To clearly see what actually caused recent power outages and the collapse of the Texas grid, it helps to separate the issue from politics. As with flooding, the contributing causes are numerous. And they don’t become apparent until rare events conspire to bring them into sharp focus. That happened this week when millions of people went for days without heat, lights, water and communications in what Governor Abbott called “the winter version of Hurricane Harvey.”

Variation from Average Climate for State

So let’s start with the weather. According to Jeff Lindner, Harris County’s meteorologist, “The average temperature for the entire State of Texas on 2-16-21 was 3.0 degrees – the coldest it has been since 12-23-1989 when it was 1.3 degrees.” In Houston, the climate averages a low of 47 and a high of 66 in February. That’s a little higher than most of the state, but not significantly different. So the Great February Freeze dropped the average temperature a whopping 50 degrees.

Was it an all-time record? No. A once in a lifetime event? No. Once in a decade? Maybe.

• We had comparable arctic blasts in 1983 and 1989, and again in 2011 when the Federal Energy Regulatory Commission recommended that Texas winterize its power plants.
• Texas got more snow in 1960, 2004 and 2009…
• And three major ice storms affected the Houston region in the winter of 2013/14.

So while this storm tied the record low for the City set in 1895, it had precedents. And recent precedents at that.

Ed Hirs, an energy fellow at the University of Houston, says this cold snap should have been foreseeable. “Every eight to 10 years, we have really bad winters. This is not a surprise.”

Almost Half of Natural Gas Production Shut In

The biggest problems appear to have come in the delivery of natural gas, as wellheads and pipelines froze. Gas normally supplies most of the state’s winter electricity.  “Texas is a gas state,” said Michael Webber, an energy resources professor at the University of Texas at Austin. While he said all of Texas’ energy sources share blame for the power crisis, the natural gas industry is producing significantly less power than normal.

The outages during this storm far exceeded what ERCOT had predicted just last November for an extreme winter event.

According to The Texas Tribune, the reasons include:

• Natural gas power plants usually don’t have very much fuel storage on site. Instead, they rely on the constant flow of natural gas from pipelines.
• In early February, Texas operators were producing about 24 billion cubic feet per day, according to an estimate by S&P Global Platts. But on Monday, Texas production plummeted to approximately half of that.
• Systems that get gas from the earth aren’t properly built for cold weather.
• Permian Basin operators struggled to bring natural gas to the surface. Cold weather and snow closed wells or caused power outages that prevented pumping fossil fuels from the ground.
• “Gathering lines freeze,” said Parker Fawcett, a natural gas analyst for S&P Global Platts. “And pumps use electricity, so they’re not even able to lift that gas and liquid, because there’s no power to produce.”

“Gas is frozen in the pipeline. It’s frozen at the rig. It’s frozen at the transmission line,” Gov. Abbott said.

This AP article lists methods and costs for winterizing oil and natural gas wells. Net: while expensive, it’s possible. Winterizing 50,000 wells (one third of all those in Texas) would take about one seventh of the state’s annual royalties on oil and gas.

Wind, Solar Shortfalls

Electricity generation from wind and solar also did not meet expectations. ERCOT lost 46,000 megawatts of production ability due to loss of generators. About 61% of that loss came from thermal (coal, nuclear, gas) plants shutting down. About 39% of the loss came from wind/solar plants shutting down, an ERCOT spokesperson said.

In a Wednesday afternoon news conference, Gov. Abbott said 19,800 megawatts of natural-gas powered generation and 17,200 megawatts of wind- and solar-powered generation were offline. 

Between wind and solar, solar accounted for the lion’s share. ERCOT planned to use 35X more solar to meet winter peak demand (see below). But a funny thing happens when snow covers those solar panels!

Wind power was demonized for failing us during this crisis. But clearly ERCOT was not counting on using much wind to meet peak winter demand. If we lost only 928 megawatts (the amount expected to be available) out of 46,000 megawatts, that represents only 2% of the total loss.

It is possible to winterize wind turbines. But operators didn’t do that either. In Iowa, where wind farms supply 40% of the state’s electricity, windmills have been turning all week despite temperatures that dropped to minus 17 degrees in Des Moines.

But the problems went far beyond natural gas, wind and solar. “Every one of our sources of power supply underperformed,” said Daniel Cohan, an associate professor of civil and environmental engineering at Rice University.

Failure to Winterize Plants

After the state’s last major freeze, during the 2011 Super Bowl held in Arlington, FERC found that energy producers’ procedures for winterizing their equipment “were either inadequate or were not adequately followed” in many cases. The report repeatedly cited another Texas freeze, in 1989, as a clear warning.

Chris Coulter of Texas Power Agents, a Houston-based energy consulting firm, likened electrical generating plants to giant tea kettles. Regardless of whether they use coal, nuclear, or natural gas as their root fuel, they generate electricity by turning water into steam that drives turbines. Power plants have water lines that course all through the plant footprint; literally thousands of feet of instrument lines where any freeze becomes a single point of failure. “Most of these plants are several stories high and above the tree line,” said Coulter, “where the water lines are particularly susceptible to wind chill.”

Plants Offline for Maintenance

Texas has a peak generating capacity of about 67,000 megawatts in winter compared 86,000 megawatts in the summer. The gap between the winter and summer supply reflects power plants going offline for maintenance during months when demand typically is less intense, according to the Associated Press.

But planners didn’t forecast temperatures cold enough to freeze natural gas supply lines and stop wind turbines from spinning. By Wednesday, 46,000 megawatts of power went offline when usage spiked to peak summer levels!

The Tragedy of the Commons

Bill King wrote yesterday about “The Tragedy of the Commons.” “In an unregulated market,” says King, “it makes no sense for an investor to spend money to take precautions that might be needed only once a decade. If they do, another generator will not and will thus be able to undercut the more cautious generator’s price.” He’s speaking metaphorically, of course, about standby generating capacity.

The tragedy of the commons refers to companies externalizing their costs to customers. In this case, that takes the form of millions of customers paying to fix ruptured pipes, repair fallen ceilings, buy new carpet, and replace spoiled food.

Insured damages have been estimated at $18 billion so far. Total damages could be far higher; CBS estimated $50 billion. Not to mention that half the state’s population – 14 million people – still doesn’t have drinkable water and dozens of people have died.

Too Much De-Regulation?

An article in The Washington Post claimed, “The real problem in Texas is that generators have no financial incentive to invest in their own assets and keep them ready for winter, because the less stable they are, the more money they get to charge for their power. [See next section below.] An expedient solution is to create a “capacity market” similar to those in other states wherein generators would be compensated to keep their equipment ready. A second option is to return to a vertically integrated market that is focused on reliability such that power is available every day and the utilities earn a guaranteed return on investment for building out capacity that may only be required a few days a year when demand peaks.”

All interesting thoughts, but while we ponder them, another problem, potentially much bigger, emerged this week…

Companies Being Forced Out of Business By Scarcity Pricing

As big as this week’s outages were, an even bigger story is developing in their wake. The website Energy Choice Matters now reports 22 or more possible defaults of load serving entities in ERCOT due to recent prolonged scarcity pricing. That number includes retail electric providers as well as municipal utilities and/or co-ops. Small public utilities and/or co-ops in particular may be facing huge bills they simply cannot pay. At least one city has asked for relief because they don’t have $2 million.

Unless these entities get relief from the Public Utility Commission, ERCOT or the State, bankruptcies could soon force a consolidation of the energy market in Texas under two dominant providers – Vistra (TXU) and NRG (Reliant) who already have 80% of the total meters, said Coulter

“Competition will all but cease to exist from the largest failure of retail providers ever seen,” one of the retailers told Energy Choice Matters.

Electricity prices rose from an average of $25 for energy and $1.80 for ancillary services to $9,000 for energy and highs of $21,000 per hour for ancillary services, said Coulter. “A typical customer on a fixed-rate plan with a 5-cent energy rate (9.5 cent total) using 50 kWhs on Feb 16 will be billed $5 that day (10 cents roughly x 50).  Meanwhile, a customer on a wholesale-index plan like Griddy using the same 50 kWhs will be subjected to a $450 bill for that day alone!  50 kWhs x $9/kWh—OUCH!”

“Most customers do not understand the risk they take with these wholesale-index plans or the ramifications of peak pricing,” said Coulter. Evidently, neither do the plan providers. Energy Choice Matters revealed in a separate story today that “ERCOT Reports Two Retail Providers Failed To Make Payment On A Settlement Invoice.” Griddy was one of them. Dozens more could follow, according to Coulter.

Just as nature is letting up on the cold, the market is turning up the heat. I’m glad I’m on a fixed-rate plan.

Posted by Bob Rehak on 2/19/2021 with help from Chris Coulter of Texas Power Agents

1271 Days after Hurricane Harvey