EIP Weekly Reads 2/16: ERCOT Super Summary Edition

Texas is in the midst of a crisis, with sustained freezing temperatures and massive power outages leading to a declared state of emergency. While there is certain to be a post-mortem in coming weeks, there has been a deluge of information to sort through in real-time and a story is starting to emerge.

Chapter One: Extreme Weather

The freezing temperatures driving a wedge through the center of the country are not coming out of nowhere. Scientists have good reason to believe that Arctic warming is linked to colder mid-latitude weather.

We can no longer call extreme weather unprecedented. It is becoming very precedented, with 22 billion-dollar weather disasters happening in 2020 alone.

Chapter 2: A Demanding Grid

While this freezing blast has covered the center of the country, Texas has been particularly hard-hit because it simply does not typically experience these kinds of temperatures (unlike, say, Minnesota). Homes are heated ~40% by natural gas and ~50% by electricity. So as the temperatures got colder, homes relied more on heating -- which began to drive up electric demand and also gas consumption for residential use.

That increased demand is the first domino. If you go back to ERCOTs resource adequacy study from November, there was no indication that we should expect trouble in the 2020/2021 Winter period. What changed? They expected a peak winter demand of 58 GW. Even on the very, very high side - they expected 67 GW. As the temperatures dropped, the short-term forecasts started to call it closer to 70 GW.

Having record high demand is manageable if you have enough capacity to cover it. ERCOT was expecting to have about 83 GW of capacity available. But as the temperatures stayed lower, longer -- capacity began dropping off steeply with unexpected outages.

Chapter 3: Forget the Winds of Winter - This Was a Song of Fire and Ice.

Let's start with renewables. The first news stories have been about wind turbines freezing up. On it's face, this doesn't come as a major shock given that wind developers in Texas would be extremely unlikely to have winterized their equipment in the same way you'd expect to see in Canada, Sweden, or even MISO. However, as the data comes out - it's becoming clearer that wind was not the real problem. While a ton of wind did go offline - depending on the hour you check, both wind and solar were mostly plus/minus 1 GW of the ERCOT forecast. In other words, those resources weren't really expected to be there in the forecast -- and the variance off the forecast was relatively low.

Nuclear, too, was mostly on track although even there they experienced one small outage which took another 1.2 GW off the grid (very close to the amount solar/wind underperformed by in the same period.

So what happened? Circling back to the cold weather, homes got the priority for natural gas resources as the temperature dropped and people turned up their thermostats. This mean gas supply was now being split between power plants and an unexpected amount of residential demand. Then, the wellheads began to freeze - which meant that supply from the source came down. Then the pipes froze. As all that unfolded, prices for electricity and natural gas spiked with high demand and supply becoming scarce. Electricity providers saw the writing on the wall, and offered to pay people to switch suppliers (especially those with pass through rates) as they realized they wouldn't be able to cover their customers.

Then the natural gas generators themselves started to experience problems (this is a great little explainer on why that is probably the case, but we need to wait on the post-mortem to really know). At the end of the day, a whopping 30 - 35 GW of thermal generation has been down depending on when you look.

Chapter 4: Houston, We Have a Problem. What's is the Solution?

This has led to rolling blackouts throughout Texas, as the grid operator seeks to maintain power to critical loads such as hospitals. They are restoring power as fast as they can, but it's a dramatic and very serious situation unfolding in real time.

The must follows on this topic are Jesse Jenkins, Joshua Rhodes, and Alex Gilbert.

What can be done? Unfortunately, there are no easy answers, but here is my take.

1. We're Living in the Climate Era. Extreme weather events including hurricanes, wildfires, winter storms, and heat waves must shape how both homes and power grids are planned. Whether you are an ESCO or working through an IRP -- this means you!

2. Homes Matter. Homes need to be prepared for extreme heat and freezing cold, which involves weatherization and resiliency services. There are technology, design, and financing challenges to this. Also, the more on-site generation and storage you have, the easier it is to reduce demand when the grid is under strain -- and power your home when there is an outage.

3. The Grid must be Hardened. Whether it is equipping turbines for colder weather or finding a way to avoid taking a propane blowtorch to wellheads. Distribution-level microgrids have long been discussed but probably need to be taken much more seriously. Energy storage, and particularly longer duration storage, will need to play a bigger role. And lastly - transmission to capitalize on geographic diversity and wheel in energy from where it's needed.

Adam James is the Chief of Staff and Senior Vice President at Energy Impact Partners. You can follow him here on Twitter or here on Linkedin.