Texas Faces Energy Cost Increases in 2023: Thermal Outages and High Demand as Main Drivers

An in-depth analysis reveals that thermal plant outages and peak demand accounted for most of the electricity price increases in Texas in 2023, overshadowing the impact of ancillary services.

Share:

In 2023, the Texan energy market experienced a surge in electricity costs, driven by exceptional market conditions. Contrary to what was previously suggested by the Independent Market Monitor (IMM), unplanned thermal outages and record demand played a key role in price formation, according to the latest report by Aurora Energy Research. The Electric Reliability Council of Texas (ERCOT), which manages most of the state’s power distribution, faced a particularly volatile environment. Aurora’s report highlights that the ten most expensive days in 2023 were primarily influenced by unplanned outages at thermal plants and extreme temperatures.

Frequent and unforeseen thermal plant outages significantly contributed to an increase in wholesale market costs. Over the ten days analyzed, these interruptions added approximately $5.4 billion in additional charges. Coupled with record demand, this created an excess of $8.3 billion. These figures underscore the challenges for the ERCOT network as the rapid growth of renewables shifts the state’s energy mix.

Ancillary Services: A Limited Role

The IMM had previously pointed to the role of the ERCOT Contingency Reserve Service (ECRS), an ancillary service introduced to stabilize grid frequency and limit imbalances during periods of stress. In May 2024, an IMM assessment concluded that the procurement of this service had contributed to a $12 billion increase in costs between June and December 2023. However, Aurora’s report nuances these findings. When taking into account high load and thermal outages, the excess cost attributed to ECRS falls to a range of $100 million to $1.3 billion.

Aurora’s analysis shows that the impact of ECRS was largely overestimated by the IMM. Rather than significantly increasing costs, this service helped to prevent major disruptions to the grid during periods of high demand. Price volatility is more directly linked to unforeseen thermal outages, highlighting the need for more targeted policies to strengthen the stability of the Texan network.

Demand Growth as a Key Driver

Electricity demand in Texas has continued to grow at a steady pace, surpassing other regions of the United States. Between 2020 and 2023, ERCOT observed more frequent load peaks, especially during the summer, exacerbated by record temperatures. Aurora’s report demonstrates that if load levels had remained consistent with ERCOT’s peak forecast of 82.7 GW, costs would have been reduced by $8.3 billion over the ten analyzed days.

This rapid demand growth represents a significant challenge for the network. To maintain system stability, ERCOT had to rely on sporadically high prices, encouraging producers to increase their generation capacity. However, this strategy remains risky, as it depends on the operators’ ability to anticipate demand shifts and avoid unforeseen service interruptions.

Upcoming Reforms and Perspectives

The situation in Texas raises important questions for regulators. Aurora’s study highlights the need for structural reforms to reinforce grid resilience. While ancillary services can contribute to stabilizing the system during periods of tension, data shows that the effectiveness of current policies is limited in the face of growing demand and repeated thermal outages.

Ongoing discussions around Texas market reform will need to consider these factors to avoid overburdening consumers while maintaining a coherent price signal for investors. Adjustments in ancillary service procurement and strengthening thermal capacity could help mitigate costs in case of future extreme heatwaves. Price volatility during the summer of 2023 underscores the need for a more proactive approach to load management and outage anticipation.

The report concludes that rapid demand growth, combined with higher levels of thermal outages, has a direct impact on prices. Without better preparation to address these structural challenges, system costs will continue to rise, affecting supply stability and the competitiveness of the Texan market.

On July 8, 2025, the Senate validated the Gremillet bill, aimed at structuring France's energy transition with clear objectives for nuclear power, renewable energies, and energy renovation.
Brazil, Mexico, Argentina, Colombia, Chile, and Peru significantly increase renewable electricity production, reaching nearly 70% of the regional electricity mix, according to a recent Wood Mackenzie study on Latin America's energy sector.
The Canadian government announces an investment of more than $40mn to fund 13 energy projects led by Indigenous communities across the country, aiming to improve energy efficiency and increase local renewable energy use.
The German Ministry of Economy plans to significantly expand aid aimed at reducing industrial electricity costs, increasing eligible companies from 350 to 2,200, at an estimated cost of €4bn ($4.7bn).
A major electricity blackout paralyzed large parts of the Czech Republic, interrupting transport and essential networks, raising immediate economic concerns, and highlighting the vulnerability of energy infrastructures to unforeseen technical incidents.
French greenhouse gas emissions are expected to rise by 0.2% in the first quarter of 2025, indicating a global slowdown in reductions forecast for the full year, according to Citepa, an independent organisation responsible for national monitoring.
The Republican budget bill passed by the U.S. Senate accelerates the phase-out of tax credits for renewable energies, favoring fossil fuels and raising economic concerns among solar and wind industry professionals.
Rapid growth in solar and wind capacities will lead to a significant rise in electricity curtailment in Brazil, as existing transmission infrastructure remains inadequate to handle this massive influx of energy, according to a recent study by consulting firm Wood Mackenzie.
In April 2025, fossil fuels represented 49.5% of South Korea's electricity mix, dropping below the symbolic threshold of 50% for the first time, primarily due to a historic decline in coal-generated electricity production.
The US Senate Finance Committee modifies the '45Z' tax credit to standardize the tax treatment of renewable fuels, thereby encouraging advanced biofuel production starting October 2025.
According to the 2025 report on global energy access, despite notable progress in renewable energy, insufficient targeted financing continues to hinder electricity and clean cooking access, particularly in sub-Saharan Africa.
While advanced economies maintain global energy leadership, China and the United States have significantly progressed in the security and sustainability of their energy systems, according to the World Economic Forum's annual report.
On the sidelines of the US–Africa summit in Luanda, Algiers and Luanda consolidate their energy collaboration to better exploit their oil, gas, and mining potential, targeting a common strategy in regional and international markets.
The UK's Climate Change Committee is urging the government to quickly reduce electricity costs to facilitate the adoption of heat pumps and electric vehicles, judged too slow to achieve the set climate targets.
The European Commission will extend until the end of 2030 an expanded state-aid framework, allowing capitals to fund low-carbon technologies and nuclear power to preserve competitiveness against China and the United States.
Japan's grid operator forecasts an energy shortfall of up to 89 GW by 2050 due to rising demand from semiconductor manufacturing, electric vehicles, and artificial intelligence technologies.
Energy-intensive European industries will be eligible for temporary state aid to mitigate high electricity prices, according to a new regulatory framework proposed by the European Commission under the "Clean Industrial Deal."
Mauritius seeks international investors to swiftly build a floating power plant of around 100 MW, aiming to secure the national energy supply by January 2026 and address current production shortfalls.
Madrid announces immediate energy storage measures while Lisbon secures its electrical grid, responding to the historic outage that affected the entire Iberian Peninsula in late April.
Indonesia has unveiled its new national energy plan, projecting an increase of 69.5 GW in electricity capacity over ten years, largely funded by independent producers, to address rapidly rising domestic demand.