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Summer Power Shortages in Texas

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The Texas power grid operator (ERCOT) announced this week that it expects record demand levels this summer. Specifically, the group foresees 78,154 megawatts of capacity with peak demands reaching 74,853 MWT. If the prediction is accurate, Texans will face a wave of alerts urging energy conservation.

The reasons behind Texas’ potential energy shortage are interesting. Of course, the economy has grown over the past few years, boosting power consumption. Perhaps more importantly, however, has been the Permian Basin’s renaissance as a major energy producer. The shale/natural gas boom has turned the region, once again, into one of the world’s most important fossil fuel hotspots. The booming industry requires a lot of energy, putting stress on the state’s grid. At the same time, shale has pushed gas prices down, cutting into the profits of power generators. In one zone the average per megawatt hour power price dropped to just $33.86 per megawatt over the past five years. In response to diminishing returns, generators are scaling back production and even shutting down plants, just as power needs are peaking.

An ERCOT alert would entail several things. In addition to increased generation, utilities could start pulling neighboring regions and implementing demand response programs. Hopefully, there would also be consumer initiatives to curb demand.

Of course, the recent bump in gas prices may drive generators to put the breaks on their cut backs. That may keep power shortages at bay but, whatever happens this summer, it seems the state will eventually have to address the shale business’ growing energy appetite. Renewables may be the solution. As I highlighted two weeks ago, IP Juno expects to complete a giant solar power system in the Permian Basin  by 2021.

Assuming shale stays hot, the Lone Start State's energy needs will continue to climb. How they’ll respond still remains unclear.

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