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The Texas power meltdown…there is a story for every agenda.

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Blog, Opinion

The events of the last week in the Texas ERCOT market area have become fodder for every conceivable agenda, viewpoint, and argument, including political, environmental, and even cultural debates.  Unfortunately, few of these arguments have been supported by facts – usually they are based on cherry-picked anecdotes, and echoed dubious news stories and memes.

I had the opportunity to sit in a webinar called “ERCOT Power Grid Outage: What Went Wrong?” presented by Enverus, one of the leading data and analytics providers in the global energy markets (to see a replay of that webinar, visit here).  As Enverus’ analysts laid out hard facts and figures in their presentations this last Monday (just a few days following the meltdown), it became clear that most of what is referred to as “facts” in the popular press about the events are either being misinterpreted due to ignorance about the structure and authority of ERCOT or are simply attempts to force fit bits of data into a narrative supporting a preferred message.

During the worst of the storm, the news was telling the story that much of the wind generation that had been scheduled had gone offline, putting pressure on the remaining generation resources, many of which also tripped off due to mechanical issues (freezing control and cooling lines) or fuel issues (lack of gas supplies or frozen coal piles). Once power was restored, the stories in the press began to shift…it really didn’t have anything to do with renewables, the whole disaster sat at the feet of hydrocarbons, since wind and solar were just a small part of Texas’ generation mix.

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As Enverus analysts pointed out and as confirmed by the EIA, the loss of wind generation was a significant contributing factor to the event. In fact, it’s becoming clear that the loss of wind power (the majority of which is in western Texas) likely also contributed to the loss of gas generation during the crisis as many of the electric powered compressors on pipelines and gas treating facilities in West Texas, which supply much of the fuel gas used by generators in the state, were impacted by blackouts. During Texas senate hearings yesterday, experts noted that much of the gas production lost in West Texas was due to the loss of electric power in the region and was cited as one of the critical factors in the near collapse of the ERCOT grid. As noted in that hearing, it became a case of circular failures – loss of power led to loss of gas production, which led to additional loss of power, which led to more blackouts and more loss of gas production, and so on and so on…

EIA’s Grid Monitor tool gives a more complete story than what will be found in the press and other media. On February 7, a full week before the extreme cold began to come into Texas, wind accounted for 42% (or 392,682 MWh) of the power generated on that day in ERCOT, with natural gas generation accounting for 19% (178,512 MWh).  On Valentine’s Day, the 14th, wind’s contribution was down to 12% or 174,601 MWh, while natural gas gen was up to 61% at 899,328 MWh. At the peak of the crisis on the 16th, wind was down to 90,087 MWh or 8% of total generation for the day, while gas’ contribution was at 65% at 692,091 MWh, even as gas generators were falling off-line due to lack of fuel or freezing control systems. In summary, over a period of 9 days, wind’s contribution to ERCOT’s generation mix fell from 42% to 8%…or a loss of about 300,000 MWh.

This observation is not to lay the blame of the ERCOT crisis on wind power, but facts do matter as politicians and regulators start to look at ways to prevent something like this or worse from happening in the future.

Politically, Texas’ governor and legislators at both the state and national level are being blamed for their failure to protect the citizens of Texas from a massive backout that left millions, including myself, in the dark for two or more days in sub-freezing weather.  Of course, in this blame game, there has been nothing put forward that suggests they could have done anything about it at the time, only vague arguments that “they were in charge and should have seen this coming and done something”. It is all nonsense, regardless of who or what political party was in office at the time, there is simply nothing that could be done by any elected official to keep the lights burning for all ERCOT customers.

ERCOT and their now resigned, non-Texan board of directors are being blamed for not forecasting the event properly and ensuring adequate generation was available to keep the lights and heat on.  Unfortunately, ERCOT cannot tell generators what to do…the market is structured to financially incentivize them to bring on power when needed, but if they can’t run due to freeze-offs in control equipment or lack of fuel, there really isn’t much ERCOT can do other than force users off the system to match the available generation capacity.  Knowing that the weather was going to be brutal and demand was going to be at or near historic highs, ERCOT had applied in advance of the storm to the Department of Energy to allow generators to run in excess of their allowable capacities (and which would have violated their emissions caps), but the DOE denied their request.  Unfortunately, once the storm hit, and even as power prices headed to the max of $9000 per kilowatt hours, there simply was not enough money in the world to keep enough power flowing onto the Texas grid.

Outside of Texas, there seems to be a lot of schadenfreude.  Social media is full of residents of northern and coastal states appearing to mock the suffering of Texans, with many noting that if only Texas was not trying to be so damned independent and was willing to join with other states’ grids, none of this would have happened.  The reality, as pointed out by Enverus’ analysts, is that none of the surrounding grids had any power to spare and were facing rolling blackouts in their own territories even before the worst of the crisis set hit ERCOT.

And so, the recriminations start.  Lawsuits are being filed and political arguments are being thrown around. Renewables “fan-boys” are pointing the finger at hydrocarbons.  Hydrocarbon “fan boys” are pointing the finger at renewables.  Houston is talking about leaving ERCOT (possibly the dumbest idea ever unless the politicians in Houston are planning on investing billions in new generation plants in the city and dealing with the emissions concerns that would surely follow), and bankruptcies and/or severe financial damage is looming for many generators that were forced to pay hundreds of dollars per mmbtu for natural gas…the same gas that cost two or three dollars the week before. On the plus side, natural gas producers who managed to keep their gas flowing are going to make as much in 3 days as they would have made all year.

If one genuinely wants to find fault, you must look at the source of the problem.  In hindsight, yes, generators should have been better winterized. But even that is a bit of loaded statement in that in Texas’ normal climate, a winterized generator is less efficient and costs more to build and operate than one that is not. As such, requiring winterization on generators in ERCOT will add costs and reduce output – ultimately requiring additional units to be constructed to maintain the same capacity, which, in turn, will increase costs and emissions even more…unless of course you want to add more windmills.

The same hindsight also says that windmills should have been winterized…after all, that is what they do in Iowa.  True, but is adding hundreds of thousands or millions of dollars in cost to each windmill going to make economic sense if most of those windmills will never see another event like we had last week during their operational life of 20 or so years?

Natural gas supplies also need to be looked at.  Though there is not yet a crystal-clear picture of all the failure points that led to loss of gas production, it is certainly a combination loss of electric power to keep compressors and treating facilities operating, and wellhead freeze-offs.  This obviously needs to be examined and mitigation needs to take place, potentially including back-up generation near compressor stations or treating plants and methanol injection at well sites to prevent hydrate formation.

Can we prevent another power apocalypse in Texas caused by freak winter storms? Probably, but it won’t be cheap as it will require much better winterization of power generation, transmission, and distribution networks. Do we make those investments and at what cost? How much financial pain is the average consumer willing to endure as energy bills will necessarily increase as a result? And do natural gas producers, gathers, and pipeline operators similarly winterize their assets? These are questions that will have to be answered by law makers, regulators, and/or the asset owners/operators.

Unfortunately, until all the facts are known, identifying the right mix of investment versus risk will be difficult…and may be impossible if political agendas and point scoring efforts cannot be set aside.