As morning demand ramped up and cold weather lingered on April 7th, 2025, ERCOT found itself in an unexpected supply shortage that sent prices soaring. We observed 5-minute real-time locational marginal prices (LMPs) skyrocket to over $4000 per MW at 6:50 AM — the highest they’ve been since December 2024. This was quickly followed by a rebound to more stable levels over the next hour.
So, what caused this sudden price spike?
To answer this question, we need to look towards the generation stack in ERCOT. Doing so, there are two main factors that stand out:
1. High Net Demand
At HE6, actual net demand was 41.1 GW, compared to actual load of 45.6 GW. Since solar had yet to ramp up for the day, the difference of 4.5 GW can be fully attributed to wind. In the past month, wind generation at HE6 averaged 17.5 GW, implying that wind generation at this time was very low. With no solar in the early morning hours and little wind generation readily available, ERCOT had to rely on other, more expensive sources to fuel the grid. Additionally, ERCOT’s day-ahead forecast was 2.4 GW higher than actuals — a significant miss that suggests there was some element of surprise that prevented dispatchable generators from receiving sufficient ramp-up notice.
2. High Number of Generation Outages
We’re currently in the midst of outage season, where many generators undergo routine maintenance in the spring, when demand is lower. The downside to this is a weak generation stack, especially when renewable generation underperforms. According to ERCOT, total generation outages were approximately 36.6 GW on April 7th, which is higher than usual for this time of year. This means that the grid was left with fewer quick and cost-effective power resources to handle real time uncertainty.
These two factors caused ERCOT to have a shortage of cheap generation readily available to handle demand. In order to rebalance supply with demand, ERCOT had to rely on their non-spin reserves (mainly batteries) to ensure there were no widespread grid outages. As shown in the figure below, around 2.65 GW of power was pulled into the grid from batteries around HE8. Since there was no other generation available, the batteries could justify bidding into the market at a very high price, which is reflected in the real time price spike.
Across the hour following, cheaper generators finished ramping up, allowing ERCOT to wane off expensive battery usage, causing prices to return to more stable levels. This quick supply rebalancing caused 5-minute real time LMPs to return to ~$500 per MW at HE7 and ~$40 per MW at HE8.
Unexpected price volatility continues to highlight the delicate balance of supply and demand that grid operators face. In this case, the combination of high net demand and a high number of generation outages allowed batteries to bid into the market at a high price, leading to sharp LMP increases in ERCOT. As outage season continues, I wouldn’t be surprised if we saw similar price volatility scenarios play out in the coming weeks.
Learn more about the challenges and value of accurate price forecasting with our free Price Forecasting White Paper.
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