Fox News Senior Meteorologist Janice Dean with more.
With nearly 3.5 million homes and businesses in Texas without power as of Monday afternoon, state officials were looking for answers and one of them could come from an unexpected source: the system of auction used by the Electric Reliability Council of Texas.
The council, which operates the power grid and manages the deregulated energy market for 75% of the state, issued emergency energy alert warnings ahead of the storm. But freezing temperatures and infrequent snowfall have increased demand for electricity and led to power outages, as cold weather has slowed many state wind turbines and reduced oil and gas production. Electricity producers who depend on fossil fuels have also been affected.
Spot electricity prices at the West Texas hub have exceeded the cap of $ 9,000 per grid megawatt hour. Electricity typically costs $ 25 per megawatt hour.
The price spike was equivalent to the cost of charging a Tesla reaching $ 900. A charge typically costs around $ 18.
TEXAS POWER GRID HIT BY EXTREME STORM
“The auction price can be quite high when there is a shortage,” said Meredith Angwin, a 30-year veteran of the utility industry and author of “Shorting the Grid”.
The high prices were at least partially due to the way the five-minute auction system is designed. ERCOT conducts real-time auctions to meet its energy needs.
Any accepted offer receives the compensation price for that round. If vendors who bid different see all of their bids accepted, they all receive the highest price.
ERCOT did not respond to FOX Business’s request for comment.
Angwin notes that regional transport operators don’t deliberately let prices get out of hand, but they are “happy when it happens.”
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She says operators should “move away” from the model that allows five-minute auctions to determine prices and return to the model where the Utilities Board setting a guaranteed rate of return.
“Reliable electricity is too important to go, well, sometimes it won’t be there, whatever,” Angwin said.
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