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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

Ben Geman, author of Generate
2 mins ago - Energy & Environment

White House moves against "super-pollutant" in climate fight

Photo: Kena Betancur/VIEWpress/Corbis via Getty Images

The EPA is finalizing rules today that cut powerful greenhouse gases used in air conditioning and refrigeration, part of a wider new White House strategy to deter these "super-pollutants" and boost manufacturing of substitutes.

Why it matters: The EPA regulation is the U.S. part of a planned global phase-down of chemicals called hydrofluorocarbons. The global phaseout can prevent up 0.5 °C of global warming by 2100, the White House said.

FBI report likely to show record increase in murders in 2020

Illustration: Aïda Amer/Axios

If the FBI data released next week shows what's expected — that 2020 saw the highest single-year spike in U.S. murders in at least six decades — experts say the sudden job losses, fears and other jolts to society at the start of COVID-19 will likely have been the overwhelming drivers.

Why it matters: Many Democrats already feared that rising crime could hurt their party in the 2022 midterms.

35 mins ago - Health

Some experts see signs of hope as COVID cases fall

Expand chart
Data: N.Y. Times; Chart: Kavya Beheraj/Axios

New coronavirus cases are continuing to decline, and some experts are cautiously optimistic that the virus will continue to wane even into the fall and winter.

The big picture: The next few months are highly uncertain, and some localized outbreaks are all but guaranteed. But the U.S. is at least moving in the right direction again.

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