Mapping the causal structure of price formation in Texas's transitioning electricity market

Economics > General Economics [Submitted on 15 Apr 2026 (v1), last revised 16 Jun 2026 (this version, v2)] Title:Mapping the causal structure of price formation in Texas's transitioning electricity market View PDF HTML (experimental)Abstract:Renewable deployment and rising demand from electrification and large digital loads are transforming electricity markets. However, how these developments reshape electricity price dynamics remains poorly understood, leaving system planners, capacity investors, and market participants reliant on assumptions from a thermal-dominated era that may no longer hold. We use causal discovery to study the evolution of wholesale electricity prices in Texas, which is undergoing rapid transformation. Our findings overturn the view of Texas as a gas-price-driven market, demonstrating that wind generation has become the dominant causal driver of day-ahead prices, with effects more than three times greater than those of natural gas. Yet wind's price-suppressing effect is weakening during peak periods, and wind growth redistributes congestion costs to distant load centres. Furthermore, rising load in South and West Texas alters system prices and regional differentials. Uncovering the evolving spatiotemporal nature of causal drivers, our analysis reveals that the pace, geographic siting, and relative scale of new generation and large loads will be decisive for future electricity price risks, infrastructure needs, and investments. Submission history From: Shiva Madadkhani [view email][v1] Wed, 15 Apr 2026 15:05:19 UTC (825 KB) [v2] Tue, 16 Jun 2026 17:12:09 UTC (931 KB) Current browse context: econ.GN References & Citations Loading... Bibliographic and Citation Tools Bibliographic Explorer (What is the Explorer?) Connected Papers (What is Connected Papers?) Litmaps (What is Litmaps?) scite Smart Citations (What are Smart Citations?) Code, Data and Media Associated with this Article alphaXiv (What is alphaXiv?) CatalyzeX Code Finder for Papers (What is CatalyzeX?) DagsHub (What is DagsHub?) Gotit.pub (What is GotitPub?) Hugging Face (What is Huggingface?) ScienceCast (What is ScienceCast?) Demos Recommenders and Search Tools Influence Flower (What are Influence Flowers?) CORE Recommender (What is CORE?) arXivLabs: experimental projects with community collaborators arXivLabs is a framework that allows collaborators to develop and share new arXiv features directly on our website. Both individuals and organizations that work with arXivLabs have embraced and accepted our values of openness, community, excellence, and user data privacy. arXiv is committed to these values and only works with partners that adhere to them. Have an idea for a project that will add value for arXiv's community? Learn more about arXivLabs.