The extreme cold is bringing the arctic air to the southern Gulf of Mexico. Fox News senior meteorologist Janice Dean with more.
With nearly 3.5 million homes and businesses in Texas without electricity on Monday afternoon, state officials were looking for answers and one may come from an unexpected source: the auction system used by the Electric Reliability Council of Texas.
The council, which operates the electricity grid and manages the unregulated energy market for 75% of the state, issued emergency energy alerts before the storm. But extremely low temperatures and a rare snowfall caused an increase in demand for electricity and resulted in continuous blackouts, as cold weather paralyzed many of the state’s wind turbines and reduced oil and gas production. Electricity generators that depend on fossil fuels were also affected.
Electricity prices in central western Texas have skyrocketed above the $ 9,000 per megawatt hour grid limit. Power typically costs $ 25 per megawatt-hour.
The price increase was equivalent to the cost of charging a Tesla to $ 900. A charge typically costs about $ 18.
TEXAS POWER GRID HIT BY EXTREME STORM
“Auction prices can go up a lot when there is a shortage,” said Meredith Angwin, a 30-year veteran in the utility industry and author of the book “Shorting the Grid”.
The high prices were due, at least partially, to the way the five-minute auction system is designed. ERCOT conducts real-time auctions to meet your energy needs.
Any bid that is accepted receives the compensation price for that round. If suppliers who bid differently have their bids accepted, everyone will receive the highest price.
ERCOT did not respond to FOX Business’s request for comment.
Angwin notes that regional transmission operators are not letting prices get out of control, but are “happy when that happens”.
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She says that operators should “move away” from the model that allows five-minute auctions to determine prices and return to the model in which the Public Service Commission sets a guaranteed rate of return.
“Reliable electricity is very important to just work, oh well, sometimes it won’t be there, whatever,” said Angwin.