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This summer, energy was not only in high demand, but pricey

Wednesday, October 17, 2018 by Jessi Devenyns

This past summer was Texas’ fifth-hottest on record with Austin experiencing 52 days of temperatures at or above 100 degrees. As was to be expected, people responded by cranking their air conditioners up, and causing the ERCOT grid to hit an all-time systemwide peak on July 19, followed by an all-time weekend peak on July 22. The result, said Khalil Shalabi, Austin Energy’s vice president of strategy, technology and markets, at the Oct. 15 Electric Utility Commission meeting, was “we did see the pricing we would expect with higher temps and higher load.”

However, the price prediction increases that were reflected this summer began in October 2017. On Oct. 6 last year, there was an announcement that one of the major coal plants was going to retire.  A week later, two other coal plants announced their retirement. To compound the effect of that announcement, a seasonal assessment report that was released in March showed a 6 percent reserve margin, “which is very low,” explained Shalabi. However, the energy pricing prediction following this announcement was not the reality that Austin Energy customers experienced. “Our net costs were essentially the same,” said Shalabi. Due to the increased renewable generation that came online, as well as generation facilities working to ensure that generation was happening at critical and peak times, customers “saw a lot more low costs.” Although overall costs in 2018 were $4.95 million more, Shalabi told the Austin Monitor that thanks to the utility’s ability to generate more power to sell to the ERCOT grid, “the net (price) effect is that they (customers) saw the same energy costs that they saw last year.” Still, costs are indeed going up incrementally, and the future doesn’t show things changing much. “Forwards show that we are going to be tight next summer,” said Shalabi, referring to the amount of generation that is forecast. Due to this prediction, Shalabi said he expects the trend toward higher prices to continue but noted that the market is responding and bringing more and more renewable energy online in an effort to temper pricing.

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