Lessons from Texas: Co-ordinate and Relax Rules
Environmental restrictions on liquid fuel consumption and feeble incentives to draw investment in newbuild capacity were among the causes of the mid-February power crisis in Texas, a CERAWeek by IHS Markit panel agreed at a March 4 session. In a state with a growing amount of renewable energy, power prices were not high enough to justify the additional cost of catering for extreme events.
As a result, prolonged power shortages led to deaths by hypothermia even inside homes, according to press reports, while prices rocketed. But the situation would have been manageable if there were legal minimum supply standards, the panellists said.
Even though on paper there was a sizeable margin of supply relative to peak demand, this shrank into single digits as a percentage once plant that could not function had been removed, such as wind turbines freezing and solar panels not operating. That plant should have been discounted from the calculations as it was not reliable.
The Texas electricity system had been designed to operate in the hottest summer but not the coldest winter, according to French operator Engie's Michael Webber. He said it was time to devise a system that does not look backwards but forwards as weather patterns at the extreme ends of the spectrum are likely to be more frequent.
Opening the debate, Lawrence Makovich quoted Bill Gates' observation from earlier in the week about the difficulty of building a reliable generation and supply system, and recommended allowing plants to run on other fuels than gas to spin the turbines. People will not invest readily if they need a waiver to burn liquid fuels for five days running, he said. That is not enough of an encouragement, and market prices alone did not encourage building plant with dual-fuel capacity.
He said that dealing with the crisis had cost ten times more than the cost of installing a system that could deliver even under those testing conditions. Consumer bills or taxes would have to reflect the additional cost for the investor, as the alternative price was far higher in the long-run. And those generators which had a way to recover their costs had winterised their plants, Webber said,
Hunt Energy's Pat Wood said that the event had showed clearly that fossil fuels still had a huge role to play in power generation but the emphasis now was on decarbonising. He said he had become a convert to carbon capture and storage (CCS). This is still an embryonic technology where power generation is concerned and it has to be developed. "Looking back at February 15, I cannot imagine another day without gas and coal being part of the mix," he said. "CCS cannot be a joke. We have to figure it out."
Co-ordination between the various regulators has also to become a fact of life, so there is a strategy to cope with multiple failures across the board as well. As well as plant failures there were also transmission and distribution failures that should have been prevented, Webber said, and this was a problem for the Public Utilities Commission, the Electric Reliability Council of Texas and the Railroad Commission had a role to play to set minimum standards. But how those standards were to be met was a matter for the market to decide.
In an earlier CERAWeek conversation with IHS Markit vice-chair Daniel Yergin on March 3, newly-minted US secretary of energy Jennifer Granholm warned of two major lessons from the storm.
"One is that there will be events like this that occur with greater frequency, and we have to think about the resilience of the grid, even if you live in warm places," she said. "I hope that the legislature in Texas provides the ability for the grid to actually be prepared to sustain the kinds of storms we saw, because that will not be a one-off."
Second, she chided Texas for its lack of connections to the rest of the US power grid, a decision taken to remain outside the oversight of federal regulators. Early in the storm, one of the few interconnections was cut by the Southwest Power Pool, which was having its own grid stability issues, leaving Texas unable to access outside power sources to replace those it had lost.
"I understand the go-it-alone ethos but there is also an ethos of helping your neighbour," she said. "Connecting could be good for Texas in times of emergency but it could also benefit Texas and the rest of the country in good times when Texas is generating all sorts of clean energy – it could send some of those clean ions out from Texas and take advantage of a market that is eager to accept it."