High temperatures and rising electricity demand are likely to drive up power prices in Texas this summer, despite the power markets in the rest of the US generally pricing lower, according to Reuters.

Spot wholesale electricity prices in the Texas power trading hub for August have consistently traded above $175 per megawatt-hour (MWh) so far in May, 94% higher than the average of $90.18/MWh for August last year.

Sean Kelly, CEO of energy analytics and forecasting at Amperon, said that higher temperatures, which stimulate demand for cooling systems, along with computing-intensive businesses such as data centres, will drive higher prices in the summer months.

“With the growth of renewables, the retirement of baseload fossil-fired generation and the dependence on renewables, on days renewables are not showing up, it is going to be very pricey,” Kelly said.

In contrast, power prices for August in the California market are trading at around $80/MWh, 30% below last year’s average for the month. According to Amperon, California benefits from an abundance of hydropower.

The US Energy Information Administration (EIA) reported that in 2022, Texas produced more electricity than any other state and generated twice as much as second-place Florida. Texas accounted for more than 12% of the nation’s total electricity net generation that year.

Texas has large wind power capacity, generating 26% of all of the US’ wind-sourced electricity in 2022, for the 17th consecutive year. Wind power exceeded coal-fired generation in the state for the first time in 2020.

Electrical grids across the US are under pressure due to rising demand for electrifying transportation as well as computing-intensive businesses like data centres that support generative AI (GenAI).

Speaking at the 26th World Energy Congress in Rotterdam last month, Ann Mettler of Breakthrough Energy said the world was underestimating the energy needs of emerging technologies such as GenAI.