February 19, 2021
Electric Crisis in Texas: Could it Happen Here?
Mike Peters From the CEO
In Brief: The energy crisis in Texas is justifiably the subject of significant media attention. Some opinions being expressed about the causes may be misinformed or only partially explain the situation. While federal regulators will fully investigate, it seems clear that numerous factors contributed to this ongoing disaster: extreme weather, an overreliance on natural gas, lack of state regulatory oversight, and Texas’ choice to isolate much of its power grid. While one can never say never, the highly reliable member utilities of WPPI are well prepared for winter weather extremes. They are also better protected from an event of this magnitude with a diverse fuel supply and proper utility regulation at the state, regional and federal levels.
As we all know, the weather has been unusually cold for the past week throughout the central portion of the United States. Texas in particular is experiencing historic low temperatures and a series of winter storms with devastating impacts on its electric generation, transmission and local distribution systems. Millions in the state have been without power or have experienced rolling outages mandated by regional operators to protect the larger grid. And, while power is coming back online as the weather improves, these impacts have caused a widespread crisis, with homes unheated, water plants failing and widespread gasoline shortages.
Understandably, the news from Texas has left some wondering about the causes of this crisis and asking about the likelihood for similar events to unfold in our region. As the investigations begin, we can assume a range of armchair quarterbacks will continue sharing their opinions in the press and on social media. At this point, those conclusions may be misinformed or only partially explain the situation.
This week I participated in a call through the American Public Power Association with more than 150 municipal utility industry representatives, including the CEOs of some of WPPI’s fellow joint-action agencies that serve in Texas and neighboring impacted states. As I learned from those on the ground, many factors are fueling this crisis, and it truly is a complicated problem.
Below is some relevant background information that I hope will be of help.
Unprecedented cold. One of the biggest contributors to the crisis is the simple fact that the Texas electric generation fleet, along with the pipeline system on which its natural gas-fired electric generators depend, was not designed for the cold temperatures we routinely experience in our part of the country. Such winter weather is not unusual for us, but the circumstances are extreme and record-setting for Texas, where roughly 46,000 megawatts (MW) of electric generation shut down in the cold.
In contrast, the grid in our region is built for such conditions and utilities here are well experienced in managing these seasonal extremes. Cold weather issues are far less likely to be a factor for us.
Natural gas supply. Texas’ electric utilities are highly reliant on natural gas, which far outpaces all other fuel sources in the state’s electric generation mix. At present nearly 40% of the Permian Basin gas field in Texas is frozen over. Here’s an article detailing the issues gas suppliers are having and how that impacts natural gas-fired electric generators. This situation underscores the importance of electric utilities embracing a diverse, robust resource mix.
As for WPPI and our region, we have established a fuel mix that is more diverse. In 2019, natural gas accounted for about 21% of the WPPI membership’s electric generation (see p. 17 of WPPI’s Annual Report). Natural gas supply issues can of course impact fuel costs and availability, as well as driving up overall market costs. But, our diversity helps limit the WPPI membership’s risk in this area.
Heating demand. Further compounding issues for the grid in Texas is the state’s reliance on electricity as its primary heating source. The cold weather drastically increased heating demand across the state just as more than 180 electric generating units began tripping offline, further compounding the weather-related stress on the system. As for those who do use natural gas for heat, their increased demand also contributed to the natural gas supply problems described above.
In our region, heating technology can of course vary by area and by customer, but as a whole we do not depend primarily on electricity for most of our heating needs.
What about wind energy? Although Texas has increased its reliance on renewables, wind energy currently accounts for just about 20% of the state’s annual generation. We have seen a fair amount of speculation about which types of generator outages contributed most to the crisis. Texas experienced significant outages in multiple types of generation, including coal, gas, wind and nuclear electric generating facilities. As we await the official investigatory reports, what is evident now is that because wind energy represents a smaller portion of the state’s expected generation, the amount of generation lost due to wind generator outages was far exceeded by the generation lost due to outages at coal, gas and nuclear generating facilities.
As for wind energy in our region, while some wind turbines did trip offline during the polar vortices of 2014 and 2019, wind energy facilities here are designed for and built with equipment to help protect them from extreme cold weather. This means that our wind energy resources will be more reliable during cold weather than those in the South, which are not designed and equipped for the low temperatures our turbines can withstand here in the Midwest.
Regulatory structure. We operate in a footprint where most states closely regulate their utilities. And, utilities here typically serve the functions of both generating electricity and distributing it to customers, whom they are obligated under state policy to serve. This makes them well able to plan for and ensure the availability of adequate resources, and also underscores the benefits of utilities owning and operating their own generation resources.
Texas, on the other hand, is a deregulated state with far less oversight by state regulators to ensure electric generator reliability and resiliency. Most utilities serving retail customers don’t have their own generation resources. Meanwhile, merchant generators are motivated to provide resources only where doing so provides the most favorable returns. This effectively limits the state’s ability as a whole to ensure that electric generating resources will be sufficient under a variety of contingencies.
Grid operators. Texas is unique in that its major transmission owners consciously decided to refrain from establishing alternating-current connections to the surrounding interstate grid, in order to avoid federal regulation applying to the sale of electricity in interstate commerce. This portion of Texas, overseen by the Electric Reliability Council of Texas (ERCOT), is thus essentially disconnected from the rest of the country.
As a result, most of the grid in Texas has very limited ability to access generation from other states when needed most.
In contrast, our Midcontinent Independent System Operator (MISO), which manages grid operations in 15 U.S. states and the Canadian province of Manitoba, is generally able to quickly and easily transport power across many states as needed. While MISO had some of its own challenges during the recent cold snap, we have a system that has shown that it is resilient and able to withstand extreme cold conditions.
While no system can be completely impervious to disaster, both the WPPI membership and our region’s integrated and regulated system are far better positioned to withstand the challenges currently faced by utilities in Texas. As we learn more from the crisis there, we will keep WPPI’s member leaders informed. The 51 member utilities of WPPI have a long-established track record of excellent service and reliability, and we remain focused on continuing to fulfill our responsibility for helping them keep the lights on.