Climate change increases energy demand and cost in Texas

This study focuses on the ERCOT electricity market in Texas and demonstrates how climate change is already driving large increases in electricity demand and total electricity costs. Results show that, compared to a 1950-1980 baseline climate, electricity demand was 2.0 GW (4.1%) higher because of the extreme temperatures of that year — climate change contributed 45% of this increase, with the rest coming from short-term climate variability. As demand increases, so does the price per unit of electricity, so consumers are hit double: they must buy more electricity, and each unit of electricity costs more. Using data from the wholesale market, we estimate that the total cost of electricity (the combination of higher demand and higher per-unit prices) increased by $7.7B in 2023 compared to the baseline climate, $295 per ERCOT customer, with most of this increase occurring during the summer. Climate change contributed about 28% of this ($2.2B, $83 per customer), while short-term variability contributed the other 72%. About two-thirds of this increase is due to price increases triggered when the ERCOT grid reaches its physical limits, either in generation or transmission capacity. Investments in increasing the power supply or the ability to transmit it across the state, or reducing demand (e.g., demand response), could substantially reduce the impact of climate change on the cost of electricity in Texas.