Test of Texas: Part 3 - Failure

Part 3 of 4

By Bryan Kaus

Expectation for a cold weather blast across Texas were set in the early part of the week prior to the cold-snap. Many folks dutifully wrapped their outdoor pipes, got out the heavy winter coats, stocked up on some extra essentials and planned for a chilly Valentine's Day weekend. Nobody knew quite what was in store. What came next was a perfect storm, literally and figuratively.

The cold swept into the state swiftly and the situation on the ground evolved rapidly. To cope, Texans headed indoors and turned up the heat to hunker down sending electricity demand soaring, at the same time, the cold weather began to take it's toll on the power generation infrastructure.

Unlike conventional outages with lines downed by ice, trees, and wind, what developed was largely the result of failures with generation capacity itself. With temperatures dipping into the teens and lower, infrastructure was faced with challenges unanticipated by ERCOT.

Wind

Some initial reports pointed to frozen wind turbines as the culprit. By ERCOT’s own estimations, at one point, roughly half of its wind capacity was impacted by ice (though generation did fall, it came in ahead of projections on existing). That’s nothing to sneeze at, as wind has grown to be roughly 24 percent of the state’s power capacity or nearly 20GWs, from around 6 percent of the mix a decade ago. This is undoubtedly part of the problem, as the variability in production means that wind is not suitable for baseload, but that is only part of the problem. As wind power fell offline, conventional generation was facing it's own problems.

Natural Gas

Roughly 50 percent of the Texas grid's capacity is generated by natural gas, most of which homegrown. Traditionally reliable natural gas generation saw strains as production began seeing well-head freeze-offs, when water and other elements in the stream freeze at the well-head and create a blockage of gas flows, dramatically curtailing supply just when the market needed it most. Additionally, the supply in the market faced competition from domestic heating needs and generation needs. With wind units offline, it would be natural to expect conventional generation to ramp-up to offset, only it seems that they they couldn't. This primed the stage for what was to come.

Trip and Fall

As frigid weather began descending on the state, multiple generating units -conventional gas and coal units and wind began failing, tripping off-line, one-after the other resulting in a cascade of load deficiencies.

To address this, ERCOT initiated a plan to cut larger industrial users that had been notified in advance and agreed to the conditions. Unfortunately, these actions were insufficient and generation came off much faster and at greater levels than had been projected in scenario planning. 

The Texas system is largely designed to support demand for hot summers rather than cold winters. And while you might say that you’d expect winter demand to be lower, even in a cold snap than during summer air conditioning season, (part of the reason routine maintenance is often conducted in the winter months, and some capacity was down) there is another point to consider – the equipment itself.

Just like Texas water pipes, the equipment generally is not sufficiently winterized to withstand extreme cold temperatures, leading to failures. This has been noted in the aftermath of previous cold snaps, such as 2011 and 1989 that almost caused grid failure. Subsequent studies recommended significant improvements to winterization of critical equipment and reserve capacity as critical. While history may not repeat itself, it certainly rhymes. However, that insurance comes with a hefty price tag for a risk that has been viewed as an outside anomaly. In an interview with the Houston Chronicle, Jim Krane, a fellow at the Baker Energy Institute noted, "In Texas, if you have one overarching thing that seems to be across the board, it's that nothing is winterized.” It seems likely that this deficiency will likely be a focus of the aftermath.

Decision Points

With so little capacity and so much demand, it was becoming more and more difficult to keep the grid stable. As initial cuts failed to address the issue, ERCOT was forced to make a call and, in the early morning hours of Monday, February 15, elected to implement what were intended to be rolling blackouts.

In a statement, ERCOT President Bill Magness, noted that the decision was made to avoid a total failure of the grid one that could have resulted in catastrophic damage where outages might not be measured in a number of hours or days, but months.

Managing an electrical grid is not as simple as flipping a switch here or there. It’s almost a living organism that requires delicate coordination and balance, the very reason for ERCOT’s existence. Out of balance and out of control, demand can overwhelm grid infrastructure causing permanent failure and distribution from the generation units to the distribution apparatus.

That decision resulted in millions being plunged into the dark. What were intended to be rolling blackouts, however, for many lasted many hours or even days. In all, the grid saw a dip of more than 34 gigawatts on system with peak capacity of around 75 gigawatts; a shock to the system that would take days to balance out and result in ancillary impacts, including damage to homes and loss of life.

As difficult and even deadly as that decision may have been, in the moment, at least on the surface, it was the only option to stop the grid from falling into a runaway death spiral.

Fear and Fury

As anxiety and panic set in for some, the finger pointing began. Several elected officials and authorities, seemed unwilling to let a good crisis go to waste, jumped into the fray, spending valuable time pointing fingers and assigning blame and passing the buck or getting photo ops rather than focusing on solving the problems at hand, with millions of residents out of power and many with little or unsafe drinking water. That of course was not universal.

Many are stressed and strained and looking for accountability, and rightly so. Those outraged at local utility providers who have no real direct blame in this case. Even the producers don’t bear total responsibility.

Ultimately, the failure is the result of insufficient action and stress-testing and redundancy required by ERCOT and the Texas Legislature to provide sufficient oversight to the grid apparatus – the buck stops there. That said, let's be clear, ERCOT has some incredibly talented and intelligent people who kept a bad situation from total catastrophe and they should be commended. Failure is attributable without issuing a wholesale incitement of all things ERCOT.

Of course, the goal now must be to navigate the present crisis. There will be plenty of time for blame as a true picture emerges and we lean forward to mitigate gaps, identify appropriate actions work on a plan to ensure a catastrophe like this never happens again. 

Now it's time to begin shaping that future.

If you missed other parts of the series, they can be found here:

• Part 1 - Cold Hard Truth
• Part 2 - The Grid

Twitter: @bryankaus

Disclaimer: Mr. Kaus holds a degree from Pennsylvania State University, certifications from The University of Pennsylvania's Wharton School and Northwestern University and is a member of the American Economic Association. Opinions represented here are solely those of the author and do not reflect the views of any persons, companies or entities referenced within the content or otherwise referenced.

All information, contained within this article, including quotes, is/are sourced from publicly available information (i.e. press releases, regulatory filings, published interviews etc.). Specific attention has been paid to accuracy, however, the author makes no guarantees as to the complete accuracy of the content. Additional attention has been paid to ensuring compliance with all policies, guidelines and laws. This should not be construed as investment advice.

Note: Mr. Kaus is an employee of Phillips 66, however, opinions represented here are solely those of the author and do not reflect the views of any persons, companies or entities referenced within the content or otherwise referenced. All information is public and in compliance with policies, regulations etc. Any and all inquiries relating to this matter should be directed to the company(ies) referenced and its appropriate and authorized person(s).

Source Notes :

Primary ERCOT Resources: 

• 2020 Report on Existing and Potential Electric System Constraints and Needs
• 2020 Long-Term System Assessment for the ERCOT Region
• 2020 Regional Transmission Plan
• Market Compliance https://www.ercot.com/mktrules/compliance
• Media Kit https://www.ercot.com/news/mediakit

North American Electric Reliability Corporation. (1990, November). Electric Utility Response to the Winter Freeze of December 21 to December 23, 1989. NERC. https://www.nerc.com/pa/rrm/ea/February%202011%20Southwest%20Cold%20Weather%20Event/ERCOT%20Emergency%20Operation%201989.pdf

North American Energy Reliability Corporation; Federal Energy Regulatory Commission. (2011, August). FERC/NERC Staff Report on the 2011 Southwest Cold Weather Event. NERC; FERC. https://www.nerc.com/pa/rrm/ea/ColdWeatherTrainingMaterials/FERC%20NERC%20Findings%20and%20Recommendations.pdf

Douglas, E. (2021, February 18). Texas was minutes away from months long power outages, officials say. The Texas Tribune. https://www.texastribune.org/2021/02/18/texas-power-outages-ercot/

Steffy, L. (2014, February 12). The Generation Gap. Texas Monthly. https://www.texasmonthly.com/articles/the-generation-gap/

Takahashi, P. (2021, February 17). Perfect storm: Energy supply chain slashed by extreme weather. Houston Chronicle. https://www.houstonchronicle.com/business/energy/article/Perfect-storm-Energy-supply-chain-slashed-by-15955484.php

Note: List not comprehensive.