Austin, Texas (March 10, 2021) — Enverus, the leading energy SaaS company, has released its latest FundamentalEdge report, Winter Reaches Texas, an objective, unbiased look back at Texas’ exceptionally cold weather beginning on Feb. 10 and the power story that left millions in the freezing dark and resulted in numerous deaths.
“The finger pointing resulting in four million without power and 70 deaths really needs to stop. There is plenty of blame to go around,” says Bernadette Johnson, senior vice president of power and renewables at Enverus.
“Texas was not prepared for this cold snap. And that’s truly unfortunate because this event looks eerily similar to what happened the first week of February 2011. During that period, an extreme cold spike led to a sharp increase in demand, several thermal generators tripped offline due to the extreme temperatures, and wind capacity was reduced due to icy conditions.
“The Electric Reliability Council of Texas (ERCOT) is getting a lot of heat for their role, but the fact that it wasn’t worse is because of those grid operators, and they deserve credit for that. If the whole grid had gone totally offline, the physical damage to power infrastructure from overwhelming the system could have taken months to repair. As chaotic as it was, the whole state was minutes away from full blackout. Restoring Texas’ grid back to full use is a delicate process. Each part of the puzzle — the generators producing power, the transmission lines that move the power, and the customers that use it — must be carefully managed. It has to balance constantly. If you bring on too many customers, then you experience another outage.
“Looking forward, no solution is perfect and likely to have costs that vary wildly. Ultimately, those costs will be borne by consumers, whether it’s homeowners, commercial businesses or industrial facilities.
“Despite what some wish, renewables will continue to be part of the electric grid. But flexibility is needed, and natural gas is the ideal fuel to back up renewables because a power generation plant can turn it on quickly and start generating power quickly. While it’s easy to blame frozen wind turbines on those who promote renewable energy, or elected officials or transmission companies or ERCOT, this is a record event. No system in the country is immune to this. Some systems are more fragile, but no system is without risk and that’s an important lesson not only for Texas but the nation.”
Due to the nature of this important event, Enverus is making its full report and analysis available to the press for download.
Key takeaways from the report:
- Exceptionally cold weather roiled U.S. gas and power markets in mid-February, sending gas prices across the central U.S. skyrocketing to all-time highs in the hundreds per MMBtu and many power prices to market caps. Gas production fell precipitously due to freeze-offs just as demand ramped up for both gas heat and electric heat, which at the margin overwhelmingly comes from gas-fired plants. Texas faced the most acute challenge, with its upstream gathering and processing facilities, as well as power plants largely not weatherized to the extent that those in colder climates are. Significant capacity from traditional resources was also offline within ERCOT, causing the ISO’s demand to top out in the ~47 GW range rather than the ~74 GW expected, leading to widespread blackouts and more than 4 million customers losing power.
- Based on natural gas pipeline nominations, Texas natural gas production decreased by as much as 5 Bcf/d while demand increased by about 4 Bcf/d on average during the peak of the storm. Storage withdrawals also increased; however, some facilities faced power outages and were not able to operate at optimal levels. This caused exports via LNG and pipelines to Mexico to drop significantly, extending the power outages to the neighbor country. Additionally, the supply/demand imbalance pushed gas prices in the state to record high levels reaching three digits when on-average prices trade within cents of the Henry Hub benchmark.
- Gas is the most economic dispatchable power source and provides a plurality of generation in the U.S. as well as in Texas. But wellhead, pipeline and plant reliability challenges point to questions about how big its long-term role can be in domestic power generation.
- This crisis likely will have lasting impacts. At this point it is not clear to what extent gas-fired generators had infrastructure damage preventing them from running versus a broader shortage of gas in the south-central U.S. If the former, ERCOT may face pressure to add a capacity market (as exists in PJM, ISONE and other markets), which pays operators for availability rather than just for generation, as the energy-only ERCOT market does. Solutions to the latter are more complicated and difficult, entailing broader re-regulation of upstream activity and/or top-down allocation of supplies on extreme days (such as cutting off LNG feedgas and/or industrial consumers).
Members of the media should contact Jon Haubert to schedule an interview with one of Enverus’ expert analysts.
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