19 Feb Preventing future blackouts in Texas: More options than just weatherization
What just happened in the Texas electric market? How did the increased use of large intermittent renewable wind power affect the situation? What should Texas – and other markets – do to avoid similar rolling blackouts and price spikes in the future?
Utilities will face significant losses – either they’ve capped bills and will have to pay wholesale prices for electricity they’ll sell at retail for a tiny fraction of the cost…or they haven’t capped bills – and will face unpaid bills by customers who can’t afford ten thousand dollar electric bills.
A quick review of commodity economics and the nature of electricity pricing, will explain why recent events led to both extremely high electric prices and rolling blackouts.
1.1 Commodity pricing
For any commodity in an established free market, including electric energy, supply and demand run in balance at a market-clearing price. When a system upset occurs that changes the supply/demand balance, a new market-clearing price has to be established that reflects that change.
Usually, a sudden rapid increase in price (a “price spike”) is caused by a short-term, unexpected shortage of supply. Such events are often caused by weather – and not just in the energy market.
- The short-term price of nickel metal increases significantly when access to the railroad through northern Russia, used to haul metal from the largest nickel mine in the world, is lost due to a particularly bad Siberian winter.
- Orange juice prices increase fast on the news of a freeze during the Florida growing season.
To adjust to a sudden lower supply, the price of a commodity goes up until demand goes down and the market clears again at the new, higher market-clearing price. The price of a mineral or agricultural commodity might go up by a factor of three or four – and then the increase will stop. Eventually, people who find orange juice too expensive after a Florida freeze will buy artificial orange juice, or apple juice. Orange juice demand falls, and the orange juice market finds a new price level.
1.2 The unique nature of short-term energy markets
Most commodities are inventoried and react in the short term to price signals. Electricity isn’t, and doesn’t. Large scale energy markets with no inventory and live delivery – electricity and retail gas – are ill-suited to handle a sudden, unpredictable loss of supply. In the electric market particularly, neither a price signal, nor inventories, can buffer this increase as they do in other commodity markets.
1.2.1 Price signals don’t affect consumer behavior and thus don’t affect demand Energy demand is inelastic in the short run. During a severe supply shortage relative to anticipated demand, the price of electricity goes up…and just keeps going up. There is no mechanism through which utilities can offer delivery of electricity to some customers willing to pay a higher price while cutting off service, or reducing service, to others.
- End consumers don’t know about the price immediately. The electric bill won’t arrive for several weeks after a wholesale price shock. A consumer who sees higher orange juice prices in a store can choose not to buy. Consumers don’t know that the electricity for their refrigerators suddenly costs ten times as much.
Individual residential electric bills in Texas have already been sent out for up to $17,000 (for a customer who paid $660 the previous month.)1
- Some end consumers are insulated from price increases by contracts with their utility company wherein the utility absorbs wholesale price increases and consumer prices per kilowatt-hour are capped. o Whether a residential bill is capped or not, if consumers did receive a price signal, they’d have no reason to react to it.
o Furthermore, most consumers don’t have good knowledge of how to react to an electric price signal even if they did receive one. To have an effect on a grid scale, many consumers would have to understand what to do, have the ability to do it, and actually do it.
1.2.2 Electricity isn’t inventoried
In most commodity markets, a sudden price spike will bring inventoried materials onto the market, increasing supply and thus limiting the price increase. When the silver price went to $50/troy ounce in 1980, people sold silver coins and jewelry.
In retail energy markets, there may be some gas inventories, but there are no meaningful inventories of electricity. Some potential electricity may be inventoried in locations with large hydroelectric dams that can be run as needed till the water runs out, but batteries or other electric storage systems are not deployed on a large scale, in Texas or anywhere else. Some consumer-installed backup generators or whole-home batteries such as Tesla’s Power Wall
may exist (either of which would have to be in place before a crisis), but, on the overall grid scale, there is effectively no inventory of electricity. Electricity has to be generated and used as needed.
Due to the cold weather in Texas, demand was higher than expected. Since electricity has to be generated as needed, generation utilities do not run power plants unless the system operator has requested that they do so. Once the situation was known, plants that were already shut down for maintenance or because demand was expected to be low could not be restarted instantly – and any such gas plants would have faced the same gas supply issues as plants that had already been on line anyway.
1.2.4 Restoring balance currently requires outages
On the demand side of the electric market, consumers don’t see a price signal and generally can’t react to a price signal. On the supply side, if generation systems are down and can’t be turned on, suppliers can’t provide additional stock from inventory. The grid requires that delivery to all customers in certain locations be turned on and off at the same time.
Therefore, during an unexpected supply shortage, the only way to bring electric supply and demand back into balance, and to prevent the entire system from going down, is to cut demand at the non-consumer level – e.g., by implementing rolling blackouts and forcing demand to go down.
2 Texas electric supply and demand during the crisis
With supply down and demand up due to unexpected use of electric heat, electric grid operator ERCOT initiated rolling blackouts in most of Texas at 1:25 AM on Monday, Feb. 15, to avoid a complete system shutdown.
2.1 Planned maintenance
Some generation systems were already down for scheduled maintenance, as Texas usually needs more generation capacity in the hot summer months and winter is the time when large-scale maintenance and repairs can usually be accomplished.
1 https://www.dailymail.co.uk/news/article-9280781/Texas-homeowners-electric-bills-surge-high-17-000-wake winter-storms.html
2.2 Fueled generation systems
About 80% of Texas’ planned winter electric generation capacity comes from natural gas, coal and nuclear power, and about half of that went off line during the mid-February 2021 winter storm. Reasons for the outages vary: • Natural gas plants couldn’t get gas. Like electricity, gas isn’t inventoried; it’s used by gas plants on an as supplied basis. Use of gas for heating increased, reducing gas supplies available for electric generation – just as gas production declined from 25 – 50% because wells were too cold to produce, gathering lines froze, and gas pressures declined in the system due to the cold. As electric generation declined, a vicious cycle started – gas system pumps that use electricity didn’t have electricity.2 About 30,000 megawatts (MW) of gas may have been off line, relative to anticipated (pre-crisis) demand in the 70,000 MW range. • Although details are not readily available, it seems likely that some coal plant instrumentation froze, with at least 1000 megawatts (MW) of coal going off line.
- Even a 1300 megawatt (0.13 GW) nuclear plant went off line when a feedwater pump shut down, causing the reactor safety systems to shut the plant down.3
2.3 Renewable energy systems
Renewable energy systems, mostly wind, also went off line, but not nearly to the same extent as the fueled systems. Solar production was actually higher than predicted. Other renewable electric sources (biofuel, hydroelectric and geothermal electric generation) are not significant in Texas.
Renewable resources, contrary to early commentary from some politicians, did not contribute significantly to the problem – and did contribute significantly to the solution.
Wind turbines did shut down when they iced over. It is dangerous to allow a wind turbine to turn when it can spin large pieces of ice off at high speeds in random directions. However, subsequent data showed that this did not have a significant effect on the overall situation.
Although early conversations about the crisis focused on wind, wind turbines are widely distributed, and not all of them stopped operating at the same time, and they recovered quickly. ERCOT data show that, although total wind production did drop in the early hours of the crisis, total wind production was over forecasts when the rolling blackouts started.4 Wind came within 1000 MW of recovery of total predicted generation (only in the 6000 MW range in the winter to start with) by Tuesday.5
Solar panels produce more in cold weather. By Thursday Feb. 18, Texas grid operator ERCOT even credited solar power availability with helping to restore service more quickly than anticipated.6,7
3 Ideas to avoid similar future situations
Many of the reports in the popular press about this situation have focused on weatherization – investing to increase the resilience of the grid in the event of bad weather. Most such articles have mentioned that doing so would be very expensive.
Other options exist, and should be explored before concluding that winter weatherization is the right option. Texas is actually more likely to have problems in the summer than the winter, as its grid is designed for the summer peak and is more likely to fail due to high demand during periods of high temperatures, rather than this unusual situation
3 https://www.nrc.gov/reading-rm/doc-collections/event-status/event/2021/20210216en.html 4 https://arstechnica.com/science/2021/02/texas-power-grid-crumples-under-the-cold/
5 https://www.expressnews.com/opinion/editorials/article/Editorial-Abbott-s-big-lie-about-wind-and-15960043.php 6 https://www.renewableenergymagazine.com/wind/ercot-finds-that-frozen-wind-turbines-was-20210217 7 https://finance.yahoo.com/news/texas-crisis-deepens-economic-fallout-150643699.html
of high demand during low temperatures while significant capacity is off line. Ideal solutions would address summer as well as winter. Many of these concepts are also applicable to markets other than Texas, e.g., islands with no access to power outside their local grid.
3.1 Increase generation capacity in Texas – without building new power plants
Local generation capacity could be increased by rule changes regarding which power plants can be off line without ability to start up quickly, thus making it less likely that power plants would not be able to be brought on line in the event of a crisis. It is not clear that this would have helped in this situation due to the shortage of available gas, but it may nevertheless be prudent for Texas regulators and utilities to work together to make sure generation that has
already been installed, can be turned on quickly.
Texas’ grid is largely disconnected from the grids in the rest of the United States. Integration would be a major project and would subject elements of Texas generation to federal regulation as it would become interstate commerce. However, more comprehensive integration with either the eastern or western grids would enable ERCOT to bid for power from other regions, instead of relying only on domestic Texas resources and very limited power from other regions. (A part of Texas served through MISO rather than ERCOT also saw early rolling outages, but was back to normal by the end of Tuesday, Feb. 16.8,9)
3.2 Increase reliable renewable generation capacity
Solar energy, wind energy, and combinations of solar/wind and batteries that can offer low-cost, renewable generated power 24 hours a day, are falling in cost quickly. To maximize development of low-cost renewable power, regulators should put all forms of energy on a level playing field as regards the generation system’s ability to sell power via whatever system operator is relevant.
Geothermal electric generation – a 24/7 renewable generation technology that should largely be unaffected by weather (although instrument weatherization may be relevant) is not used in Texas. However, the state has a long history of oil and gas development and is thus familiar with the exploration and drilling technologies required for successful geothermal development. Many, many wells with downhole temperature data – relevant to successful geothermal development – have already been drilled. This data should be explored for the presence of large quantities of hot underground water, and the feasibility of adding economic generation capacity using the latest geothermal generation technologies suitable for low water temperature operation should be explored. In other markets, options for often-neglected, but 24/7 and low-cost, geothermal and hydroelectric development should be explored.
3.3 Energy storage
As explained in section 1.2.2, electricity isn’t inventoried on any large scale. Providing inventories could help significantly as regards reducing the severity of elements of an electric supply crisis. Options to do so, and their anticipated effects, are briefly outlined here.
3.3.1 Hydroelectric generation as a form of energy storage
Hydroelectric development, when possible, offers the opportunity not only for low-cost renewable generation, but can also effectively be used to store electric energy by using energy surplus to immediate needs (e.g., otherwise curtailed solar or wind) to pump water back above the dam.
The feasibility of conventional hydro development in Texas is low as the state does not have the large elevation changes usually associated with utility-scale hydro. However, low-cost, otherwise-curtailed wind is readily
8 https://www.powermag.com/ercot-sheds-load-as-extreme-cold-forces-generators-offline-miso-spp-brace-for worsening-system-conditions/
9 https://www.12newsnow.com/video/news/local/entergy-ends-outages-for-now-after-southeast-texas-sees-spike-in rolling-blackouts-tuesday-night/502-35baf9da-3dec-4b2f-8bab-b8fb26e64313
available at some times in north Texas. Further, experimentation with reverse hydro systems, in which water drains into, e.g., an abandoned mine to generate power, and is then pumped back up to ground level with low-cost energy, is ongoing in several locations worldwide. Before deciding to weatherize Texas’ entire energy infrastructure, it may be worth exploring the option of instead creating some reverse hydro systems that would effectively be used to store surplus wind and solar power.
3.3.2 Batteries, fuel cells and electric vehicles
Straightforward energy storage technologies – batteries and fuel cells (which store energy in the form of hydrogen that can be converted readily to electricity) have never been used on a utility scale because of their cost. However, costs of both are dropping very dramatically. From small-scale whole-house batteries like a Tesla Powerwall, to utility-scale battery installations, the feasibility (both technical and economic) of installing battery systems that would use low-cost energy (energy generated on off-peak hours, and otherwise-curtailed energy) should be evaluated both by customers and by utilities.
Electric vehicles (EVs) have batteries large enough to power a house for hours or even days. To the extent EV manufacturers do not offer power offtakes directly, there is an opportunity for third parties like utilities to develop systems that can connect an electric vehicle to a house for vehicle-to-grid (V2G) power delivery during an emergency. EVs are becoming more cost-effective as battery costs fall and as manufacturers achieve production at large scales. Their market share is going up rapidly, and most manufacturers have announced plans to phase out internal combustion engine vehicles. Although EV offtakes would not have helped much during this crisis, their increasing presence makes this concept relevant as an option to minimize the effects of future outages. Utilities, vehicle manufacturers, customers and regulators should plan ahead to make sure this option is viable.
3.4 Load management
3.4.1 Direct load management programs
Rolling blackouts are a very unsophisticated form of load management. Improvement of Texas’ existing load management programs, wherein utilities pay customers for the right to turn off specific devices during periods of significant supply-demand imbalance, may be more cost-effective than large-scale weatherization of power plants and gas delivery – and may also be effective in the summer. Regulators and utilities should re-evaluate load control options, especially in light of the recent situation and the improved capabilities of thermostats that can be read and controlled by the utility. Turning thermostats down to, say, 45 F across the board for all customers may be less disruptive and expensive than outages.
3.4.2 Two-way live communication with the customer on prices
Finally, sending real-time price signals to customers is now feasible, and automating customer decisions to turn off appliances or change thermostat temperatures based on price can be achieved.
Introducing this technology on a large scale – and training customers to use it – could be both the most cost effective option available to address both summer and winter supply crisis situations, and the most popular, as it would delegate the decision as to what to pay for an end-use energy service (e.g., heating, cooking) back to the customer…as happens in virtually every other consumer product market in which normal price signals exist.