Texas Wholesale Electricity Revisited


Another important market dimension to consider for wholesale electricity is the Federal Energy Regulatory Commission (FERC). Utility Dive lays out some talking points on regulatory efforts for a greener grid. More specifically, the roles that Attorney Generals and FERC plays in regulation, which in turn will pave the way for the future wholesale electricity market, is a key facet to keep in mind. 

This is apparent by just how polarizing clean energy technology initiatives are becoming. Many in favor of gas and coal are vehemently opposed to aggressive implementation of green technology because they argue it will undermine our fuel security. They also state that alternative energy sources are not being accurately valued because of just how many credits, incentives, and various valuations are skewing their real worth.

What this debate and subsequent shimmy for market valuation change means for wholesale electricity is that things might only get more complicated from here on out. Especially as regulators both give priority to clean energy and try to keep things as fair and free in the market. 

The Need for a New Model?


The majority of the country is competitive when it comes to electricity. This is especially true in Texas, where about 85% of consumers have the freedom to choose their provider. But Science Daily (via Cornell University) points out that restructured market models were originally designed to fit the more traditional energy mold: natural gas, coal, and other fossil fuels for electrical generation. What this means is that the market model might need to be tweaked to further welcome in alternative energy sources. Either that or the market will correct itself naturally, but many think there needs to be bumpers in place in order to further integrate green efforts for the grid. 


Science Daily, in the same source, shares that electricity is too complex to be completely free – as perhaps all markets are – and in that respect, small administrative changes should be implemented in order to make the market more conducive for renewables. As mentioned above, there are a lot of challenges to those types of changes, but all of which could have wide scale implications on the wholesale electricity market. 


On a similar note, in this article on the need for Congress to step in, the author Tom Hassenboehler states that Congress should step in, along with the FERC, and make sure electricity markets are more open and able to flourish in their competitive state. This sort of regulation will ensure transparency and would be a larger model of what the majority of Texas has adopted since 2002.


 Recent News on Utility-Scale Batteries 

The Energy Information Administration (EIA) says that most utility-scale batteries are now made of lithium-ion. What does this mean for the electric grid? It largely means that energy and power capacity is only improving for battery storage options. This could have widespread implications for the future of electricity storage, meaning that more efficient models – most of which will probably use vanadium – will drive what the EIA estimates to be 2,500 MWH of storage power capacity by 2023.  Vanadium, in particular, is an attractive alternative to lithium just because it has an almost endless cycle life, which is a battery’s ability to charge and discharge without becoming defunct.

Regardless of if most utility-scale batteries are made up of lithium-ion or vanadium, there are now a lot more in circulation. The EIA shows that California and Illinois are leading the pack in utility-scale storage sites. Texas is close behind. 

This growth is encouraging because utility-scale sites work well with sustainable energy sources and microgrid efforts, meaning that the grid will be backed up with much more electrical reserves if needed. 

Short Overview of Utility-Scale Battery Storage

Just to provide some context on the practice, large scale battery storage ventures are typically done through pumped hydropower. In other words, depending on peak hours for electricity demand, water is pumped up reservoirs and then funneled down to power a turbine when the grid needs more energy to compensate. This same sort of practice is being scaled out for more efficient and portable battery storage options.

Whereas a residential solar panel will store energy in the kilowatt range, utility-scale batteries are much larger, offering megawatts of storage potential. This is only increasing as technologies improve.

A Fully Renewable Grid with the Help of Utility-Scale Storage

There is a lot of opportunity for carrying out a fully renewable grid with the help of utility scale batteries. Solar and wind has long had a storage problem, especially during peak wind or sunshine days where a lot of energy goes to waste. As better batteries are rolled out, so too the opportunity for completely renewable grids comes closer.

Scientific American, when looking at the future of energy storage, forecast that lithium-ion batteries will be the dominant technology for the next 5-10 years. But to fully make a renewable grip operational will mean moving beyond the capabilities of lithium ion. This will most likely mean something similar to the aforementioned vanadium flow batteries or gravity storage.

But with increasing renewables, microgrids, and battery storage advancements, more storage means less blackouts and more flexible regions when it comes to spikes in electricity demand. 

We will have to wait and see what exciting things continue to develop in battery storage capacity, and how that relates to the grid of the future.

Texas: A Bitcoin Miner’s Paradise?

Although the bitcoin craze has died down some since it rose to monumental values in 2017, there is still a booming industry in the cryptocurrency. For those who don’t know about the digital coinage, it and the blockchain technology it utilizes was not too long ago touted as the next big thing. 

Although intriguing and vastly practical for protecting user data, cybersecurity, and a wide range of manufacturing models, it has yet to reach a high level of utility for individuals.  But wide scale adoption of novel ideas take time, after all. 

Currently, one bitcoin is worth about $8,200 USD. That could change quickly because of the volatility of money. But to acquire bitcoins-more realistically, to acquire fractions of a bitcoin-means you have to “mine” them. As Jason Evangelho of Forbes states, mining for cryptocurrencies (like Bitcoin) means that you are using extremely powerful computers to solve math encryption problems that do two things:


  1. Miners verify a particular public record transaction by solving a difficult math problem (of sorts), which keeps the transaction anonymous through encryption.
  2. This “solved” math problem closes a “block”, which you can think of a node on a chain of other solved blocks- all of which are decentralized and unlikely to be hacked.

But what does all of this have to do with Texas? To put it simply, mining for bitcoins requires a lot of computer power to close off blocks, which in turn means a lot of electricity is needed to power the mining of even just a fraction of a bitcoin. But because Texas has some of the cheapest electricity available, a lot of entrepreneurs are flocking to Texas to develop a Bitcoin empire of sorts.

Layer1 and Bitmain

The entrepreneur and billionaire Peter Thiel is investing 200 million in a Bitcoin venture from Layer1, which will be located. West Texas. Giving credit where credit is due when considering electrical usage, the entire project will aim to harness all-renewable energy to generate electricity and power necessary for the cooling of the ultra-powerful mining computers. 

Another company, Bitmain, is posed to take over Rockdale, Texas as well. The Chinese cryptocurrency hardware manufacturer will produce what they’re calling the largest bitcoin mining facility ever.

But despite these installments, there’s definitely a bright point to the excessive electricity consumption that large bitcoin mining installations will pose. After all, projects like Layer1 and Bitmain could be a solution to natural gas flaring

“Flaring”, or burning off of excess gas, is what producers do when there is a surplus. This practice is obviously not good for the environment and bitcoin miners can use the surplus natural gas that would already go to waste and power their powerful computers.

But bitcoin is not exactly a viable strategy for everyone. Just ask the inhabitants of Rockdale, Texas, who all had high hopes for new jobs to be created when Bitmain arrived, only to be disappointed when only about 30 would become available. 

Regardless, things are shaping up to be interesting in Texas as the bitcoin mining industry continues to expand. 

Checking in on ERCOT

We pose this question because ERCOT recently released information on the Texas grid, reporting that there would not be any declared emergencies or scrambles for energy. It’s looking like there will be enough electrical capacity to last the rest of the year. This is of course a welcome change compared to the record-setting summer we had here recently.

According to the actual SARA report just released by ERCOT, there will be almost 84,000 MW total, with an expected peak of close to 61,000. This means that the reserve capacity will sit at a comfortable 22,900 and some change. No need to panic or call for energy-saving procedures across the state.

But as a reminder, the data and projections are compiled and forecasted using weather stats from years prior. They are not infallible, but because the weather is the definition of chaos, it’s impossible to completely know whether the grid will have enough. It’s looking safe enough to assume that Texas will be fine.

Speaking of ERCOT and predictions though, they are facing legal backlash because of their grid projections. 

Predictions Mean Hot Water for ERCOT?

ERCOT, the grid overseer for 90% of Texas’ state load, they have been in hot water because of a recent lawsuit with Panda Power. According to this source, ERCOT stated they needed much more energy generation than was really needed. Panda Power then built power plants to fulfill ERCOT’s urgent needs. As a consequence of there being plenty of electricity, Panda couldn’t generate enough revenue because supply was too abundant to cover the costs of maintaining their plants. They are suing ERCOT as a result of misleading information. 

As the aforementioned source says, Panda is “alleging that the Electric Reliability Council of Texas intentionally manipulated the projections to encourage new power plant construction and relieve the political pressure that was building on the grid manager.”

As the argument goes: because of ERCOT’s sovereign immunity status, what’s really stopping them from manipulating information whenever they want, if there are no legal repercussions for ERCOT

Natural Gas to Ensure Stronger Grid?

Lastly, this one seems to be an obvious question. With coal and nuclear being lessened across the country, natural gas will have to be ramped up to saddle the void that coal and nuclear leave behind. Renewables only account for about 11% of energy in the U.S.. 

So, as the PJM Interconnection is doing, natural gas will probably be needed to make sure that grids stay on reliably while the entire Nation’s renewable infrastructure has time to develop and catch up to always-increasing demand.

 Coal’s Influence in Texas Continues to Fall


Coal is continuing to fall. According to the EIA, coal shipments within the U.S. are consistently declining. As they state, “Nearly 600 million short tons (MMst) of coal was shipped to the U.S. electric power sector in 2018, the lowest level since 1983.” And specifically for electricity: “Coal shipments to the electric power sector in 2018 were 7% (47 MMst) lower than the previous year. “

It’s interesting to note that the EIA recently put out an energy flow diagram to track the total fossil fuel usage in the country. The collected data shows that in 2018 alone, “80% of domestic energy consumption originated from fossil fuels.” And as this diagram that the EIA put out shows, coal has fallen by a large amount when accounting for total fossil fuel usage in the country. 


Extrapolating the Data on Coal


If coal continues to fall, then natural gas will have to rise to make up for a dearth in coal plants. Because coal accounts for the second largest amount of electricity generation in the United States, will this also mean that the rest of the country will need more nuclear plants as well? 

Nuclear energy is close behind coal in electricity generation after all. And renewables (the most notable being Wind energy) don’t even produce half the megawatt hours as nuclear (on a national average), so it will be some time until renewables catch up or can produce on par with coal.


But that’s when we look at the Nation as a whole. If Texas continues to outpace coal production with wind energy, they might be more apt to adapt to a continued reduction of coal.  In Texas, ERCOT said that about 22 percent of electricity came from wind. This is just slightly higher than the 21% by coal, but it offers a snapshot into the state’s future.


This is all despite the fact that many experts feel that coal will stick around in the Lone Star State for quite some time. After all, coal is still a huge part of the economy.




As the Houston Chronicle states, Texas has seen some of the most notable declines in coal-generated power as everyone else. Their biggest coal mine, the Kosse Mine near Waco, was down 16 percent last year, and will only continue declining as plants all over the country close down. 


The aforementioned Houston Chronicle article has this to say about trends in the country: “The number of active coal mines in the United States has fallen by more than half over the past decade to 671 mines in 2017 from 1,435 mines in 2008.” 


But as coal plants are phased out, some suppliers are worried that prices will rise as supply shortens. And they very well could rise for areas that rely more on coal, like the Midwestern and Northeastern states.  


Texas shouldn’t be as affected, and the reduction of coal plants will most likely follow a more gradual rate for the time being. Which means that the 3% drop in coal-generated electricity by 2020 will most likely stem from the higher concentrated areas in the Northeast. 

What The Blistering Summer of 2019 Has Meant for Texas Natural Gas and Electricity Prices

The power sector has been vastly affected by this recent and unprecedented heat wave that has hit the United States. In fact, last month was historically significant as the hottest in recorded history

So, it comes as no surprise that energy demand and electricity usage soared  last month as a result, and demand is still high in August.

But as the EIA has stated in a recent report, the mixture of the high temperature and the low price of natural gas has proven to be a record-setting month for natural gas use in the country. And because Texas is already one of the leading energy consumers and producers, you can bet that this is affecting the Lone Star State heavily.

Quick Facts About Texas Natural Gas

In this overview, the EIA shows just how much oil and natural gas that Texas produces: in 2017 alone Texas accounted for 24% of the nation’s natural gas production. Additionally, the EIA has data that shows that “Texas is the largest energy-producing state and the largest energy-consuming state in the nation.” 

And as the Department of the Interior recently announced regarding the oil reserves in the Permian Basin, there is about 281 trillion cubic feet of natural gas stored there. These are technically continuous resources as well. 

Natural Gas Prices Are Extremely Low In Texas Right Now 

According to Reuters, Texas uses the most natural gas for generating power than any other state. To drive this usage up even more, there is a record-setting abundance of natural has in the Permian basin. So as demands for electricity generation increase because of the summer, cheap gas is being used to generate electricity more frequently. 

Reuters also states that “the Waha Hub in West Texas, which touched a record low of negative $9/mmBtu in April.” This is strongly correlated with the strong shift from coal to natural gas usage in recent years.

But how is this affecting electricity prices for consumers and wholesalers?

A Resultant Rise in Electricity Prices?

According to data curated by Bloomberg, “The unprecedented market rally highlights how volatile the Texas power market has become as coal-fired power plants, which have seen their profits squeezed by cheap natural gas and renewable energy resources, continue to close.”

So yes, because natural gas has been thriving, prices have been climbing. Because after all, in a July that has seen record after record, prices hit a record high this week with a 36,000% increase in wholesale electricity prices.

And this is all compounded by a smaller than usual amount of wind-generated electricity in the region. 

Overall though, with natural gas production as high as it has been this month, as per the previous EIA report, will prices continue to rise or will they soon level out? And just like the temperature, what goes up must eventually come down. Let’s hope that it’s sooner than later!