Dallas Fed says fixing Texas’ grid is ‘worth it’
Preparing Texas’ power plants and natural gas system to withstand another winter blast could cost hundreds of millions of dollars, but an analysis by the Federal Reserve Bank of Dallas found the expense would be worth it.
Dallas Fed analysts estimate the winter storm cost Texas households and businesses $4.3 billion worth of electricity. That’s power they would have used if not for the calamitous outages stemming from the deep freeze.
Total storm-related costs are significantly higher. Insured losses from the storm are as high as $20 billion, and some estimates put the losses to the Texas economy at more than $100 billion.
Early in the week of Feb. 14, the cold snap caused many power plants to seize up and touched off a shortage of natural gas, a fuel used to generate electricity and heat homes.
Dallas Fed researchers concluded weatherizing natural gas wellheads — some of which froze during the winter storm — costs about $20,000 to $50,000 per well. Protecting every gas well in Texas from another long bout of freezing temperatures likely would cost about $200 million annually.
“That is something that would be a recurring annual expense, because you’re constantly drilling wells and having to install this
(equipment),” said Garrett Golding, a Dallas Fed business economist.
Weatherizing Texas’ 162 natural gas-fired power plants could be trickier, but the Dallas Fed estimates it would be a one-time cost of up to $95 million.
The cost to weatherize a power plant would be at most $500,000. The Dallas Fed came to that figure by calculating the expense to install the weatherization equipment recommended in a report by the Federal Energy Regulatory Commission following the 2011 freeze that caused power outages in Texas.
The measures could include upgrading heat tracing circuits, beefing up thermal insulation and installing wind breaks or other temporary enclosures to protect equipment against wintry gusts.
Texas power plants aren’t designed to trap in heat during winter. They’re built to shed heat during the sweltering summer months when power plants are producing the most electricity.
“There’s going to be a lot of problems with just the overall architecture of (power plants),” Golding said. “They’re extremely exposed to the elements because these are supposed to run hard in the summer. There are some things that will need to be bolted on and bolted off, as far as seasonal changes go.”
The analysts also found that weatherizing the state’s 13,000 wind turbines could be expensive.
Wind turbines can be equipped with special blades that have internal heating equipment to prevent ice formation. But such blades cost about $400,000, add to the turbines’ already hefty price tag — a few million dollars each.
However, wind farm operators can apply coldweather lubricants and blade coatings to protect against an ice storm without running up a massive tab, according to the Dallas Fed.
Wind energy has made up a greater share of electricity on the Texas grid in recent years — and the Electric Reliability Council of Texas, the grid operator, has had a harder time avoiding outages when the wind isn’t blowing as strongly as expected.
On Tuesday, ERCOT called on Texans to conserve power, citing a higher-than-usual number of power plants offline for maintenance, as well as wind and solar output that was lower than anticipated.
Still, the Dallas Fed said that even if Texas’ wind turbines had been entirely replaced by fossil-fuel based generation, the state still would have experienced blackouts during the February storm.
“There should have been enough (power) available for us to make up for this loss of wind,” Golding said. “Where everything just went off the rails was the lack of availability for the gas to be procured, and then obviously, power plants just not being able to withstand the elements.”
The Dallas Fed didn’t weigh in on whether state lawmakers should mandate weatherization of natural gas wellheads or power plants. But Golding said whether legislators require the investment or power companies make it on their own, it will pay off.
“The insurance policy of this stuff is a good cost-benefit trade-off,” he said. “It’s going to be worth it.”