The Failures of (ERCOT) Power

Feb 17, 2021: this article has been modified to include the location and date of the image below, update the EIA graphic to Feb 16, and remove the anecdotal reference to Germany which doesn’t have any bearing on United States power generation. This article discusses the electricity grids in the United States, which only consume about 1/3rd of total energy in the United States. Approximately 67% of energy demand is still required to keep the economy running that is not at all contemplated herein.

(Sweden, 2015) A fossil-fuel-powered helicopter, made of refined fossil fuels, sprays chemicals derived from fossil fuels onto a windmill manufactured by burning fossil fuels, and made of more refined fossil fuels

We are supposed to be panicking about Global Warming. Instead, power providers like Texas’ Electric Reliability Council of Texas (ERCOT) and Oklahoma’s Southwest Power Pool (SPP) should have been preparing their infrastructure for record-shattering, freezing temperatures that have also created unprecedented electricity demand. Yep, you read that right, how stupid can these oil and gas people be to NOT have prepared for record cold?! 97% of scientists agree that they are stupid (yes, I’m being facetious).

Energy Finance Twitter (#EFT and #OOTT)

The Deep Freeze Effects on Wind, Solar, and Natural Gas

Solar panels are covered in snow and wind farms are frozen stiff or turbines locked due to winds exceeding 25 knots. For the first time in history, the Southwest Power Pool has had to initiate planned rolling outages to protect its system from blackouts (“Blackouts” are unplanned outages, not planned outages). It has been estimated that there is $60 billion of wind investment, $9 billion of solar investment, and $7 billion of transmission investment in Texas alone sitting idle right now (Mark Nelson). ERCOT reported zero solar generation while wind generation fell to as low as an estimated 1.3% of installed capacity yesterday, approximately 400 MW of wind generation out of the total 30,904 MW installed wind capacity of Texas.

However, the problems for power suppliers did not stop with wind and solar. The unprecedented freeze has also frozen up natural gas supplies as well, in what is known as “freeze-off”.

Freeze-off occurs anywhere there is a pressure drop in the system. That pressure drop acts like a refrigerator. Water is produced alongside oil and gas, and that water can create crystals that freeze-off the well at multiple points. For example, most wells are hooked up to separators that separate the oil from the gas from the water where you get a low-pressure situation. The moment that a low-pressure situation occurs, the water forms crystals and freezes the well off from producing. However, the larger issue is with rich gas and high-rate wells (like those produced in the SCOOP and STACK). Those wells produce methane hydrate crystals instead of simple water crystals. Those hydrate crystals form more easily than water crystals and they are harder to get rid of, too. Methanol is largely used to try and combat these situations, along with burying lines deep enough into the ground to shield from cold surface temps. Oklahoma is not set up for this kind of cold; we don't wrap stuff with heat tape like they do in the Rockies or Canada.

In addition to disrupting wind, solar, and natural gas, this freeze has affected so much more - it has caused Permian producer Oxy to declare Force Majure, Houston shipping channel closures, and Nuclear facilities to go offline resulting in 1,280 MW of lost capacity as well.

What Happens if the Natural Gas Lines Go Offline?

If natural gas lines to consumers are not filled to a threshold pressure, the line will go down and the utility company will shut it off. Once the natural gas is back, it doesn’t just turn back on. The process could take weeks.

The utility turns off the gas line to customers if supply drops below a certain threshold.
The utility sends out an army of people to physically turn off gas at every single physical location affected by the outage
Once the gas supply is high enough, the utility will re-fill the line
The utility sends out another army of people to physically inspect every single physical location affected by the outage for leakage
If no leakage, the utility will manually turn customers’ gas access back on one-by-one

The Blame Game

A Failure of Solar and Wind

Groups like Life.Powered have come out swinging, blaming the ERCOT blackouts on wind and solar. The chart below, which has now been updated through February 16th, is used to show the dramatic freefall in wind and solar power generation throughout the freezing period while it’s clear that natural gas added dramatic amounts of generation to offset the lost wind generation (solar is kind of an afterthought really). In addition to picking up the slack for renewables, natural gas was also trying to provide enough energy to satisfy record excess demand as well. Texas set a new power demand record at 69,150 MW Sunday - 3,200 MW higher than the previous record set in 2018 (Austin American-Statemen). The ability of natural gas to fire up that quickly and satisfy as much demand as it did is nothing short of incredible.

Blizzard - ERCOT electricity gen by source EIA (2021-02-16).png

However, just because wind and solar failed does not have any bearing over the next argument - whether thermal infrastructure failed. To say “what about renewables” is an intellectual logical fallacy in and of itself known as “whataboutism.” The failure of wind and solar simply does not negate natural gas’ failure. As Robert Clarke of Wood Mackenzie tweeted, as of February 15th, an estimated 7 billion cubic feet (BCF) of natural gas is offline due to freeze-offs with the majority of that coming from Oklahoma (est. 2.5 billion cubic feet of gas per day). For perspective, the entire state of Oklahoma produces about 5.8 billion cubic feet of gas per day (source: Hefner Energy LLC; Enverus). That’s roughly half of Oklahoma’s natural gas going offline, and another 3.3 BCF offline in other states when utilities need it most.

A Failure of Thermal Energies (Coal, Natural Gas, and Nuclear)

Low-carbon advocates, like Jesse Jenkins and Michael E. Webber, suggest that the failure of Texas’ ERCOT grid is mostly due to the failures of natural gas rather than wind and solar. Mr. Jenkins argues that ERCOT was counting on just 6 GW of wind vs. 70 GW of thermal (coal, natural gas, and nuclear). In his view, the fact that wind-generated 1 GW of wind instead of the 6 giga-watts that ERCOT was modeling to rely upon pales by comparison to the 40 GW out of the 70 giga-watts that ERCOT was relying upon from thermal sources (the failure of thermal sources maxed out around 34 GW deficit to ERCOT’s 70 GW reliance during the freeze so far). The point being made here is that while the percentage failure of wind (83%) sounds much more dramatic than the failure of thermal sources (42.9%), the actual amount of power that failed is more important (5 GW for wind vs. 34 GW for thermal).

What he does not state is that Texas has installed wind capacity of 30.9 GW of generation (source: windexchange.energy.gov). Wind thus generated a low of ~400 MW, or just 1.3% of capacity. For the record, I’m not certain what that says about the confidence interval in wind power when ERCOT “relies'“ upon 6 GW out of 30.9 GW of installed capacity.

Even the Southwest Power Pool seems to be throwing shade at natural gas when it suggested that the outages were due to “inadequate supplies of natural gas”. Anecdotally, the SPP is providing 42 GW of power right now across its 14-state territory while ERCOT is providing 46.6 GW of power to the portion of Texas that it covers at the time of the SPP’s tweet. As Mr. Jenkins noted, >30 MW of thermal power was offline in Texas, and we can’t ignore its failure in all this as well.

A Failure of Climate Denial

Mr. Webber decided to take the fight up to level 10 this morning though when he took a shot at Texas residents, labeling their Climate denial as the cause for Texas’ failing infrastructure. This is a good example of how smart people, I truly enjoy Mr. Webber and he’s been very kind towards me and my family, can get caught up in the emotions of any particular situation.

This criticism is not at all fair to a state that leads the nation in installed wind and solar capacity. In fact, no other state comes close to Texas which has over 30 GW of installed wind capacity. Iowa is in second at 10,201 MW; Oklahoma is third at 8,172 MW.

Moreover, Houston’s Mayor, Sylvester Turner, was just announced as the new Chair of the nation-wide coalition of Climate Mayors (ClimateMayors.org). He succeeds Mayor Martin J. Walsh of Boston, who was nominated by President Jo Biden as Secretary of Labor. In fact, on April 30, 2020, Mayor Turner committed the City of Houston, the "oil capital of the world", to 100% renewable energy. So, suggesting that the most aggressive state in terms of wind and solar investment is failing because it denies climate change is insincere, at best.

To highlight how aggressive the blame game has gotten, look no further than the fireworks flying right now between Jason Isaac, head of the Texas Public Policy Foundation (@TPPF), and Michael Webber. As fun as the reading is, it is truly Renewables vs. Fossil Fuels for many, and each side is digging in.

A Failure of Government

A more nuanced and historically-minded explanation comes from Ed Hirs, who has been advocating for what seems like decades that Texas lacks investment in its infrastructure because they aren’t allowed to make any profits by which to reinvest in their ever-aging infrastructure. As the Houston Chronicle writes:

“Ed Hirs, an energy fellow in the Department of Economics at the University of Houston, blamed the failures on the state’s deregulated power system, which doesn’t provide power generators with the returns needed to invest in maintaining and improving power plants.

“The ERCOT grid has collapsed in exactly the same manner as the old Soviet Union,” said Hirs. “It limped along on underinvestment and neglect until it finally broke under predictable circumstances.

“For more than a decade, generators have not been able to charge what it costs them to produce electricity,” said Hirs. “If you don’t make a return on your money, how can you keep it up? It’s like not taking care of your car. If you don’t change the oil and tires, you can’t expect your car to be ready to evacuate, let alone get you to work.”

Hirs said Houston residents can expect more power outages in the future. “The year 2011 was a miserable cold snap and there were blackouts,” said Hirs. “It happened before and will continue to happen until Texas restructures its electricity market.””

— Houston Chronicle

Mr. Hirs argues that decades of (a) neglect of the ERCOT power system and (b) it’s deregulated structure are to blame for the continued rolling blackouts.

To amplify the neglect, and by what can only be fueled by the religious zealotry of the climate change movement, Texas has instead chosen to invest in energy-disparate wind and solar rather than its existing systems. Texas has invested $53.1 billion in wind from 2009-2019 alone (Powering Texas). I find it hard to find an estimate of how much Texas invested in its aging fossil fuel infrastructure since that time. Further compounding the problem is that the shale industry has floundered since 2009, increasingly becoming starved for capital by the DivestFossilFuels movement, a lack of access to public debt, and a lack of access to public and private equities.

Oklahoma oil and gas production over time (source: Enverus, Hefner Energy LLC)

As a result, America has gone from producing a record 13 million barrels of oil per day (mmbopd) in November 2019 to producing just 10 mmbopd just a year later.

In Oklahoma, we have gone from producing a record 230 billion cubic feet of gas (BCFG) in May 2019 to produce just 137 BCFG in November 2020, the most recent full month of gas production data available. That lack of investment amounts to a 41% decline during that very short period.

The starvation of capital and the lack of profits the oil and gas industry has endured created the perfect storm for natural gas inventories to fail. This, more than any other single reason I’ve observed thus far, seems to explain natural gas’ failure.

Crypto Miners & Technology Companies Are Complicit in the Failures

Technology companies would have you believe they are “green” and 100% renewable when nothing could be further from reality. This is only an anecdotal reference to the power consumed by this sector to make the point that it would be nice to be able to turn off non-essential industrial electricity hogs during times like these.

Switch - IT Sector is the 3rd worst global offender.jpg

To show the scale of this sector’s thirst of electricity, the IT-sector, if it were a country, consumes more electricity than Russia and is only second to China and the United States. Companies like Facebook, LinkedIn, Amazon, Google, Apple, and cryptocurrency miners, to name a few, are electricity hogs and do not provide any life-essential services to those stranded without power in the midwest right now. (Not Twitter, of course, Twitter is essential).

crypto mining electricity consumption.png

Meanwhile, Bitcoin mining has exceeded the energy demands of Pakistan - a country with more than 200 million people. Remember though, electricity only accounts for roughly 33% of energy demand in the United States.

This is why I wrote an article - Why Tech Companies Owe You an Answer. You might be surprised to learn that Oklahoma has the most inexpensive, ethically-sourced, and green electrons the world has to offer.

Tech Companies Owe You an Answer

The Failure of Everyone to consider what happened after the electricity went out

I’ve had the opportunity now to speak with some of my friends in Houston. Many of them went without power (electricity) for days and are still without running water days later. Each of their stories are similar, too. They all moved their families - some of them extended families - into the living room where they huddled together to keep warm in front of the fireplace.

As I heard a similar story from each of them, it dawned on me that most of the analysis has been focused on why ERCOT’s electricity grid failed. Very little, if any, brain cells have been spent considering how these people managed to avoid freezing to death in their homes without electricity (regardless of why it failed). The simple fact of the matter is that these poeple’s lives would have looked starkly different had they not had natural gas to fuel their fireplaces. Each person I spoke with was thankful - thankful for that natural gas.

The Early Lessons

While countless lessons will become apparent, there are a couple of early lessons to be learned from the failures so far.

Lesson #1: If we have learned anything from the failures of our electric grids this week, it needs to be that an all-of-the-above energy approach is required to adequately handle the various scenarios that climate change now demands of civilization. As climate patterns get worse, grid resiliency is required to be more flexible. An all-of-the-above energy approach is one that both the Obama and Bush Administrations pursued equally - it should not be partisan.

Lesson #2: refusing profits to utilities and refusing capital markets to companies that are considered “fossil fuel companies” has set up the perfect storm for grid failures.

Lesson #3: things just don’t work when it’s absurdly cold in the south.