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A natural gas power plant outside Dallas. Photo: Samuel Corum/Anadolu Agency via Getty Images

ERCOT, the electricity grid that serves most of Texas, delivered more power on Wednesday than it ever had, only to deliver even more on Thursday, setting a new system-wide peak demand record of 73,259 megawatts. Friday’s demand is forecasted to be even higher, but the worst might not come until Monday.

Why it matters: The Texas grid is an energy-only market, which, unlike capacity markets, pays power plants only when they produce energy. This summer has been seen as a make-or-break test for this market strategy, and so far it is passing.

Background: The ERCOT market is lean, so the power plants are not typically guaranteed to make money. And because the price of natural gas has continued to stay low, some technologies, mostly coal, have had to exit the market. In just the past year, about 25% of the Texas’ coal fleet retired. This has left margins relatively tight, and more coal retirements are planned.

During peak hours, electricity prices soared into the thousands of dollars per megawatt-hour (they’re usually in the mid to upper 20s). Almost half of ERCOT’s summer peak demand comes from residential air-conditioning. This heat wave is not over, and is only getting more intense.

But ERCOT has yet to use all of its tools to keep the lights on. If reserves fall much lower than they did on Thursday, scarcity pricing starts to take effect, rising almost exponentially until the market hits the price cap of $9,000 per megawatt-hour. As reserves fall below 2,300 megawatts, all available resources are deployed. If reserves fall below 1,750 megawatts, ERCOT can, under prearranged contracts, reduce demand via voluntary load reduction and even transfer some load to other grids. If reserves fall below 1,000 megawatts, utilities are instructed to implement rotating blackouts.

The bottom line: So far, ERCOT is managing the grid well. There are more tests to come, and prices are likely to be very high over the next few days, but this is normal. Energy-only markets are designed to use power plants more efficiently, and that means that lower average prices come at the cost of higher high prices.

Joshua Rhodes is a research associate in the Webber Energy Group and the Energy Institute at the University of Texas at Austin.

Go deeper

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Super Typhoon Surigae seen on satellite imagery Saturday morning east of the Philippines. (CIRA/RAMMB)

Super Typhoon Surigae surged in intensity from a Category 1 storm on Friday to a beastly Category 5 monster on Saturday, with maximum sustained winds estimated at 190 mph with higher gusts.

Why it matters: This storm — known as Typhoon Bising in the Philippines — is just the latest of many tropical cyclones to undergo a process known as rapid intensification, a feat that studies show is becoming more common due to climate change.

Updated 5 hours ago - Politics & Policy

What we know about the victims of the Indianapolis mass shooting

Leaders of the Sikh Satsang of Indianapolis participate in an interview addressing their grief. Photo: Jon Cherry/Getty Images

Law enforcement in Indianapolis have identified the eight people killed in Thursday's shooting at a FedEx facility.

The big picture: The Sikh Coalition said at least four of the eight victims were members of the Indianapolis Sikh community.

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