Last Updated on April 7, 2021 by Mary Pressler
It’s summer in Texas. Let’s talk electricity.
Most Texans welcome summer with excitement. From lake trips to pool days, we’re good at finding ways to cool off. And most Texans will try most anything to spend less on electricity during our hottest months.
At Quick Electricity we’re Texans helping Texans and we’ve put together this friendly guide to understanding Texas electricity in the summer and what to expect in 2020. Hint: Things are looking bright.
ERCOT Expects the Texas Energy Grid to Remain Stable in Summer 2020
The year 2019 tested the limits of the Texas electricity grid, and the market price of electricity was especially high in August. Each year before summer, the Electric Reliability Council of Texas (ERCOT) estimates the electric supply and maximum consumption expected.
The power supply must be higher than consumption to prevent blackouts, and ERCOT aims for a reserve margin of at least 13.75%.
Notable Data from ERCOT
- The reserve margin for 2019 was only 8.6%.
- The outlook has improved for 2020 with a reserve margin of 12.6%, according to ERCOT as of May 2020.
- A 10.6% margin was estimated in March 2020, but ERCOT reviewed and updated its projections.
- However, the 2020 reserve margin is still below the target of 13.75%.
The Texas electricity grid could withstand the 2019 summer load without major blackouts, but electricity prices reached very high levels. Consumers with variable-rates or wholesale memberships were affected the most. This is why we recommend choosing an energy plan with a fixed rate.
Comparing Texas Electricity: 2019 vs 2020
The reserve margin is higher in 2020, but make no mistake: the expected peak in consumption is also higher than in 2019. Texas reached a peak load of 74,666 megawatts on August 12, 2019, and the wholesale price of electricity reached $9,000 per megawatt-hour.
However, a peak consumption of 75,200 megawatts is expected for summer 2020. ERCOT estimates that electricity consumption will continue increasing by around 1.7% annually.
Megawatts are used to measure the instant power being delivered by a power grid, while megawatt-hours measure the accumulated energy supplied in a time period.
To visualize the numbers above, consider that one megawatt is roughly the power consumption of 200 homes. One megawatt-hour is slightly less than the monthly consumption of the average Texan household.
- If the $9,000/MWh price remained for a full month, users with variable or indexed plans would probably get a power bill of over $10,000!
- This does not happen, however, since electricity price peaks only occur when there are consumption peaks. This normally happens on the hottest days, when homes and businesses are using their air conditioners at full capacity.
To mitigate the impact of the summer 2020 electricity prices, the best strategy is getting a fixed-price electricity plan. As of late May, electricity is already being traded at high prices for August, and even 12-month fixed-price contracts are now more expensive.
However, longer term energy plans are priced lower, since the outlook is very favorable for the next two years. ERCOT estimates a 17.3% reserve margin for 2021, and 19.7% reserve margin for 2022.
How Does Coronavirus Affect Power Consumption for 2020?
The power consumption of businesses is more predictable than home consumption, and less affected by the weather. Since many companies have instructed their employees to work from home, business consumption is lower and residential consumption is higher.
This means that electricity consumption is more difficult to predict during the COVID-19 emergency.
- Space heating and air conditioning represent more than 50% of the energy bill for many residential consumers.
- However, most heating systems run with natural gas, while cooling systems run with electricity. This means that the power grid is burdened in the summer, but not in the winter.
- According to ERCOT, residential consumption can jump from 25% of the Texas total on a moderate day, to 50% of the total on a hot summer day.
If more people are staying at home instead of their normal workplaces, higher residential loads can be expected this summer. For example, two adults working from home will likely be using computers and air conditioning.
Normally, this power would be used by commercial or industrial buildings. The unpredictable nature of residential consumption could pose an additional challenge for the Texas power grid during summer 2020.
Many Texas counties have introduced a moratorium for disconnections, to ease the financial burden for customers who may have difficulties paying on time.
Some moratoriums are automatic for consumers who meet certain requirements, but an application is necessary in many cases. These benefits are normally available for residential consumers, and rarely for commercial accounts.
The Texas Power Grid Is Reducing Its Carbon Footprint
Most of the electricity used by Texas comes from natural gas. The name of natural gas can be misleading, since it is actually a fossil fuel and not a clean energy source. However, natural gas is much less polluting than coal and oil, while also being more efficient as an electricity source.
Between 2018 and 2019, wind power surpassed coal as the 2nd largest energy source in Texas. This has been possible because the wind power capacity is growing, and also because natural gas turbines are becoming more efficient.
Solar power is still a small electricity source in Texas, representing only around 2% of the capacity in 2019. However, over 3,500 megawatts of solar generation could be brought online in 2020, bringing the total capacity to 5,800 megawatts.
In terms of installed capacity, natural gas increased from 39% to 47% between 2017 and 2019, while wind power increased from 17% to 20%.
During the same period, coal dropped from 32% to 17%, while nuclear power stayed at 11%.
Natural gas has improved as a power source thanks to the combined cycle technology, which couples a gas turbine and a steam turbine. In other words, two turbines can be moved by burning natural gas only once.
According to the US Energy Information Administration, wind and natural gas are the fastest growing electricity sources in the US. While natural gas growth concentrates in the Mid-Atlantic, wind power growth concentrates in Texas.
Natural gas has become widely available at lower costs thanks to hydrofracking, while wind power has been driven by lower technology costs and the Production Tax Credit (PTC) from the federal government.
It’s Time to Switch to a Fixed Rate Energy Plan in Texas
Currently, the lowest electricity prices are available for customers who get a 24-month or even a 36-month contract at fixed rate. With the current electricity outlook for Texas, long term energy plans have the cheapest fixed rates.
- If you currently have a fixed-price electricity plan that expires after summer, you don’t have to worry about price spikes. Actually, you can get an even better deal after summer, since the outlook is favorable for 2021 and 2022.
- However, if your fixed-rate plan expires before the hottest months (June – August), the best strategy is getting a new one ASAP, ideally a fixed-rate electricity plan with a term longer than 12 months.
- Residential customers can secure a new electricity plan up to 60 days before the current one expires, so there is no need to wait. Find a fixed rate plan now!
If you cannot get a fixed rate electricity plan before summer, the recommendation is to minimize your consumption. We recently published an article with effective energy savings measures during the coronavirus pandemic.
The outlook is even better for commercial electricity…
Business owners can shop for new electricity plans with greater anticipation, sometimes a year or more before their plan expires. This means businesses have more options for avoiding the electricity price peaks of summer months.
Has it been a while since you’ve reviewed your business electricity rate? It’s a good idea to reevaluate your electric bill and shop for a cheaper rate right before summer.
From small businesses to large organizations, Quick Electricity is here to find the most affordable energy rates with the most perks. Start saving today!
Trust Quick Electricity – We’re Texas Energy Experts
Did you know there are over 150 Retail Energy Providers (REPs) doing business in Texas? No wonder we’re all confused when shopping for power!
Choosing a new electricity company in Texas can be a daunting task. At Quick Electricity, we’ve spent the last 8 years building relationships with only the best energy providers to ensure our customers have the most reliable light service with most affordable rates.
What makes a great electricity company?
We avoid providers with a delicate financial situation, since they could go bankrupt before the end of your contract. This happens more than you might think. Thousands of Texans were left scrambling to find a new power company after Breeze Energy closed abruptly in summer of 2018.
Our energy companies have 24/7 customer service and many payment methods, so you can manage your electricity plan more effectively.
Transparency is also important, and you should avoid electricity companies with hidden fees – all their charges should be clearly described upfront in the Electricity Facts Label (EFL).
Article By Leonardo David and Mary Pressler for Quick Electricity