Power and Renewables

The impact of load growth and datacenters on ERCOT prices: A new era for West Texas?

byScott Bruns

In the past, the energy market experienced significantly low prices during extreme lows of net load in West Texas. However, recent observations indicate these ultra-low prices are becoming rarer. The increasing presence of price sensitive datacenters in West Texas is believed to be a major driver behind this change.

Let’s explore the effects of these developments on power flows and energy pricing in the region.

A shift in power flows

The growing number of cryptocurrency mining operations and datacenters in West Texas has led to an increase in native load growth with 2.4 gigawatts having received approval so far, and 8-20 gigawatts under study through 2027. As a result, power flows out of West Texas along the typical binding paths have remained below last year’s levels.

Our Panorama power flow simulator for FTR/term-traders reveals decreased flows out of the region versus the prior year, which supports this hypothesis.

The impact of weather patterns

As we’ve reported in our biweekly 90-Day Forecast Flash publication for ERCOT, our April forecasts predict average to high wind conditions due to the transition from La Niña to a more neutral El Niño-Southern Oscillation. On average or under-performing days, there is a risk of the HB_WEST hub taking the premium due to insufficient thermal generation and solar power locally to meet the increased demand from these new loads.

Source: Enverus power market publications, 90-day ISO price forecast, West Texas wind.
Source: Enverus power market publications, 90-day ISO price forecast, West load actuals.

Bringing it all together for real-time optimization and trading, we can monitor these paths live in our Mosaic congestion decomposition tools, which provide an accurate lookback and a continuous forward-look for these paths and prices for the next week.

Source: Enverus MOSAIC and Muse real-time power analytics.

Outages and risk premiums

The current high number of thermal outages compared to historical levels may also contribute to an increased risk premium for energy contracts into April 2023 if they persist.

An evolving energy market

The emergence of cryptocurrency mining and datacenters in West Texas has reshaped the energy landscape, contributing to lower power flows out of the region and reduced instances of extremely low net load prices. As the industry continues to evolve, it is crucial to monitor these trends and adapt to the changing dynamics of energy pricing and availability. Stay tuned for further updates on this topic, as we keep a close eye on developments in the Texas energy market.

Enverus Power & Renewables supports power market leaders to reduce the complexities of market volatility. We help traders and asset managers hedge risk, accelerate trade opportunities and make data-driven decisions.

To talk to one of our power market experts today about navigating power market volatility, fill out the form below.

Scott Bruns

Scott Bruns

Scott Bruns is a senior power analyst at Enverus. Before joining Enverus, Scott traded physical and financial power for nearly a decade at Direct Energy. Changing focus, he moved into the fundamental analysis group at Direct where he focused on developing congestion models and provided traders with short- and long-term price views. In his spare time, Scott enjoys enhancing his Python programming skills and taking his puppy to the dog park with his wife and children. Scott has a bachelor’s degree in mathematics from the University of Houston.

Subscribe to the Enverus Blog

A weekly update on the latest “no-fluff” insight and analysis of the energy industry.

Related Content

Enverus Blog
Power and Renewables
ByKatherine Paton-Ilse

In an era where electricity demands continue to escalate, the importance of a reliable and efficient electrical grid cannot be overstated. Transmission lines form the backbone of the power grid, crucial for transmission and distribution of electricity from power generation...

ByAndrew Dittmar

In a year that began with lackluster minerals-focused M&A activity, there were signs of life in Q2 with the first transaction exceeding $10 million as Kimbell Royalty Partners acquired MB Minerals for $143 million. Compared to operating company M&A, even this...

Enverus Blog - Analyst takes: 6 January energy trends you need to know
ByErin Faulkner

Over the last few quarters, executives at U.S. upstream operators have grown accustomed to analysts asking about cost inflation. It’s an inevitable part of every conference call. During the late July to mid-August earnings season for Q2, the question shifted...

Enverus Blog - Energy Transition Today: EPA jumpstarts EV uptake
Energy Transition
ByKevin Kang

Behind the meter (BTM) solar is a key factor in decreasing load in CAISO, especially in California where it has the most impact on annual demand. The state’s potential for nearly 195 GW of rooftop solar capacity exists, although its...

Enverus Blog - 3 price management capabilities to offset cost inflation
Energy Transition
ByKiana Cruz

Seismic surveys are a vital tool in the oil and gas industry. Effective use of seismic surveys allows industry professionals to identify prospects, assess potential resources, reduce risk and even quantify reserves – in short, to make well-informed decisions that...

Energy Transition
ByAlex Nevokshonoff

While we are still waiting for guidelines from the IRS regarding hydrogen incentives released with the Inflation Reduction Act (IRA) last year, it is clear that supportive policy must be in place for green hydrogen to compete in existing hydrogen...

Enverus Press Release - Breaking down the CCUS basins
Energy Analytics Energy Transition

Panel discussion with CCUS experts from Enverus EVOLVE Conference Introduction CCUS offers a promising solution to curb greenhouse gas emissions by capturing CO2 from industrial sources and power plants and storing it underground. CCUS has gained significant attention in recent...

Analyst Takes
ByChris Griggs

As we usher in the month of August, it’s an ideal moment for retrospection on the past month’s shifts and trends in the energy sector. Our proficient Enverus Intelligence® | Research (EIR) team has delved into critical trends and innovations,...

Energy Transition
ByCarson Kearl

The Vogtle Unit 3 nuclear reactor began its commercial operations at the end of July. Based in Georgia, the facility will provide clean electricity to the southeast U.S. for likely longer than the next half-century. This marks the first U.S....

Let’s get started!

We’ll follow up right away to show you a quick product tour.

Let’s get started!

We’ll follow up right away to show you a quick product tour.

Sign up for our Blog

Register Today

Get Energy Transition Research updates straight to your inbox by filling out the form below.

Sign Up

Power Your Insights

Connect with an Expert

Access Product Tour

Speak to an Expert