Now that the Texas deep freeze is receding and electric power is being restored, the blame game is heating up.
Gov. Greg Abbott has called for an investigation and resignations at the Electric Reliability Council of Texas, known as ERCOT, the state’s electric grid operator. Texas House Speaker Dade Phelan has asked two committees in the lower chamber to hold a joint hearing later this month to review the outages. Lt. Gov. Dan Patrick, head of the state Senate, says the Senate Business and Commerce Committee will soon hold hearings “to get answers to our questions.”
Meanwhile, Dallas County Judge Clay Jenkins is blaming the power failures on Abbott and the Texas Railroad Commission, which regulates the oil and gas industry. He argues that, at a time of scarcity, the railroad commission failed to ensure that natural gas power generators had fuel in the cold weather. Rick Perry, a former governor and secretary of energy, has chimed in with the bizarre comment that the rolling blackouts that left millions in the cold and dark are “a sacrifice Texans should be willing to make if it means keeping [federal] regulators out of the state’s power grid.”
In the past, ERCOT has done an excellent job balancing supply and demand during extreme weather events. But most rapid spikes in demand have occurred in the summer, not the winter, and ERCOT has planned accordingly. ERCOT certainly didn’t foresee a polar vortex that would plunge the entire state into subfreezing temperatures for more than a week.
Last November, ERCOT forecast peak winter demand at 58 gigawatts. But on Feb. 16 demand hit a record 69 gigawatts. As the temperature fell, businesses and residents cranked up their thermostats while 34 gigawatts of gas-fired generation and wind power, more than one-third of installed capacity, dropped off the grid.
Natural gas, the fuel that accounts for about 55% of ERCOT capacity, was in short supply due to low pressure in pipelines and fewer rigs operating because of the pandemic-induced drop in gas demand. Consequently, many natural gas power plants had to shut down. (Due to EPA regulations, most natural gas compressor stations now run on electricity, rather than natural gas, compounding the low pressure problem.)
At the same time, power from wind, which accounted for 42% of the grid’s electrons in the week before the big chill, fell to less than 10% as thousands of “unwinterized” turbines were taken offline to prevent freeze damage.
These were among the proximate reasons for ERCOT’s need to impose rolling blackouts in order to maintain grid stability. But there are more endemic problems in the Texas power market that must be addressed if the state is to avoid future catastrophes.
Unlike most other states, the demand for power is growing steadily in Texas, thanks to the continuing influx of people and businesses. But investment in baseload natural gas plants has lagged while nearly 10 gigawatts of coal-fired generation have been retired in recent years with more slated to close in the near future. At the same time, thanks in part to federal and state tax incentives, investment has poured into renewables. Texas now has more installed wind generation — about 25 gigawatts — than California, Iowa and Oklahoma combined. These subsidies cause market distortions that also discourage investment in baseload power, that is, the type of power plants that run constantly.
Despite the huge growth in renewables, coal and nuclear still account for 35% of Texas’ generation capacity. But in our deregulated price environment, where power generators only get paid for the electricity they put on the grid, power companies are rolling the dice if they invest in new baseload generation. Because of cheap natural gas in normal times, wholesale power prices are often too low to justify, or even sustain, such investments.
For example, Panda Temple Power, a relatively new, large, 758-megawatt gas-fired, combined-cycle power plant, filed for bankruptcy in 2017 because it could not generate enough cash to service its debt.
ERCOT did double the wholesale price cap from $4,500 to $9,000 per megawatt hour some years ago in the belief that the prospect of extremely high prices during an emergency would induce more baseload power plant investment, but this has not happened. In some states that have deregulated their power markets,coal, nuclear and large gas plants are allowed to include a “capacity payment” or “resiliency charge” in addition to an energy charge to recapture part of their fixed costs. ERCOT and the Public Utility Commission should give serious consideration to allowing such payments in order to retain and encourage new investments in baseload power plants.
ERCOT estimates we will need at least 100 gigawatts of additional power over the next 15 years to keep up with anticipated demand. Not all of those electrons can come from windmills and solar farms. To ensure long-term resiliency both for our power grid and our fast-growing economy, Texas needs a pricing scheme, including a capacity charge, that acknowledges the value of baseload power plants.
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- On February 22, 2021