Why is the wholesale energy market in Texas unstable?

May 26th, 2022

Why is the wholesale energy market in Texas unstable?

Over the last few weeks, we’ve gotten a lot of questions about what’s going on with the Texas energy grid and what to look out for during summer months. Let’s dive in a bit further about Texas’ grid, wholesale energy markets, and what to expect this summer! 

A whole lot of people moved to Texas

We’re sure a lot of you have gotten new neighbors within the last few years. For the last 7 years, more than 500,000 people have moved to Texas per year.  And while some people have left, Texas boasts one of the highest retention rates for residents; approximately 82 percent of people born in Texas still live in the state

With the increased amount of people moving in and with few leaving, this means that more people need energy. Especially during summer months, because y’all…it’s hot! And when it’s not hot, it gets really cold. In Texas, we’re exposed to extremes of all temperatures meaning we need a lot of energy to keep us comfortable. 

Where’s the power?

Unfortunately, power generation from renewable sources hasn’t caught up as quickly as the new demand placed on the grid. And that makes things here a little more difficult. Texas is the only state within the continental United States that has its own electricity grid. The rest of the country is connected to either the Eastern or Western Interconnection grids. So when any other state has a power shortage, one of its neighbors can lend out some of its resources — everyone stays connected, lights stay on, and people stay safe, especially during extreme weather conditions. However, because Texas isn’t connected to any other state, we can’t connect with our neighbors when things heat up or cool down to the extreme, meaning that we have to generate all of our own power. 

More people and higher temperatures lead to grid strain

As more people move in and then need to use power, the grid becomes strained as it reaches its peak demand capacity — when this happens, energy prices skyrocket. Moreover, as we reach peak demand, there is the potential for rolling blackouts during extreme weather conditions. The potential for extreme weather is already here — in May, we’ve already seen record demand on the grid that we historically don’t see until the month of August. 

As a retail energy provider, when the prices surge, we can’t offer you our typical competitive rates like we could when the supply and demand was more predictable. It’s why we’re encouraging people to lock in an energy rate as soon as they can, because variable rates will increase significantly. Summer has barely begun and we’re seeing quite a few hot months ahead: with little power generation planned to come online this summer, we’re going to test the limits of our grid. Until we integrate more cost-effective energy, like wind, solar, and battery storage, we’ll continue to feel the effects of price scarcity within the energy markets.

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