texas electricity trends for 2021 electricity rates

Texas Electricity Trends for 2021

With 2021, we expect to see low prices for long term plans and an increasing number of green energy electricity plans as Texas moves more and more generation to renewable energy.

In this article we cover:

For information on our assessment of Winter Storm Uri and the Texas winter electricity outage, check out this article, What’s Going on With Texas Electricity? February 2021.

Texas 2021 Reserve Margin Forecast

Before we get too deep into this, let’s define a term that you will hear a lot about in the ERCOT Texas electricity market — Reserve Margin.

Reserve Margin is the difference between the amount of power generation capacity that is available, versus the amount of power demand that is expected.

To ensure system reliability, ERCOT, the Electricity Reliability Council of Texas, likes to maintain a 13.5% reserve margin. That means they like to have 13.5% more generation capacity than projected demand. It’s the “just in case” margin that we have.

The “just in case” allows for the impact of hotter than expected temperatures, which would spike demand. And it allows for the risk of unexpected generation shut downs, which would reduce supply. It also factors in the chance the wind doesn’t blow when it’s expected to.

ERCOT releases three resource adequacy projections each year.

  • December 2020: ERCOT releases its Capacity, Demand and Reserves (CDR) report with initial projections for summer 2021.
  • March 2021: ERCOT releases its preliminary Seasonal Assessment of Resource Adequacy for the ERCOT Region (SARA). They use historical projections for the summer weather.
  • May 2021: ERCOT releases its final SARA report for the year, taking into account the Texas weather forecasts for the summer months.

With peak demand holding steady vs. 2020, no plant retirements and new wind and solar projects coming online, reserve margins are expected to increase in 2021 to 15.5%, well above the target of 13.5%. And it’s the first time we’ve been in this good a position in the last 3 years.

And as Texas moves toward wind, solar and battery storage projects, our supply will continue to grow. Here’s what the future looks like in Texas.

ERCOT CDR Reserve Margin 2020 Report

This graph is taken from the ERCOT Capacity, Demand and Reserves Report in December 2020. See that data off to the right side? That shows even more generation available in 2022 and onward. That’s good for long-term Texas electricity rates.

So who cares about all this economic mumbo jumbo? Everyone that buys electricity should care. Here’s why.

How Do Reserve Margin Forecasts Impact TX Electricity Prices?

ERCOT’s projections of Texas electricity supply and demand have an impact on how wholesale energy gets traded on the open markets.

Good reserve margins projections for 2022 and beyond have a positive impact on energy trading. And that means lower consumer prices for long term Texas electricity rates. 

While the Summer 2021 reserve margin forecast looks great, there’s always a risk that something can change between now (January) and then. That pushes 12-month electricity wholesale contracts to be more expensive than long term contracts.  

If you read no further, here’s your takeaway:

  • Go for a long-term contract of 24 to 36 months to get the best electricity price in Texas for your home or business.
  • We expect pricing for 12-month contracts to increase throughout the Spring, with the highest rates in August 2021.

How Does Weather Impact TX Electric Prices?

The big wild card in Texas electricity prices is always – always – the weather.

That’s because only 20% of ERCOT load is residential electricity on a normal day. But on a scorching hot day? Residential electricity jumps to almost 50% of the total ERCOT load.

Commercial load is easier for retail energy providers to plan for. That’s because Commercial facilities have a more predictable usage pattern.

But homes in Texas use 50% or more of their electricity to heat and cool their homes. And when is Texas the hottest? July and August.

So anyone setting the electricity prices for Texas residential rates has to factor in a number of weather related risks like:

  • How does the 2021 hurricane season look?
  • What if we get a heat wave like we did in August 2019?
  • What if the wind doesn’t blow like happened in August 2020?
  • Will working from home continue, driving up electricity usage for A/C?

These are all weather risks that factor into any short term electricity plans that include July and August 2021.

Renewable Energy is the #2 Energy Generation Source in Texas

The times they are a changing. And the big story for Texas 2021 electricity is renewable.

In 2011, 80% of Texas power supply came from coal and natural gas fired power plants. In 2020 Wind Power supplied 24% of all power generated in Texas.

For 2021 and 2022, the majority of new power generation capacity built in Texas will be renewable. And by 2022, solar and wind is expected to supply almost 40% of the state’s electricity, out-pacing natural gas.

ERCOT Generation Texas Energy Sources
Source: Enel X Energy Market Outlook: What to Expect in 2021 and Beyond

Now, wind can be risky. Two years in a row, Texas experienced price spikes in August because the wind didn’t blow at the level that it was expected to.

Enter solar power and battery storage. Large utility-scale solar power assets are being developed by companies like 174 Power Global (parent company of Chariot Energy). Plus utility-scale battery storage devices can store power when the sun is shining and wind is blowing. 

You can go green in Texas by installing solar on your roof and selling excess capacity back to the grid. That’s a $20K investment in your home. (And we’ve got a solar buy back electricity plan for your excess power if you go that way.)

Or you can go green in Texas by buying a green energy product from any one of the REPs that offer 100% Texas green energy. You’ll find our review of Texas green energy companies here.

Shop Green Energy Plans in Texs

The Impact of Economic Recovery on Power Prices

As we get COVID-19 under control with vaccination rollouts, offices , schools and commercial entities will re-open, increasing the demand for power.

According to Enel X, an energy transformation company, “the nation will continue to see upward pressure in the natural gas market, which in turn will raise electric prices compared to 2020.

Forbes writer Robert Rapier concurs, saying that falling oil production will mean a decline in natural gas supplies. That writer predicts that natural gas wholesale prices will increase by 25% in 2021.

Texas electricity is less tied to natural gas than in the past. However, 40% of power in Texas will still come from natural gas generation assets in 2021.

But based on the way electricity generation companies buy natural gas on the forward markets? We think any resurgence in natural gas prices won’t impact Texas electricity rates in 2021.

But rising natural gas prices could start to put pressure on wholesale prices in 2022 and 2023. If that happens, you could see Texas long term electricity rates (plans longer than 12 months) increase toward the back half of 2021.

Long Term Texas Electricity Rates for 2021

If you’ve read everything above, you already know why long-term electricity plans give you the best Texas electricity rates for your home or business.

To recap:

  • REPs are able to secure wholesale contracts for 2022 and 2023 power at a lower price than 2021 power.
  • Short Term wholesale contracts (12 month contracts) have more weather and supply risk, which means a higher price for consumers.
  • The best 2021 rates for Texas electricity plans are for 24 months or longer.

Here are our Top 10 cheapest long-term electricity plans in the Houston and DFW areas.

Top 10 Long Term Electricity Plans for Houston Area

Provider Plan Name Term Rate/kWh
Champion Energy Services Champ Silver 24 24 9.0 ¢ Details
Champion Energy Services Champ Saver 24 24 9.1 ¢ Details
Pulse Power Texas Fixed 36 36 9.3 ¢ Details
Champion Energy Services Champ Saver 36 36 9.5 ¢ Details
Pulse Power Texas Fixed 24 24 9.5 ¢ Details
Direct Energy Veterans and Active Military 24 24 9.8 ¢ Details
Pulse Power Free Energy Nights 36 36 9.9 ¢ Details
Pulse Power Free Energy Weekends 24 24 9.9 ¢ Details
Frontier Utilities Frontier No Hidden Fees 24 24 10.3 ¢ Details
Rhythm Rhythm TX Breeze 36 36 10.3 ¢ Details

Top 10 Long Term Electricity Plans for Ft. Worth Area

Provider Plan Name Term Rate/kWh
Champion Energy Services Champ Silver 24 24 8.8 ¢ Details
Direct Energy Veterans and Active Military 24 24 8.9 ¢ Details
Champion Energy Services Champ Saver 24 24 8.9 ¢ Details
Pulse Power Texas Fixed 36 36 9.2 ¢ Details
Champion Energy Services Champ Saver 36 36 9.3 ¢ Details
Pulse Power Texas Fixed 24 24 9.4 ¢ Details
Rhythm Rhythm TX Breeze 36 36 9.7 ¢ Details
Rhythm Rhythm TX Breeze 24 24 9.8 ¢ Details
Pulse Power Free Energy Nights 36 36 9.8 ¢ Details
Pulse Power Free Energy Weekends 24 24 9.8 ¢ Details

Shop Texas Electricity Rates by Zip

Short Term Texas Electricity Rates – When to Go Short

While the best 2021 Texas electricity rates will be long term plans, most consumers buy 12 month electricity plans.

Why? Could be habit. Could be that they’re concerned about picking a new provider and committing to the unknown.

All of the electricity providers on ElectricityPlans.com have been carefully vetted and evaluated. Some of them, like Gexa Energy and Rhythm, offer a satisfaction guarantee. And we always recommend fixed rate Texas electricity plans that don’t have gimmicks. (Look for “Basic Electricity” when you shop.)

Some consumers want to shop for a 3-month electricity plan or a 6-month electricity plan. But watch out for these plans! While they will look really cheap, you will expire close to the summer. And your next electricity plan will be more expensive.

>>Shop fixed rate electricity plans online to find short term electricity plans.

When’s the Best Time to Shop for Electricity in Texas

We are often asked, when should I shop for electricity in Texas?

The best pricing opportunities are in the shoulder months, for contracts that expire between October and May. Contracts that expire in June through September are exposed to the pricing risk of summer weather.

But you can’t always pick your contract end date. It’s usually tied to whenever you first shopped for electricity, or perhaps when you moved into your most recent home or apartment.

The best time to shop for electricity in Texas is 60 days before your current contract expires.

Pick your switch date to be 7-10 days ahead of your expiration date of your current contract. That way you avoid any early termination fee, and you can lock in your electricity rate to avoid summer price increases.

Or, pick an electricity company that will pay your early termination fee with your current company. That way you can switch immediately without worrying about your contract expiration date. Rhythm will reimburse your contract early termination fee when you switch, up to $150.  

Expiring in the summer? Look for an odd-term contract that can help you shift your contract expiration date. For example, if you’re shopping for electricity in August, look for an 18 month contract term, so your next contract expires in February.

Whatever you do, don’t go onto a month to month “holdover” or “default” rate. That’s what happens when you don’t renew your electricity contract with your current provider, or shop for a new one. You get to pay their highest electricity rate. And we’ve seen providers charge as much as 20 cents per kWh when the going average rate is 10 cents per kWh.

Don’t. Forget. To. Shop. In fact, sign up for our electricity plan expiration reminder service right now while you’re thinking of it. We’ll remind you to come back and shop for electricity.

Shopping Commercial Electricity for Your Business in Texas

For business owners, long term plans will offer you the best electricity rates.

And, while residential customers must wait until they are within 60 days of their expiration date to shop their contract, commercial customers can lock in a new rate as much as a year in advance.

That means business owners can shop for commercial electricity to avoid shopping during the peak pricing months of June through September.

Here are some tips for shopping commercial electricity for your Texas business.

  • If you are a new business, work with a business electricity expert to get help establishing your service without a deposit.
  • If you are moving to a new location, work with a business electricity expert to get help with the city permit process.
  • Shop up to one year in advance of your contract expiration date to get the best prices.
  • Pay attention to your usage on the hottest days of the summer. That can help to keep your demand charges low.

Call us to shop for business electricity in Texas — 844-244-5559.

Or shop online to compare commercial electricity prices. You can complete the entire contracting process online in less than 10 minutes.

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