The following op-ed was written by Dean Foreman, Ph.D., Chief Economist at the Texas Oil & Gas Association (TXOGA):
Texas’ electricity markets have seen record-high demand this summer, and some analysts have been puzzled by the stark contrast in demand when compared to the rest of the U.S. Contrary to some misleading suggestions, while wind and solar energy have been strong contributors and are welcomed, natural gas remains the constant source of power generation that is dispatchable, no matter the weather.
In the last decade, Texas’ electricity generation saw rapid growth at a rate of 2.0% per year, which is four times faster than the national average of 0.5% per year. The Electricity Reliability Council of Texas (ERCOT) grid specifically has seen a 6.3% year-over-year (y/y) increase in power generation so far this summer. A breakdown of this reveals that natural gas-based generation contributed half of the total generation, emphasizing its role as the backbone of Texas’ power infrastructure.
Furthermore, wind and solar-based generation have grown by 11.8% y/y and 32.9% y/y, respectively, over the same period, which reflects capacity expansions of wind and solar generation as well as favorable weather conditions. Specifically, for wind, areas like Corpus Christi and Houston have recorded higher average wind speeds this summer compared with last year.
Despite the U.S.’ overall electricity generation dropping by 0.7% y/y this summer, Texas’ ERCOT region surpassed its previous year’s levels on 42 of the past 48 days, mainly due to the state’s distinct combination of demographic and economic growth, and hotter temperatures. For instance, Houston reported an average temperature of 86.4°F this summer, a 1.1% y/y increase. Temperature increases correlate directly with electricity demand. If Houston’s data is indicative of the broader state trend, it means roughly 40% of the increased electricity generation this summer was due to higher temperatures, while the state’s demographic and economic growth contributed the remaining 60%.
Looking at the specific hours of the day, natural gas has provided over half of total generation during the afternoon and evening so far this summer. Compared with last summer, natural gas has also increased its share of total generation between 9:00 PM and 10:00 AM, while wind and solar-based generation grew at other times, especially during the afternoon. This shift reflects the economic rationale behind Texas’ energy dispatch order, with wind and solar being utilized first due to their lack of fuel costs. However, during non-peak hours for these renewable sources, natural gas becomes the primary contributor, underlining its indispensable nature in Texas’ power grid.
In summary, the diverse drivers behind Texas’ electricity demand and generation—spanning seasonal weather, demographics, economic growth, and capacity additions—paint a multifaceted picture. Natural gas remains a mainstay in the energy mix, especially during early morning hours. Its continuous prominence might be due to actual demand or as a precautionary measure to ensure reserves for anticipated needs. Either way, it is abundantly clear natural gas is indispensable to improving the lives of all Texans.
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Founded in 1919, TXOGA is the oldest and largest oil and gas trade association in Texas representing every facet of the industry.