The Texas Freeze: How the Texas Electric Grid Failed Us All: Part III

Mar 7, 2022 | Energy Conservation

A year has passed since Winter Storm Uri walloped. Recent winter weather got us and our customers wondering if what happened in the aftermath of the big Texas Freeze of 2021 and if Texas is now better prepared.

Part 3: The Aftermath

As the facts about the 2021 Texas Freeze disaster have unwound, it’s evident that there are several layers to the story. In one, all types of generation technologies that served the grid failed. In another, the ERCOT market failed to protect consumers from unnecessarily high prices. And lastly, no sharp-toothed regulations to prevent such a preventable disaster had ever been enacted by the Texas legislature.

As an energy provider, our job is to help customers better understand how weather and grid operations affect their Texas electricity bills as well as what could happen in the future. Yet, one year after all of the alerts and reports, there’s still a lot waiting to be resolved.

At The Edge of Black Start

During the night of February 14 -15, ERCOT lost nearly half its generation capacity. Over 30,000 MW and 180 generators had gone offline. The only way the grid operator managed to avoid losing everything was to order the TDUs to use rolling blackouts to shed about 10,000 MW of load. So, on the morning of Monday, February 15  recovery efforts were far from easy because the cold would hang on for days.

Bringing generators back up is not just a matter of clicking a switch. Large steam-powered generating plants need about 10% of their total load capacity from the grid to run all their pumps, blowers, etc just so they can start up. Now, Texas has 28 black start generators that can start by themselves and then jump-start the grid. But because all of these relied primarily on natural gas, 23 of 28 units had gone off-line at some point during the event. Their average outage duration for all the state’s black start generators during the event was 40 hours.

So, had the Texas grid collapsed, ERCOT and the TDUs would have taken days (if not weeks) to resurrect it.

Throughout Monday and into Tuesday, the grid operator had to increase the outage in order to juggle resources with demand and maintain the grid. By the end of the day, February 16, with temperatures across the state struggling out of the single digits, 52,277 MW was offline. About 4.4 million customers had lost power. Though ERCOT ended its load-shedding and rolling black outs the next day, February 17, Texans would be in the dark for two more days.

Fault Conditions

Early on, many fact-starved individuals were quick to blame one thing or another for the disaster. In fact, all generation technologies, both renewable and fossil fuel, failed. But as federal and state authorities began investigating the causes, they found that there were three very familiar factors that drove the event.

Lack of preparation for extreme cold: The report filed by FERC and NERC Regional Entity Staff lays the cause of outages squarely on the failure of all types of generation to prepare for extreme cold and precipitation. In fact, the report states in bold print:=

Protecting transmitters, sensing lines and instrumentation, as well as wind turbine blades, against icing and freezing could have cut the MW of generating units experiencing an outage by 67 percent in ERCOT…”

As a result, FERC and NERC recommended that generator owners not only identify and insulate their generator unit’s cold-weather-critical components, but also that the owner should be compensated for the costs.

Failures in the natural gas sector: The University of Texas at Austin report points out that weather squeezed the natural gas sector with a combination of high demand and freezing conditions. Reduced production dropped pipeline pressure not just in Texas but across much of the central U.S. market, causing staggering prices for natural gas. Producers struggled to meet both residential heating demand and the needs of the region’s generating units.

FERC and NERC recommended that federal, state, and regulatory agencies should require natural gas infrastructure facilities to develop cold weather plans and insulate their plants from cold-related problems that reduce production.

Inaccurate forecast and reserve margin planning: One of ERCOT’s significant miscalculations was that it only took average winters into account for its planning. Specifically, FERC and NERC cite “multiple years of mild-weather peak loads and very few cold-weather peak loads.” As a result, ERCOT’s estimates were 14.3% below what the peak demand actually was. Their estimates also did not adequately predict extreme load days when homes and building would use electric (resistive) heating.

Likewise, demand calculations also assumed full capacity of natural gas generators would be available for reserve margin calculations because it ignored the potential for cold weather problems to interfere with gas delivery.

As a result, FERC and NERC recommended that ERCOT and other grid planners in southern states should adjust their forecasts to reflect actual historic peak loads during severe cold weather in their areas. And to take into account how much natural gas could be relied upon to fuel generators given that it may be also be needed to residential heat.

Domino Effects

On February 15, as ERCOT and the TDUs scrambled to plug in generation when it became available, the Public Utility Commission of Texas (PUCT) ordered that electric prices to reflect scarcity pricing. Wholesale spot prices shot to their stratospheric cap of $9,000 MWh ($9 kWh). Both customers and retail electricity providers (REPs) faced insane prices. In particular, customers who had signed with wholesale rate providers (like now-defunct Griddy) saw their rates soar from 5 cents per kWh to $1 per kWh and even higher.

Retail electricity providers (REPs) got squeezed by high spot prices and ERCOT fees. ERCOT market rules require REPs to put down cash as collateral for their Day Ahead Market purchases of electricity. So while big Texas power corporations had the cash in ready reserve, small companies had to scrape together millions of dollars in collateral. In one example, ERCOT asked a REP to post $6.5 million as collateral for just 4,000 customers. One by one, REPs grew so desperate to stay afloat that they urged their customers to switch to other providers and offered waiving termination fees and cash incentives. Some customers who tried to switch couldn’t because other providers weren’t accepting new enrollments.

On February 17, when ERCOT issued its final firm load shed instructions, the PUCT order allowing scarcity pricing should have expired. However, ERCOT continued scarcity pricing for another 32 hours. Retail provider bills became crippling. At one point, ERCOT announced that a handful of retailers owed it $345 million in payments. One, Brazos Electric Power Cooperative Inc, the largest and oldest electric co-op in Texas, was ultimately billed $2.1 billion by ERCOT. The Co-Op filed bankruptcy and launched a suit against ERCOT’s multibillion dollar charges. Other REPs also went bankrupt and left the state, including Just Energy, Griddy, and Entrust Energy.

When the independent market monitor announced that ERCOT’s 32 hour delay had improperly added $16 billion in additional costs to REPs, interested parties started lawyering up and heading off to court.

A full year later, the Brazos Coop case is just getting started. The PUCT has warned that if the court finds that ERCOT overcharged, a “domino effect” would lead other REPs to file bankruptcy and seek similar relief. Meanwhile, other questions linger over pricing decisions taken at the start of the rolling blackouts. One plaintiff’s argument is that the PUCT and ERCOT violated Texas law by not following proper procedure to set scarcity prices on February 15.

These court cases are still pending.

Legislative Solutions

Public outrage over the needless 246 deaths as well as the ordeal of millions of Texans drove the state’s legislature to enact changes. Though many lawmakers jabbed fingers at the heads of the PUCT and ERCOT during their testimony, a number also admitted that some of the blame for the mess lay with the legislature itself for having turned a blind eye to the grid’s weakness. Needless to say, once the initial hearings concluded, the ERCOT board, its president, and then the heads of the PUCT resigned or were fired in rather rapid succession.

Lawmakers then took up serious consideration how to better protect the grid. One of their first measures, HB16, banned electricity plans (like Griddy) where wholesale prices for power are passed to customers. Next, they took up two critical measures to change the Texas grid’s operation.

  • SB2 overhauled the ERCOT board of directors. Rather than relying on 16 industry insiders (who didn’t reside in Texas), the new 11 member board would be political appointees.
  • SB3 requires electric generating plants, transmission operators, and local utilities to submit weatherization plans to the PUCT. The PUCT oversees their weatherization and penalizes companies who violate their rules. Fines can range from $5,000 to $1 million per violation per day.

Because, gas and oil plants are regulated by the Texas Railroad Commission (RRC), SB3 allows gas facilities deemed “critical” by the RRC need to weatherize. But when lawmakers learned gas facilities could opt out of weatherizing, the RRC hardened its requirements. Its rules now state that certain facilities are not eligible to opt out of weatherizing if they are part of the electricity generation supply chain.

Is The Texas Grid Prepared?

Though much was made about the “reliable” Texas Grid being tested in the recent February 2022 storm, there’s more that can be done.

For one thing, the recent early February storm was nothing compared to 2021. While there was plenty of snow and ice, nighttime lows stayed in the 20s and low 30s. This was nowhere near the bitter single-digit lows from 2021. And while ERCOT saw its load top out at 69,000 MW and was backed up by extra wind output, the cold didn’t really push it hard enough.

While electric generators are close to full compliance with the new PUCT winterization rules, the RRC lags behind. It has until 2023 to require gas operations to come to compliance with its weatherization rules. In the meantime, a really brutal Polar Vortex could blow in and freeze off the unprepared natural gas facilities and choke off the fuel supply to generators. So, fossil fuel and renewable generators still have lots to do.

One thing that all homeowners in Texas can do is to reduce their energy usage both in winter and summer. This includes things like air sealing and adding insulation to your attic, sealing your ductwork, and preventing drafts around windows and doors. Not only does this cut your monthly bill but it also reduces load on the ERCOT grid and keeps it humming along for everyone.

 

Read Part I and Part II of The Texas Freeze: How the Texas Grid Failed Us All.

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