Reliability questions
The prospect of profiting from record-high electricity prices failed to persuade Texas power plants to weatherize operations that would have prevented last month’s catastrophic power failure, IHS Markit experts said Thursday at CERAWeek.
“Historically, Texas has relied on high prices to ensure reliability,” said Michael Pickens, the global research firm’s associate energy director. “I think the five days that we were in emergency conditions demonstrated that the high prices alone aren’t enough to ensure reliability. We need to go beyond just prices.”
Experts from IHS Markit debated whether Texas’ electricity grid overseen
by the Electric Reliability Council of Texas needed more regulation mandating weatherization, or even an entire redesign, to ensure deadly and damaging power shortages never happen again. Dozens of Texans died during rolling blackouts, while frozen and burst water pipes caused billions of dollars of property damage.
The experts were speaking Thursday at a virtual session of the energy conference held by Cambridge Energy Research Associates, an IHS Markit company. The weeklong gathering of energy executives, government officials and analysts is usually held every March in Houston, but
CERAWeek experts say Texas’ power grid needs more than a profit-driven strategy to keep the lights on
went virtual for the first time this year after the coronavirus pandemic forced cancellation of last year’s event.
Texas’ power grid, overseen by ERCOT, relies on generators to supply electricity to the grid in real time. When demand for power spikes — to run air conditioners during scorching summers and heaters during cold snaps — generators benefit from the soaring wholesale price of electricity, but only if they can keep power plants running. This market design was supposed to persuade power plant owners to weatherize their equipment to ensure they can run during times of peak demand and prices.
It didn’t work, however. Last month’s winter storm and bitter cold knocked out some 40 gigawatts of power — or half of Texas’ power plants — leading to a massive shortage. The Public Utility Commission of Texas, which oversees ERCOT, raised wholesale electricity prices to the state cap of $9,000 per megawatt-hour to spur power suppliers to get back up and running, but it took days for power to be restored across the state.
“Nobody likes to talk about mandates around weatherization and reliability,” Pickens said. “But this was a watershed moment. It’s clear that high prices alone do not ensure reliability.”
It’s likely Texas power generators didn’t see a need to prepare their plants and equipment for extreme cold temperatures, said Douglas Giuffre, an IHS Markit energy director. Last month’s winter storm was Texas’ third most extreme weather event in 70 years. By contrast, the 2011 winter storm which also caused major power outages didn’t crack the top 15 most extreme weather events statewide, he added.
“If (generation owners) think it’s very infrequent, it may not justify the costs of making certain investments in winterization or firm fuel supply,” Giuffre said. “In a capacity market, that revenue stream is going to be there and you’ll be penalized if you’re not available.”
As climate change brings more extreme weather events to Texas, state policymakers and regulators will need to discuss how to prepare the electricity grid to handle them, Giuffre said.
“We are seeing more extreme weather, and the question is:Does it make sense to plan around these most extreme events?” Giuffre said. “Certainly in hindsight here in Texas, that would have been great, and could have saved people from suffering. But if you do build to such extreme cases, the vast majority of the time, there’s going to be a lot of idle capacity on the system that ultimately customers pay for.”