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Texas' electricity market will see a make-or-break test this summer

Smoke rises above a natural gas power plant outside of Dallas, Texas, on January 04, 2018.
A natural gas power plant outside Dallas. Photo: Samuel Corum/Anadolu Agency via Getty Images

The electricity grid that serves most of Texas, known as ERCOT, operates on a relatively rare energy-only electricity market. An energy-only market pays power plants only for producing electricity, while other markets provide "capacity payments" to generators to be available even when not producing power. Texas built this lean market to keep down costs, but this summer could pose a threat to its survival.

The big picture: A combination of sustained low natural gas prices and increasing supply from renewables has kept ERCOT’s electric wholesale market prices so low for so long that some power plants have been driven out of the market.