European utilities expect first quarter 2021 profits to be hundreds of millions of euros lower as a consequence of the impact the extreme cold in Texas had on renewables, power supply and pricing.

Engie as part of its financial guidance for this year currently estimates a potential net negative impact on its current operating income (COI) of €80-120m ($97-146m).

“Included within this guidance is an estimated impact that follows the extreme cold weather in Texas earlier this month,” the French utility said in its 2020 earnings report.

“Engie is assessing the situation, which mainly affects renewables and supply activities.”

Unprecedented Arctic weather conditions in usually warm Texas had led to a spike in demand as millions of residents switched on their heating, while crippling fossil fuel generators and even freezing part of the state’s vast wind turbine fleet.

As the main Texas grid operator ERCOT had to temporarily switch off part of the fossil and renewable generation fleet, millions of Texans were trapped in their homes without power while electricity prices spiked to absurd heights.

RWE pricing strategy crossed

RWE last week said part of its onshore wind fleet was out of service from 9 February on because of icing and grid issues. The German utility employed operations teams to get the affected wind turbines back on.

“Priority number one is to safely resume operations at our production sites. I would like to thank all our employees who are working hard to get through this difficult situation for all families in Texas,” said Silvia Ortín Rios, chief operating officer for onshore wind and solar Americas at RWE Renewables.

Extremely high electricity prices following the spike in demand crossed RWE’s forward pricing strategy in a perverse way.

As the company had sold parts of its expected production from wind farms in advance, the company had to purchase these volumes to fulfil its supply obligations. The already high prices were further increased following an order from the Texan public utility commission directing ERCOT to make adjustments to prices.

This resulted in costs to buy back power increasing further to up to $9,000 per megawatt hour, RWE said.

As a result, RWE expects its 2021 earnings before interest, taxes, depreciation and amortisation in its onshore wind and solar segment to be negatively affected in the range of “low to mid three-digit million euro amount”.

Wind

Engie, RWE profit to plunge by hundreds of millions on Texas cold spell