Texas power grid set for now, but fu­ture less cer­tain

Houston Chronicle - - OUTLOOK - By Bernard L. We­in­stein We­in­stein is as­so­ciate direc­tor of the Maguire En­ergy In­sti­tute and an ad­junct pro­fes­sor of busi­ness eco­nom­ics at South­ern Methodist Univer­sity’s Cox School of Busi­ness.

Last month was the sec­ond-warm­est May on record in Texas, and fore­casts for this sum­mer in­di­cate we’ll be hit­ting aboveav­er­age tem­per­a­tures. At the same time, Texas’ pop­u­la­tion is grow­ing twice as fast as the na­tion’s, driven in part by the more than 1,000 peo­ple per day who are mov­ing here from other states and coun­tries.

All this means the de­mand for elec­tric­ity is grow­ing steadily to meet the needs of Texas’ grow­ing num­ber of house­holds as well as the state’s ro­bust com­mer­cial and in­dus­trial de­vel­op­ment. Which begs the ques­tion: Will the Texas power grid hold up this sum­mer against po­ten­tially record de­mand?

Since the be­gin­ning of the year, three large coal-fired power plants have been shut­tered, re­mov­ing 4.2 gi­gawatts of base load power from the Texas grid. Ac­count­ing for 22 per­cent of the state’s coal-gen­er­at­ing ca­pac­ity, these plants pro­duced enough elec­tric­ity to sup­ply 2.1 mil­lion homes.

While coal ca­pac­ity has de­clined, wind gen­er­a­tion has grown ex­po­nen­tially. With 22 gi­gawatts of wind, al­most a fifth of to­tal in­stalled ca­pac­ity, Texas leads the na­tion by far in re­new­able en­ergy. Un­for­tu­nately, in the mid­dle of the day in the mid­dle of the sum­mer, the wind in west Texas is usu­ally not blow­ing, thereby pos­ing se­ri­ous chal­lenges to grid re­li­a­bil­ity. What’s more, be­cause Texas’ power grid is free-stand­ing with lim­ited in­ter­con­nects to other states, the out­look for this sum­mer is even more ten­u­ous.

Last week, the Trump ad­min­is­tra­tion floated a plan to help en­sure grid re­silience and re­li­a­bil­ity in Texas and else­where by or­der­ing grid op­er­a­tors to buy elec­tric­ity from coal and nu­clear plants, cur­rently strug­gling to com­pete against cheap nat­u­ral gas and re­new­ables. Since 2010, 628 coal-burn­ing units at power plants in 43 states have closed with the loss of 115 gi­gawatts of elec­tric­ity. In­vestor-owned util­i­ties are ex­pected to re­tire, or an­nounce the clos­ings, of an­other 16 gi­gawatts of coal and 550 megawatts of nu­clear ca­pac­ity by the end of this year, while two dozen nu­clear plants, cur­rently gen­er­at­ing 33 gi­gawatts of power, are sched­uled to shut down by 2021.

The U.S. De­part­ment of En­ergy would also es­tab­lish a “Strate­gic Elec­tric Gen­er­a­tion Re­serve” with the aim of pro­mot­ing the na­tional de­fense and max­i­miz­ing do­mes­tic en­ergy sup­plies. The DOE’s in­ter­ven­tion would buy time for a two-year study of vul­ner­a­bil­i­ties in Amer­ica’s en­ergy sys­tem.

The Trump pro­pos­als are gen­er­at­ing blow­back from oil, nat­u­ral gas, so­lar and wind in­dus­try groups that claim these ini­tia­tives would raise en­ergy prices and dis­tort mar­kets. But the power mar­kets are al­ready dis­torted be­cause of the govern­ment sub­si­dies to wind and so­lar as well as the re­new­able port­fo­lio stan­dards man­dated in most states. But be­yond the grid re­li­a­bil­ity and na­tional se­cu­rity ar­gu­ments for sus­tain­ing com­mer­cially vi­able coal and nu­clear plants is the case for main­tain­ing en­ergy di­ver­sity. Amer­ica is richly en­dowed with oil, nat­u­ral gas, coal and nu­clear, much of which is used for elec­tric power gen­er­a­tion. In turn, rel­a­tively in­ex­pen­sive and re­li­able elec­tric power pro­vides the ba­sis for our eco­nomic pros­per­ity and global com­pet­i­tive­ness. This is es­pe­cially the case in Texas, where we rank No. 1 in the na­tion for oil, nat­u­ral gas and elec­tric power pro­duc­tion. But we also rank first in en­ergy use, with nat­u­ral gas cur­rently ac­count­ing for about 50 per­cent of our to­tal en­ergy con­sump­tion. Cheap and plen­ti­ful nat­u­ral gas is a boon to Texas’ con­sumers and in­dus­tries, but will this al­ways be the case?

Texas and the na­tion need to be con­ser­va­tive with en­ergy re­sources, es­pe­cially in mar­kets fraught with un­cer­tainty as ev­i­denced by oil prices that have jumped from $30 per bar­rel a year ago to $70 to­day. Will grow­ing liq­ue­fied nat­u­ral gas ex­ports push up prices? Will wind and so­lar con­tinue to draw in­vest­ment when tax­pay­ers are not longer forced to sub­si­dize pro­duc­ers? Can in­vest­ment in crit­i­cal en­ergy in­fra­struc­ture sur­vive grow­ing op­po­si­tion by the anti-fos­sil fuel crowd? We just don’t know.

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