{"id":4685,"date":"2013-07-31T16:44:48","date_gmt":"2013-07-31T16:44:48","guid":{"rendered":"http:\/\/blogs.edf.org\/energyexchange\/?p=4685"},"modified":"2026-04-10T16:51:20","modified_gmt":"2026-04-10T20:51:20","slug":"west-texas-electricity-prices-skyrocket-demand-response-is-the-answer","status":"publish","type":"post","link":"https:\/\/blogs.edf.org\/energyexchange\/2013\/07\/31\/west-texas-electricity-prices-skyrocket-demand-response-is-the-answer\/","title":{"rendered":"West Texas Electricity Prices Skyrocket \u2013 Demand Response Is The Answer"},"content":{"rendered":"<figure id=\"attachment_4686\" aria-describedby=\"caption-attachment-4686\" style=\"width: 300px\" class=\"wp-caption alignright\"><a href=\"https:\/\/blogs.edf.org\/energyexchange\/wp-content\/blogs.dir\/38\/files\/2013\/07\/ENR-New-York.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-4686\" src=\"https:\/\/blogs.edf.org\/energyexchange\/wp-content\/blogs.dir\/38\/files\/2013\/07\/ENR-New-York.jpg\" alt=\"\" width=\"300\" height=\"230\" \/><\/a><figcaption id=\"caption-attachment-4686\" class=\"wp-caption-text\">Source: ENR New York<\/figcaption><\/figure>\n<p>The Wall Street Journal recently reported that electricity prices in West Texas <a href=\"http:\/\/online.wsj.com\/article\/SB10001424127887324694904578601793013694354.html\" target=\"_blank\" rel=\"noopener\">skyrocketed over 20% this year<\/a>.\u00a0 West Texas is home to the Permian basin, one of the world\u2019s largest oilfields, and energy producers use hydraulic fracturing, or \u201cfracking,\u201d here to unlock vast new oil and gas supplies.\u00a0 The increased drilling, oil refining and natural gas processing uses large amounts of electricity.<\/p>\n<p>Cheaper electricity supplies are available, but cannot be delivered to West Texas due to transmission bottlenecks, or \u201ccongestion.\u201d\u00a0 The only power that can be delivered is from older coal plants.\u00a0 This leads to transmission \u201ccongestion\u201d charges (<em>i.e<\/em>., higher energy supply costs caused by the transmission bottlenecks), which commercial and industrial consumers must pay as a surcharge on their monthly electricity bills.\u00a0 Using these older coal plants leads to more pollution as well because these plants burn fuel less efficiently and have higher levels of toxic air emissions.<\/p>\n<p>The typical solution is to build new transmission lines to access cheaper electricity supplies.\u00a0 But a better and cheaper approach is to pay consumers for voluntarily reducing their electricity usage when energy supplies are tight.\u00a0 Known as \u201c<a href=\"https:\/\/blogs.edf.org\/energyexchange\/2013\/04\/08\/dont-turn-the-lights-off-on-demand-response\/\" target=\"_blank\" rel=\"noopener\">demand response<\/a>,\u201d this solution:<\/p>\n<p><!--more--><\/p>\n<ul>\n<li>creates a new market where consumers can respond to wholesale electricity price signals by deciding whether to use higher-priced energy or to be paid for voluntarily reducing their usage;<\/li>\n<li>defers investment in new fossil fuel power plants and costly transmission upgrades;<\/li>\n<li>lowers electricity prices for all consumers, not just those who are paid for voluntarily reducing their usage; and<\/li>\n<li>keeps our air cleaner and preserves our scarce water supplies by running older, dirtier coal plants less often.<\/li>\n<\/ul>\n<p>\u201cEverything is bigger in Texas,\u201d but not demand response.\u00a0 Although it has <a href=\"https:\/\/blogs.edf.org\/energyexchange\/2012\/01\/12\/demand-response-a-key-component-in-texas-electricity-market-why-arent-we-taking-advantage-of-it\/\" data-wplink-edit=\"true\">more potential demand response than any other state<\/a>, Texas has actually implemented only a small amount of demand response \u2013 which is used to avert rolling blackouts during electric emergency conditions.\u00a0 Other regions of the country use demand response to much greater advantage.\u00a0 Voluntary demand response programs in PJM, the electricity market in the northeast, have paid consumers nearly <a href=\"http:\/\/monitoringanalytics.com\/reports\/PJM_State_of_the_Market\/2013\/2013q1-som-pjm-sec5.pdf\">$2 billion in demand reduction<\/a> revenues since 2007.<\/p>\n<p><a href=\"https:\/\/blogs.edf.org\/energyexchange\/wp-content\/blogs.dir\/38\/files\/2013\/07\/John-Finnigan_jpg.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"alignleft  wp-image-4606\" src=\"https:\/\/blogs.edf.org\/energyexchange\/wp-content\/blogs.dir\/38\/files\/2013\/07\/John-Finnigan_jpg-199x300.jpg\" alt=\"John Finnigan\" width=\"139\" height=\"210\" srcset=\"https:\/\/blogs.edf.org\/energyexchange\/wp-content\/blogs.dir\/38\/files\/2013\/07\/John-Finnigan_jpg-199x300.jpg 199w, https:\/\/blogs.edf.org\/energyexchange\/wp-content\/blogs.dir\/38\/files\/2013\/07\/John-Finnigan_jpg.jpg 425w\" sizes=\"auto, (max-width: 139px) 100vw, 139px\" \/><\/a><\/p>\n<p>Demand response would lower electricity prices not only for West Texas but throughout the state.\u00a0 Electricity prices are a function of supply and demand.\u00a0 Texas tries to maintain adequate electricity supplies through an \u201cenergy-only\u201d wholesale market, which procures electricity supplies in real-time with no long-term planning.\u00a0 Texas is the only region in the U.S. using this method.\u00a0 Other regions ensure adequate electricity supplies by using either administrative mandates or an energy market combined with a \u201ccapacity market\u201d (a market-based approach using long-term planning).<\/p>\n<p>Texas has inadequate electricity supplies (the \u201cenergy crunch\u201d) to meet projected electricity demand plus a healthy safety margin. \u00a0Texans learned this lesson the hard way when consumers experienced rolling blackouts during a cold snap in February 2011 and the extreme heat and drought in July and August 2011.\u00a0 The Electricity Reliability Council of Texas (ERCOT), which runs the Texas wholesale electricity market, hired The Brattle Group to study how to ensure adequate electricity supplies.\u00a0 Brattle advised ERCOT that energy supplies could be increased by, among other things, re-designing the market to enable much <a href=\"http:\/\/www.ercot.com\/content\/news\/presentations\/2012\/Brattle%20ERCOT%20Resource%20Adequacy%20Review%20-%202012-06-01.pdf\">higher levels of demand response<\/a>.\u00a0 This could be done by implementing a capacity market, such as the forward capacity market used in PJM or the new and innovative \u201cflexible capacity\u201d market under consideration in California.<\/p>\n<p>ERCOT can relieve high West Texas energy prices and assure adequate electricity supplies for the state as a whole by enabling much higher levels of demand response.\u00a0\u00a0 Let\u2019s bring the Lone Star State a new market-based solution where Texans, as a whole, can earn billions of dollars in payments for voluntarily managing their electricity use.\u00a0 As part of the bargain, we\u2019ll also get adequate electricity supplies, lower electricity prices, cleaner air and <a href=\"https:\/\/blogs.edf.org\/energyexchange\/2013\/07\/11\/its-time-our-policies-reflect-the-fact-that-energy-and-water-are-fundamentally-intertwined\/\">better water management<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Wall Street Journal recently reported that electricity prices in West Texas skyrocketed over 20% this year.\u00a0 West Texas is home to the Permian basin, one of the world\u2019s largest oilfields, and energy producers use hydraulic fracturing, or \u201cfracking,\u201d here to unlock vast new oil and gas supplies.\u00a0 The increased drilling, oil refining and natural &#8230;<\/p>\n","protected":false},"author":12461,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[38678,181],"tags":[84856,46614,224,27316],"coauthors":[114130],"class_list":["post-4685","post","type-post","status-publish","format-standard","hentry","category-demand-response","category-texas","tag-demand-response","tag-electricity","tag-energy","tag-texas-2"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>West Texas Electricity Prices Skyrocket \u2013 Demand Response Is The Answer - Energy Exchange<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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