A Different Take on ERCOT’s Failures

This article was adapted and published in The Oklahoman on February 27, 2021 and in Newsmax on March 8, 2021.

Photo by henry perks on Unsplash

Record-setting cold weather took down Texas’ electrical grid, known as the Electricity Reliability Council of Texas (ERCOT), this week. While it also strained the Southwest Power Pool (SPP), which provides power to a 14-state region including Oklahoma, all of the news has focused on Texas, the oil capital of the world. First, some ERCOT numbers to remember:

• 2x. Texas produces more electricity than any other state, generating nearly twice as much as Florida, the second-highest-electricity-producing state. Texas peaked at 69,150 MW of demand this week, breaking the 2018 record of 65,950 MW by 3,200 MW.

• 93%. The failure rate of Wind (peak 9,015 MW; trough 638 MW)

• 1.8%. The trough of operational Wind supply to its total capacity (638 MW out of 34,583 MW installed wind capacity)

• 36%. The failure rate of Natural Gas (peak 43,013 MW; trough 27,542 MW)

• 31%. The failure rate of Nuclear (peak 11,065 MW; trough 7,650 MW)

• 24%. The failure rate of coal (peak 5,140 MW; trough 3,785 MW)

You’ve likely heard and read countless articles by now trying to blame either wind or thermal energies (coal, natural gas, and nuclear) for ERCOT’s failure this week. The first point we need to understand is that all forms of energy failed in Texas this week, from wind to nuclear.  In addition to disrupting wind, solar, and natural gas, this freeze caused Permian giant Oxy to declare Force Majure and Houston shipping channel closures as well. 

Freeze-Offs

To understand how and why thermal energies like natural gas failed, you need to understand “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 key choke points. For example, most production at the wellhead flows to a “separator” that separate the oil from the gas from the water. If you get a low-pressure situation there, the well freezes off before it even gets to the pipelines.

More significant than water crystals are methane hydrate crystals. These hydrate crystals from high-liquids content in the gas coupled with high rates of flow (i.e. shale gas wells). 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 and Texas simply are not set up for these kinds of cold weather systems.  We do not insulate our infrastructure the way they do in the Rockies or Canada – nor can we due to the extremely hot temperatures encountered in the summer months.

Since more than 30 MW of thermal sources – coal, natural gas, and nuclear – failed, it has provided a rare opportunity for deep decarbonization, special-interest groups to point their finger at the very fuel that ultimately saved thousands of lives this week – Natural Gas.

Why Natural Gas is Not to Blame

There are three reasons, which should be blatant to energy experts, that natural gas is not to blame for the ERCOT failures.

#1 Natural gas pulled more than its weight this week

This graphical representation from the Energy Information Agency (EIA) speaks for itself. In fact, natural gas set a generation record during this storm even though it still saw a 36% failure rate.

#2 Texas has incentivized heavy investment in renewables that ERCOT does not rely upon

The fact is, nobody is incentivized anymore to invest in thermal infrastructure. Capital markets have squeezed it out, the federal government disincentivizes it, and the state of Texas disincentivizes investment into thermal infrastructure. As you would expect under such a scenario, Texas chose to neglect existing and more reliable thermal infrastructure while renewables exploded.

The United States spent $71.6 billion in federal subsidies for wind and solar from 2010-2019, $25 billion for oil and gas, $15.4 billion for nuclear, and $12.8 billion for coal. While I’m not sure how many of those dollars flowed directly to Texas, their installed wind capacity suggests that the bulk of those dollars ended up there. Texas itself has handed out additional renewable free-bees like the Competitive Renewable Energy Zone transmission, property tax abatements, grid interconnection costs, and the REC program, which total an estimated $18 billion through 2029 (TPPF).

Installed Wind Capacity by State

These incentives ignore the amount of work done by a barrel of oil, a pound of coal, and a British Thermal Unit of natural gas, all in the name of climate change.

Values are “Subsidies” as defined by the EIA

As a result, Texas’ buildout of wind – which ERCOT does not rely upon – has exploded.

#3 Utilities have prioritized “reliably unreliable” wind instead of thermal infrastructure

In the words of the highly-quoted, low-carbon advocate, Jesse Jenkins, wind and solar are “reliably unreliable.” While ERCOT only “relies” upon 19% of installed wind capacity in Texas, the utilities have been either incentivized or required to take wind – when it’s actually blowing – first. Since wind has priority over thermal energies like natural gas, that means that natural gas power providers have to sit idle while they continue to incur fixed costs, dramatically reducing their operating margins. Texas has at times achieved more than 50% of electrical demand supplied by wind, leaving increasing amounts of natural gas power plants sitting idle. As their profits decline, they don’t have the money to invest in their existing infrastructure. More importantly, they are not incentivized financially to do so either. Yet, they are still required to back up wind and solar when they inevitably fail.

As Ed Hirs, an energy fellow in the Department of Economics at the University of Houston, put it, “The ERCOT grid has collapsed in exactly the same manner as the old Soviet Union – 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. If you don’t make a return on your money, how can you keep it up?”

Can you expect your car to work during the harshest of conditions after neglecting it for over a decade? Texans are lucky that while ERCOT failed, the natural gas flowing to families huddled around their fireplaces did not.