On June 26, 2024, E3 hosted a public webinar on our ERCOT (Texas) market outlook and electricity price forecasts.
The webinar was hosted by Jack Moore, Senior Director, and Grant Freudenthaler, Senior Managing Consultant. Jack and Grant covered key trends and drivers of the ERCOT market, including:
- The record-breaking heat wave in 2023 and conclusions we can draw about the future;
- Recent large solar additions and the impact on prices and reliability in August 2023;
- E3’s near term price, load, and resource outlook for summer 2024-2025;
- Market design updates including Senate Bill 2627 and House Bill 1500;
- E3’s outlook for the ancillary services market;
- E3’s generation and load expectations for ERCOT; and
- E3’s long term price outlook for ERCOT.
Jack and Grant discussed the impact of market design on the outlook, the changing net load shape of ERCOT, the impact of future large loads and why ERCOT is attracting diverse large loads, and how the system is likely to evolve in terms of price and reliability.
Watch the event recording here.
Key takeaways from the Webinar:
- Summer 2023 was an outlier in terms of temperature and pricing. Summer 2023 has expanded the envelope of what type of price action is possible in ERCOT—forcing market participants to prepare assets for a broader range of scenarios. This has increased risk perceptions for August 2024 and forward markets have adjusted to reflect the wider envelope of summer outcomes. Energy storage will be the resource to watch this summer as large additions are being deployed and may prove very valuable.
- While still very uncertain as to the final design and implementation, ongoing market design changes will certainly have an impact on resource economics and price formation in the system, including: the Dispatchable Reliability Reserve Service (DRRS), performance credit mechanism (PCM), the Renewable Firming Requirement, and the Grant and Loan program for “Dispatchable” generation. Jack and Grant discussed the impact of DRRS on the energy mix if the service increases the total reserves ERCOT procures. Renewable Firming, PCM, and low cost financing terms will send a strong market signal for dispatchable generation and likely increase supply adequacy.
- Large loads and their pace of integration remains uncertain, but ERCOT is very likely to see continued investment by new large loads. Proximity to industry, fast interconnection, an open and competitive market, strong renewable penetration, and other supportive policies make ERCOT a prime market for data centers, oil & gas and petrochemical industries, new manufacturing, and other large loads. Transmission headroom and locating in areas of surplus generation will be key variables in how these loads can be integrated and how they may affect pricing in the market.
- Annual average prices do not tell the full story: E3 is anticipating that ERCOT will see increased volatility in daily and seasonal energy prices, driven by continued wind and solar development over the next several decades. Solar will drive price shapes by reducing mid-day prices and pushing peak net loads into the evenings after the sun sets. This creates a predictable arbitrage opportunity for energy storage and a need for gas peaking capacity.
This webinar was the first in a series. Future webinars will focus on the various other energy markets E3 has forecasted, including CAISO, NYISO, MISO, and seven others. These forecasts have been applied to all classes of energy technologies and are particularly helpful for long-term asset valuation, revenue potential of emerging technologies, and potential pricing impacts of decarbonization policies. Find the full forecasts here, and sign up for event alerts and other E3 news.
