Pricing in ERCOT’s wholesale market is dominated by natural gas prices, since natural gas generating capacity comprises approximately 70% of total capacity in ERCOT. When gas prices are low, it can become cheaper to run a natural gas plant than so-called baseload coal plants.
This situation may offer a rare but interesting opportunity for Austin Energy to temporarily shut down the Fayette coal plant and instead “baseload” the Sandhill combined cycle plant (which is much cleaner) or buy power off the market (somewhat cleaner, depending on the source). Based on information provided by the utility, natural gas prices below $3 per MMBtu suggest the Sandhill combined cycle plant should be dispatched BEFORE the Fayette Coal Plant based solely on the economics of relative fuel costs.
Indicative Marginal Operating Costs (as provided by Austin Energy)
Fayette Power Project = $22.50/MWh
Sand Hill Combined Cycle: $4.00 X 7.5 = $30.00
Sand Hill Combined Cycle: $3.00 X 7.5 = $22.50
Sand Hill Combined Cycle: $2.50 X 7.5 = $18.75
Fuel Cost ($/MMBtu) x Heat Rate = $/MWh
Since August 20, 2009, spot market natural gas prices have averaged less than $3/MMBtu.
Austin Energy staff told the Generation Resource Planning Task Force on September 9, 2009 that this situation has recently occurred for the utility, and that at times the Sand Hill Combined Cycle plant has been dispatched before the Fayette Power Project based on relative operating costs.
