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Summer Electricity Usage to be Lower in The U.S. but Higher in Texas

Nationwide electricity usage is expected to dip this summer even as electricity in Texas is expected to hit record highs.

The U.S. Energy Information Administration is projecting the lowest summer electricity usage in over 10 years across the country.  As with most things in 2020, these numbers are impacted by the Covid-19 pandemic.  Specifically, a decline in usage in the commercial and industrial sectors is expected to decrease overall electricity demand for the country.   Even with states easing stay at home orders, the type of economic activity that drives electricity usage will be slow to ramp up.  The EIA forecast calls for a decline of 12% in commercial electricity usage.  Residential electricity usage is expected to increase 3% as people stay home during the pandemic.

Ordinarily, long term weather forecasts account for the largest part of the government’s forecast of electricity usage.  This year, however, weather is a secondary driver to the unprecedented shifts in lifestyle, manufacturing, and retail activity brought about by the pandemic.

This reduction in electricity demand will also result in a lower utilization of coal.  Coal power plants are often the last sources to come online when demand on electricity grids peak.  This will accelerate the already multiyear trend of natural gas and renewable energy sources taking power market share away from coal.  Coal is expected to account for only 17% of electricity production across the US this summer.  This is compared to 24% in the summer of 2019.

Despite the expected national decline in electricity usage over the summer, Texas officials are predicting record high demand for electricity in Texas. According to ERCOT President and CEO Bill Magness:

“There is a lot of uncertainty in today’s world, but we are confident that Texas will still be hot this summer, Texans will need electric power as they do every summer, and ERCOT is prepared to do our part to keep it flowing reliably.”

Residential electricity usage represents a larger share of Texas energy usage than other parts of the country.  This is because of hot summers and larger houses.  Even though there is no statewide stay at home order in place, many people are still working from home and going out less.

As of June, summer 2020 electricity rates in deregulated parts of Texas are much cheaper compared to last year.   In both the Dallas and Houston areas the average electricity rate listed on Vaultelectricity.com is more than 1¢/kWh cheaper than this time last year for the 1000 kWh usage level.  This translates in to a $10 per month lower electricity bill at 1,000 kWhs per month.

 

 

Geothermal Energy, Groundwater, Renewables and Texas Electricity

Although geothermal energy generation might conjure up images of California and the Pacific Northwest where the geographical location supports the renewable source most, it is still an important component of the future of Texas renewables.

Geothermal most recently accounted for 0.4% of all electrical generation in the U.S., which is not a large margin by any means, but still helpful. California led the pack, understandably, with 72% of all geothermal production. This is all according to geothermal data provided the EIA.

Texas, of course, has never been a player for geothermal because of the geographical region, but many are thinking that with coal being phased out, geothermal could play a big role in the future of Texas renewables. Even if the geothermal plants are not exactly in the state. With more geothermal plants in the works to be built by next year, it will be interesting to see if geothermal gets a larger supporting role in the context of renewables.

Higher Capacity Factor and Lower Groundwater Depletion

An important thing to remember is that solar and wind have high rates of variability: this means they fluctuate and are harder to pin down for consistent electrical output. This also means that solar and wind have lower capacity factors, which is the annual energy output divided by the installed electrical capacity; or, in other words, it’s the amount of electricity that was actually generated divided by the overall potential of generated electricity if the plant, wind farm, or solar pv collection had been running at capacity 24/7. 

Geothermal energy runs consistently with low variability. As a result, the capacity factor is extremely large. Last year it was in the upper 70%. Whereas wind stayed around the mid 30% and solar in the 60% range. The point being that geothermal could provide some extra stability to the grid as the U.S. grows more renewable in operation. The capacity factor speaks to a stability that would make a transition to renewables easier.

Another important consideration is that Texas has a groundwater depletion problem – geothermal can help with this by providing backup to water-free renewables like solar and wind. This is because nuclear, coal, and natural gas plants take significant amounts of water to operate. Add scorching temperatures to the mix, as well as drought in California and Texas alike and you have a big problem. Using water, naturally, like geothermal does, is a great (albeit definitely not as powerful) alternative to the ground-water heavy plants of old. 

Will Texas See a Geothermal Future?

According to the EIA, “Texas has a unique untapped geothermal resource: its large network of crude oil and natural gas wells.” This has many assuming that Texas could its own geothermal plants opening up in the near future. Energy generation capacity for geothermal has actually risen by 4% since 2017, according to this report on geothermal’s rising market value.

Even though it’s overshadowed by the larger players in the renewables game – wind and solar – geothermal could still have an important role to play throughout the country, and even in Texas.

August 2019 Texas Electricity Rate Update

The electricity market in Texas this August has been a tale of two markets.  Wholesale electricity rates at times during the month spiked to levels seldom seen before.  The electricity market in Texas is designed to drive up wholesale electricity rates substantially during times of extraordinary demand.  Electricity producers make much of their annual revenue during such periods.  This occurred multiple times throughout the month of August.  With temperatures soaring to over 100 degrees in most of the state, grid capacity struggled to keep up with demand.  At times the real-time price in the wholesale market hit an astonishing level of $9,000 per MW.  This is the price cap set in place by grid authorities.

Despite the historically high wholesale prices, retail electricity rates actually managed to fall during the month of August.  This is particularly true for plans targeting the 1000 kWh usage rate.   The average electricity rate for electricity plans being offered in the Centerpoint (Houston) delivery area fell from 8.5¢/kWh in July to 7.6¢/kWh in August for 1000 kWh of usage.

The cheapest electricity rates for the 1000 kWh usage level in most parts of the state are currently being offered by Pulse Power.  The Texas Saver 12 plan offered by Pulse has a rate of 7.0¢ per kWh in the Houston area.  The 24 month version of this plan is even cheaper.

August Top Electric Companies

 

Many electricity providers are currently marketing electricity plans that aggressively seek to have a cheap average rate at the 1000 kWh usage level.  As a shopper, however, you need to make sure that this fits your needs.  Many of these plans have rates that jump substantially if you use 2000 kWhs of electricity or more for a given month.

Go Griddy Customers Burned

Meanwhile, consumers whose electric bills are tied directly to the wholesale price of electricity have had a very difficult month.  Go Griddy is a retail electricity provider based out of California who promised Texas consumers savings by allowing them to buy directly from the wholesale market in exchange for a monthly membership fee.  Customers of Griddy found themselves paying more that 100 times the price of a fixed rate electricity plan at times.  Many unhappy Griddy customers took to social media to complain that their entire monthly budget was wiped out in a matter of a day or two.

 

Electricity rates for 2020 and Beyond

Although the turmoil in the wholesale market hasn’t directly hit customers who are on fixed rate electricity plans yet, wholesale prices will eventually impact the price consumers pay on their bills.  Electricity rates in Texas have been steadily falling through out 2019.  Even in the summer, when electricity rates usually go up, they have continued to decline.  Look for rates to bottom out soon, however, and start to clime towards the end of this year and going into 2020.

Renewable Energy Could Overtake Coal For Electricity Production In 2020

New data shows that the rest of the U.S. could be following Texas with renewable energy set to surpass coal as a source of electricity for the first time. Renewable energy is booming across the U.S. now that solar and wind are exponentially cheaper than they were a decade ago.

Although Texas passed this threshold last year, this will be the first time that the U.S., as a whole, is set to have renewable sources of energy overtake coal for the production of electricity.

Will Coal be another victim of the Coronavirus pandemic?

With businesses shutting down nationwide because of the COVID-19 pandemic electricity usage has declined precipitously.

Because coal plants are more expensive to run than natural gas, there has not been a lot of justification for a resurgence of coal. Or in other words, as businesses are shuttered, coal plants continue to gather cobwebs.

As mentioned before, Texas has seen a decline in coal for many years. This was first driven by cheap natural gas and in recent years more so by the proliferation of wind energy.  This year, Texas has almost tripled the amount of electricity derived from renewable means over coal production. Of course, a lot of this has to do with large renewable energy infrastructure that Texas boasts, but it is still a telling detail.

Will Coal Rebound Later This Year?

The question that many are asking is will coal rebound later this year?

Many are expecting a resurgence – or a brief return to form – for coal once business reopen. More than likely though, keeping coal plants running will continue to be more expensive than they are worth.

After all, coal plants have fallen below 50 percent of operating capacity, meaning that they are quickly making less sense to keep running. Especially with the EIA projecting average coal consumption to decrease by 23% in 2020.

Their rationale behind the percentage is derived from low natural gas prices, the COVID-19 economic impacts on the coal industry, and an already strong uptick in renewable energy sources.

Texas has only produced 16% percent of energy from coal so far this year. It seems safe to say that alternative renewable energy models are cheaper and more sustainable  in the long term than coal.

Texas Electric Companies Respond to Coronavirus Impact

*** Updated 3/25/2020*****************

The Texas PUC Chairman DeAnn Walker has put forth a proposal to assist Texans who are having trouble paying their electricity bills during the Covid-19shut down.  The plan also has provisions for cushioning the impact on retail electricity providers and helping to keep them solvent during a moratorium on disconnects.

 

The proposal would replace the patchwork approach by the local utilities (TDUS) who have separately committed to suspend disconnects already.  If adopted in it’s proposed form, the plan will prevent all retail electricity providersin electric choice areas in the state of Texas from disconnecting residential customer for non-payment for the duration of the state of emergency declared by Governor Abbott.

 

The plan would reimburse electricity providers at a fixed rate for electricity they provide to residential customers who are not able to pay their bills.  This will be funded by a new pass through fee charged by the TDUs.  This would ultimately flow through to all electricity customers including residential and business electricity users.

 

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Most of the largest electricity providers in the state of Texas have announced that they are suspending disconnects due to non-payment at this time.

 

  • The Texas PUC this week encouraged all Texas electric companies to suspend disconnects.

 

  • TXU is extending payment due dates and waiving fees. They are also reducing down payments and offering to spread balances over multiple installments.

 

  • Reliant Energy and its sister brands including Cirro, and Green Mountain energy have announced similar efforts.

 

  • The distribution utilities responsible for delivering electricity to Texans have suspended disconnects for non-payment until further notice during the coronavirus outbreak. These include Oncor, which maintains he powerlines and is responsible for electricity delivery for the Dallas Fort Worth area and other parts of the state.

 

  • Centerpoint in the Houston area has suspended disconnects.

 

  • AEP Texas and Texas-New Mexico Power has also suspended disconnects at this time.

 

Impact on Electricity Providers in Texas

The decision to suspend disconnects, however, could have a large impact on the Texas electricity market.  Retail electricity providers in Texas must pay for the electricity they provide end users by purchasing it on the wholesale market.  If a substantial percentage of customers fail to pay their electricity bills, the electric providers could run out of money and fail.   This could lead to higher electricity rates for all Texans.

EIA Short Term Energy Outlook

The EIA recently put out a short-term energy outlook, which analyzed how the upcoming winter will look for all areas of the energy industry. Because of just how severe this summer was, perhaps it’s pressing to look ahead and contrast with what looks to be a completely manageable winter for the U.S. and by extension, Texas. 

This is extrapolated from the EIA short-term winter fuels outlook as well. But as is discussed, a forecasted “milder weather” will mean less fuel usage to heat houses. Depending on region, a Texas home heated by natural gas will be more expensive due to natural gas markets, as is discussed in the same report: 

“In contrast to the national average, EIA forecasts that expenditures will increase for homes that heat with natural gas in the Midwest and South as a result of higher retail natural gas prices.”

But on average, everything is expected to drop in the home-heating department, meaning that the majority of customers will see a drop in their bill by 1%.

The overall outlook also extends into the beginnings of 2020, so the data looks beyond the winter on a more surface level basis. We will briefly explore electricity, coal, renewables, emissions, and natural gas when considering the EIA’s projections.

Electricity, Coal, and Natural Gas: Greatest Hits of the Energy Outlook

Perhaps a positive effect of having warm overall temperatures this year is that we can expect a milder winter. This means less expensive energy bills due to decreased furnace usage and winter fuels in Texas and other southwestern states mainly, as discussed above. 

Looking past the winter and into 2020, the amount of electricity generated by natural gas plants will rise. This will most likely be necessitated by the continual decrease of coal plants. The EIA says coal will continue to fall by another 11% in 2020. 

Additionally, natural gas saw increased consumption this year, but because surplus storage, the prices stayed low in the last half of the year. The EIA forecasts natural gas production to stay relatively flat and prices to actually decrease through the early 2020 year because of the oversupply at the Henry Hub. This is all despite an increasing demand for natural gas to generate electricity across the country. 

Renewables and Emissions

Electricity derived from wind energy will increase from 10% to 12% in 2020, owing to the continual rise in renewable energy initiatives (especially in Texas). As the outlook states, “Texas accounts for 19% of the U.S. non-hydropower renewables generation in 2019 and 22% in 2020.”

As coal slowly dies out, CO2 levels are going to keep falling. By this time next year, CO2 levels will have dropped 4.1% in comparison to 2018 levels. A lot of this has to do with what they project to be a year that sees less household energy consumption overall.

What to Expect From Wholesale Electricity Rates in 2020 and Beyond 

Using data from 2018 on the wholesale electricity market, we can view the somewhat consistent pricing of wholesale electricity from the ERCOT North hub – from the months of January to June. Yet this consistency is just a lesson in perceived stability, as wholesale electricity, after all,  is rife with volatility. 

Wholesale prices this year alone were a wild ride as graphs spiked and danced to reflect the surging prices of extreme heat. But that’s just the nature of the market; as all commodities go, things fluctuate and you can only ride out the waves until a baseline homeostasis replaces the chaos.

Given that we accept this volatility, what if even more erratic behavior is in the books for wholesale electricity in the near future? 

Let’s explore that question in a little more detail

More Volatility on the Horizon?

Let’s pursue an answer to the following question: if wholesale electricity prices fluctuate in tandem with renewable sources like wind and solar, will an increased reliance on renewables simply necessitate a more volatile market?

There has always been a reliability problem for renewables in the sense that wind can stall for days on end, leading to an electricity demand that outweighs electricity generation. 

But when the wind is really rolling, this often means negative wholesale electricity prices. These wholesale prices don’t necessarily mean cheaper retail electricity for consumers, but only those who are trading on the wholesale power market and who can utilize the cheap electricity. Often though, negative wholesale electricity prices simply mean a surplus of electricity generation + a decreased demand, meaning that many companies pay factories to take excess energy off their hands. After all, it’s often cheaper to burn up excess energy than power down an entire factory. 

With this being said though, if renewables continue to grow, and we get closer and closer to an all-renewable grid, will this reliance on wind and solar simply mean more violent fluctuations of negative or exorbitant prices? Unless battery storage continues its positive trajectory, it just may.

Google (And Company) Will Hold a Huge Share of Electricity

According to Green Tech Media, Google has laid claim to even more renewable energy investments, meaning that they will hold the power to sway wholesale markets in the future. And tech giants continue a similar trajectory and push for renewables, the markets might rise and fall in conjunction even more with more green-minded stakeholders. 

But alas, Google isn’t only looking to decarbonize the grid but also to up the ante on energy storage technology, meaning that when the wind blows strongest, and the sun shines its brightest, there will be plenty of energy for the cloudy, windless days.