Tesla charging cost magnified as Texas electricity auction system fuels price spike

With nearly 3.5 million Texas homes and businesses without electricity 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 electric grid and manages the deregulated energy market for 75% of the state, issued emergency energy alert warnings in advance of the storm. But bitter-cold temperatures and a rare snowfall caused a surge in electricity demand and resulted in rolling blackouts as cold weather idled many of the state's wind turbines and reduced oil and gas production. Electricity generators that rely on fossil fuels were also impacted.

Spot electricity prices in Texas’ West hub spiked above the grid’s $9,000 per megawatt-hour cap. Power typically costs $25 per megawatt-hour.

The surge in prices was equivalent to the cost of charging a Tesla reaching $900.  A full charge costs about $18 while a typical charge is less depending on how much power was used.

TEXAS POWER GRID HIT BY EXTREME STORM

“The price on auctions can go quite high when there's scarcity,” said Meredith Angwin, a 30-year veteran of the utility industry and author of the book “Shorting the Grid.”

The high prices were at least partially due to the way the five-minute auction system is designed. ERCOT conducts real-time auctions to fill its power needs.

Any bid that is accepted receives the clearing price for that round. If providers who make different offers all have their bids accepted, they all get paid the highest price.

ERCOT did not respond to FOX Business’ request for comment.

Angwin notes power plants aren’t deliberately letting prices get out of control, but they are “happy when it happens.”

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She says operators should “move away” from the model that allows five-minute auctions to determine prices and revert back to the model where the Public Utilities Commission setting a guaranteed rate of return.

“Reliable electricity is too important to just go, oh well, sometimes it won't be there, whatever,” Angwin said.