ERCOT’s 85 GW load forecast for Winter Storm Fern wasn't just high—it was indefensible
We’re one month removed from the havoc that was Winter Storm Fern. Focusing on its effects in ERCOT, we dug into the weather, grid, and market fundamentals to provide six strategic insights:
1. Five days out, temperature forecasts disagreed about timing and intensity but were reasonably correct about the event low/peak heating period on 1/26. While the peak heating event was relatively extreme, in this particular case it wasn’t much of a short-term surprise. In terms of long-run climatology though, the peak heating event on 1/26 was a P99 event for that calendar day, the week was a P97 and the month was P65.
2. ERCOT appears to have deliberately biased their load forecasts high (incorrectly). Assuming ERCOT was using weather forecast consensus (which was relatively accurate) as the input, we find their 85 GW forecast for 1/26 and 80 GW forecast for 1/27 to be essentially indefensible, falling well outside the range of recent weather-load relationships.
3. ERCOT appears to have deliberately biased wind generation forecasts low (correctly). We know this because their STWPP forecast (representing a P50 level) was below their WGRPP forecast (representing a P20 level). They appear to have manually adjusted the STWPP low but left the WGRPP alone, creating a mathematically impossible scenario.
4. Load in West Texas was significantly affected by icing of oil and gas infrastructure. A large share of load growth in West Texas has been driven by the electrification of oil and gas drilling and processing. When these wells/pipes froze, the associated electrical compression didn’t operate, resulting in exceptionally low load.
5. The market result: a high day-ahead (DA) clear driven by ERCOT’s posturing and then a real-time (RT) fail due to reality and load destruction. ERCOT’s posturing appeared to have the intended effect, supporting a high DA clear with ample reserves to blunt the risk of RT market capacity shortfalls — even in the face of lower than expected wind.
6. Sunairio’s price forecast explained the actual realization and the advanced market fear premium. Looking at our forecast of the 1/26 5x16 North Hub locational marginal pricing (LMP) realizations from the week before, we can see that our expected value was almost spot on, while the long tail to the right explains why some were willing to pay $600+ (because there was a small chance of clearing over $1,000). Note: the mean of our price distribution was at the 80th percentile — far from the median — because of the extreme right skew (risk of high prices).
