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18 February 2021

Texas gas addicts use power cuts in unfounded assault on wind

The news has been littered with articles this week, trying to point the finger at different parties for the massive power outages seen in Texas, USA. While the state’s energy demand has soared through a period of extreme cold, the same factor has resulted in swathes of generator outages and a shortfall of available supply. Some climate deniers are using this as an excuse to call for more natural gas, placing the blame for the blackouts with a smaller number of frozen wind turbines, while the truth of the matter lies in the incompetence of its fossil fuel loving grid operators.

In short, the real failure of Texas’ power system is a result of its crippled gas resources, a non-existent capacity market, and an obsession with deregulation, which has left it without access to power from the national grid in the US.

Over the past few days, 4.7 million Texans have had power outages, while electricity prices have risen 10000% to $11,000 per MWh in the 5-minute market. Gas has risen a similar multiple to $395 per million BTU, compared to average levels in January.

The issue, still not fully resolved, started on Monday morning. Temperatures in the minus twenties have been teetering on the edge of record lows as Artic air has been driven south in a polar vortex storm. With a deep freeze settling in, power demand – driven by household heating – hit a winter record of 69.15 GW.

With many fearing that this could rise as high as 75 GW, the Electric Reliability Council of Texas (ERCOT) – the state’s independent system operator (ISO) – issued pleas to some 26 million customers to implement power saving measures including: unplugging appliances, turning down heating, and even wearing jumpers. Across the state, infrastructure and appliances like traffic lights have been left without power.

While demand soared, the extreme cold also caused supply to plummet. Generating units across all fuel types were forced off the grid, with 45 GW of inactive capacity – including 30 GW of fossil fuels – standing idle on Monday. Demand of 70 GW is not uncommon in the summer months in Texas, when blistering heat causes a surge in demand for air conditioning and is often satisfied by Texas’ 128 GW of utility-scale generating capacity.

However, the combined impacts on supply and demand have caused a rare power deficit in Texas, causing prices for electricity to rocket to $9,000 per MWh, from typical levels of around $20 per MWh. It has since settled down to around $30 per MWh, while much of the state is left without power. As of Wednesday, 2.7 million households were still under rolling blackout conditions; a federal emergency has been declared for all 254 Texas counties. Many citizens are complaining that the ‘15-to-30-minute rotating outages,’ which started at 1.25am on Monday, are now lasting far longer.

Data and statements published by ERCOT makes it far easier to assess the performance of renewable technologies through these conditions. Wind power, which accounted for 23% of Texas’ power in 2020, saw 12 GW of turbines of its 25.1 GW turbines out of service, according to the ISO.

These ‘locked up’ turbines, however, do not usually run at full capacity during Texas’ winter months. In January, wind power output averaged at around 10.4 GW. This dipped down to just 650 MW at 8pm on Monday but has since recovered to levels of around 4 GW, which are not uncommon for this time of year.

Wind power is certainly part of the system disruption, but the core of the problem lies with natural gas, and how the ERCOT market has been established.

Natural gas accounts for 45% of Texas’ power production, and its load-following characteristics have historically been responsible for balancing the system during periods of high demand. While many have tried to blame wind power for the outages – referencing decade-old photos of frozen nacelles (from Sweden) – the fact that gas prices have risen in tandem is telling. ERCOT had previously been forecasting a demand spike of 67 GW, only 7% of which was expected to come from wind power. In fact, it has been noted that many of the coastal turbines have been outputting more energy than expected, helping to offset some of the power generation losses.

In theory, ERCOT should have had 82 GW of capacity available, but was left with just 48 GW after its generators were shut down.

Gas supply disruption in Texas, across operation and the supply chain, has consisted of frozen gas wells and pipelines. For every locked wind turbine, there is a handful of frozen production technologies and gathering lines, which simply cannot operate in the sub-zero temperatures faced by the state. To some extent, the problem is self-perpetuating; the pumps required to extract the gas require electricity to operate, and have faced similar shortages to consumers this week.

Gas reporting is seldom transparent, but some estimates indicate that nearly half of the state’s supply has been brought to a standstill over the past few days. In early February, Texas operators, including those at the West Texas Permian Basin – one of the most productive sites in the world – were producing about 24 billion cubic feet of gas per day. On Monday, they produced somewhere between 12 and 17 billion cubic feet per day, despite the fact that gas demand was rising for both electricity generating and space heating. Prices have surged up to 4,000% in states including Texas, Oklahoma, and Missouri.

With power plants unable to purchase the necessary fuel to run, and with little onsite storage, many gas-fired power plants have been forced to shut down entirely, while one nuclear plant has also been halted in the state and up to 4 GW of generating capacity was already under maintenance.

Texas’ lack of storage stems from two factors. Firstly, the state usually has an abundance of resources, and can simply pull gas from the ground when it is needed, which it currently can’t. Secondly, the absence of a capacity market from the country’s power sector provides little-to-no incentive to provide a guaranteed supply.

While many developed energy markets, including the US, have remained highly regulated through the energy transition, in 2002, Texas lawmakers opted to deregulate its power market and hand it over to privately run operators – only Regional Transmission Operators (RTO’s) remained regulated. The premise was to create a competitive marketplace for all types of energy and drive down prices, but essentially it has just compounded ERCOT’s monopoly on the state’s power market.

Unlike most operators, ERCOT does not have a capacity market, where consistent payments are made to ensure that a sufficient baseload capacity can be provided to the grid at any one time, at a level determined three years in advance. This market is often key to handling extreme weather events, with generators receiving income regardless of whether the power is used or not. Instead, Texas generators can only be paid for per unit of electricity delivered, and regulators use scarcity pricing to ensure reliability, resulting in huge price spikes, as seen this week.

The poor outlook of such a freewheeling system has even caused retailers such as Griddy Energy to suggest its customers look elsewhere for a secure supply of energy, in a statement made this week saying “If the forecast and prices are too extreme for you right now, we understand if you want to switch providers.”

The lack of capacity market has seen ERCOT’s reserve margin – the surplus of production capacity versus forecast demand – drop from 20% to 10% since 2010, in a sure sign of increased strain and less flexibility within the grid.

In reality, ERCOT should have seen all of this coming. During the similar freeze of 2011, widespread blackouts were only barely prevented by planned rolling blackouts, according to a federal report on the impacts of the storm.

Protecting generation resources from the harsh winter elements is no easy task, and has been deemed impossible by many industry experts. While this is almost certainly the case for natural gas, technology has emerged to provide turbines with warming systems to prevent detrimental ice build-up – providing a way to successfully ‘winterize the system,’ in places like Finland and Canada. Similarly, the introduction of cold-resilient energy storage should help to alleviate any sudden shortfalls in available generation capacity. But the ERCOT system needs to be set up to embrace these.

The Federal Energy Regulatory Commission (FERC) and the North American Electric Reliability Corporation (NERC) announced on Tuesday that they would launch a joint inquiry into the operations of the bulk-power system after the power outages. Operators SPP and MISO, which saw similar a shortage of power and rolling blackouts, will also face an investigation.

In Texas, the shortage of energy supply and surplus of demand has also impacted the oil industry. The 630,000 barrel-per-day Port Arthur refinery — the country’s largest — was shut down until it was safe to resume operations, according to owner Motiva Enterprises. This has been a partial driver in the continued rise in US oil prices, with the West Texas Intermediate (WTI) Crude price rallying to $60.26; its highest in over a year.