by Gabriel Canal, Senior Energy Consultant

What year is this again? 1989? 2011? Oh wait, its 2021!

Texas has long been the first to step up and set the standard for what it thinks is best. Texas is a booming spot for all things business, real estate, pro sports, and you guessed it electricity.

Texas has uniquely positioned itself, like with most things it does, to be able to manage its own grid. In the 1970’s ERCOT, the Electric Reliability Council of Texas, was formed to as a nonprofit group to oversee the Texas power grid (at least almost all of it). Because Texas has its own grid not connected to the rest of the US, ERCOT does not fall under the rule of the Federal Energy Regulatory Commission or FERC.

ERCOT has 4 main purposes:

• Ensure access to transmission.
• Competitive wholesale market
• Competitive retail market
• System Reliability

The question that is being asked considering recent events is twofold.

• Why is there not enough electricity being generated? Whose fault is it?
• Are we really using more power now than in the middle of the summer?

Are we really using as much power now as in the middle of the summer?

The short answer is yes, despite the large number of power outages. More people are at home and unable to leave. Texas primarily uses natural gas for heating, but the bulk of these heating systems are rarely used, out of date and therefore not efficient. Much like the increased demand we saw during the shelter ins caused by COVID-19 in 2020, this hard winter storm has caused a large spike in the demand on the grid. Many times, Texas has seen below freezing temps, but it is not common to be at or below zero and below freezing for an extended period. During the last week, the record winter Peak Demand record was broken by reaching 69,150 MW. This is awfully close to the all-time high of just over 74,000 MW. This answer the question of whether we are really requiring a significant amount more than the usage winter demand.

Why is there not enough electricity being generated? Whose fault is it?

If you ever find your self reading about the Texas electricity market, there is a good possibility it will be about supply (capacity) and demand during peak summer times. Texas consumes an enormous amount of electricity. Electricity does not appear out of thin air and there isn’t an efficient way to store it, so how do you balance supply and demand properly knowing that you are going to see huge spikes in demand? Texas has led the way in bringing renewable energy online mainly through wind and solar. Texas has also implemented programs that allow large consumers to voluntarily curtail power and others to be reimbursed for curtailing their electricity usage also known as Demand Response. The reason we are having issues generating enough electricity to meet demand is because demand is higher than normal, and the extreme cold has acted as a roadblock for our infrastructure. With renewables, basically nonexistent in this icy weather, more pressure was assigned to natural gas plants to meet the demand. This could cause issues, but then those plants began to experience shutdowns/failures due to freezing and a spike in NG pricing. This crippled the supply side and what was available became awfully expensive. ERCOT approved pricing to reach its maximum allowable price of $9,000/ MWh in order to be consistent with the fundamental design of ERCOT’s supply VS Demand system.

The Texas electricity grid is not new to winter storms causing problems. In 2011, Texas was sitting right where it currently is today- Harsh winter storm, generation not keeping up, plants shut down, and rolling black outs. ERCOT has 3 warning levels when demand comes within the 13.75% reserve. Both in 2011 and 2021, level 3 was called into actions, which includes rolling black outs. Even 2011 was not Texas first experience with black outs due to cold weather. In 1989 a similar storm happened from December 21^st to December 23rd. The PUC still has a single copy of the report on this storm in a library at the Capitol. Its titled “Electric Utility Response to the Winter Freeze of December 21 to December 23, 1989”. At the time of this storm there was no requirement for utilities to weatherize their equipment. Fast forward to 2011 and after once again experiencing another harsh storm, Texas legislature passed a law requiring utilities to report their efforts to weatherize equipment to the PUC of Texas. FERC issued a report that detailed the steps that needed to be taken in order to keep this issue from repeating itself. These recommendations involved increasing responsive reserve capacity, how generators should prepare equipment for the cold, better forecasting models, improved plant design, and many other items relating to winterizing equipment. This report showed that there were major failures in the area of being prepared for a harsh winter storm.

So, what happened to the regulations and why were not they enforced. These are questions that will need to be addressed as we move forward. Its obvious that as time passed, slack was given on these recommendations and with no penalties in place for noncompliance, Texas went about its business preparing for Summer reliability and winter became an afterthought. Next thing you know, a decade has passed, equipment has not been properly winterized consistently and BOOM another big storm hits. In all reality, power companies had little incentive to spend the money on winterizing equipment that they would not see a return on. Texas, being Texas, has its own grid because it did not want to deal with big government telling them what to do. The fewer regulations for people to follow the better. Historically it makes sense. Three major storms, averaging about 1 per decade, does not seem too bad right?

In the end, the blame falls on all involved agencies that are put in place to serve the people of Texas. A band-aid was put in place until the problem went away and now the problem has returned. This is strike 3 and if these issues are not addressed, there is no one else to blame. Texas can have cold weather. Equipment owners need to be held responsible for handling extreme cold and heat. There needs to be consequences and action taken when there are shortfalls.

This content was created by Gabriel Canal, Senior Energy Consultant at Eisenbach Consulting, LLC, the parent company of ElectricChoice.com.   He can be reached at gabriel.canal@eisenbachconsulting.com or 903-705-7769.