Learning from the Valentines’ Day Freeze
A look at what caused Texas’ infrastructure to fail, and what comes next
Key Takeaways:
- In spite of freezing temperatures and low wind, the Texas grid should have been able to generate enough electricity to serve its residents. Planning reports listed 83,000 MW of power plants that grid operators and regulators assumed would be available to meet peak demand. Texas’s electricity demand peaked at 69,150 MW on Sunday, February 14.
- Everything failed a little bit, but natural gas power plants failed the most. Over 45,000 MW of power plant capacity on went offline, including a whopping 25,000 MW of natural gas, 5,000 MW of coal, and 1,350 MW of nuclear. Roughly 18,000 MW of wind power was also offline, although only a fraction of this was expected to be running in the winter.
- Natural gas production in the region also fell by 20%, limiting fuel supply the natural gas power plants. This was partly due to liquids freezing in wellheads and pipelines, and partly due to equipment losing power.
- Unlike the rest of the US, Texas has an “energy only” market that pays electricity producers in real time and relies on scarcity prices to incentivize capital investment. Electricity prices spiked to over $9 per kilowatt hour, and natural gas prices spike to over $200 per MMBtu due to shortages.
- Wind and solar failures didn’t contribute significantly to the outage (wind is typically low in the winter). However, the huge increase in cheap, intermittent renewable energy on the Texas grid in the last few years creates an interesting dynamic with the current market structure.
- Both the Texas Public Utilities Commission (which is appointed by the State Legislature) and ERCOT (which manages the grid and electricity market in Texas) feel that they didn’t have the authority to require winterization. Hopefully these agencies (and their lawyers) will find a solution before the next extreme weather event.
Two events blew my mind in the past two weeks. On February 14 (Valentine’s Day) 2021, a cold snap caused a near catastrophic failure of Texas’s energy and water infrastructure. Four days later on February 18, the Perseverance rover was successfully lowered by sky crane onto the surface of Mars (if you haven’t watched the video yet, do it).
When undertaking a mission to Mars, we invest years of careful planning and make contingencies. Yet when it comes to critical yet mundane infrastructure at home, it’s easy to assume everything will continue to be fine.
Even worse, when things go wrong there’s an ugly tendency to turn events like the Valentine’s Day Freeze into a blame game. Accusations are still flying fast and fierce, distracting from what is a valuable opportunity for both Texas and the rest of the country to re-evaluate critical infrastructure. (I also touched on the state of our infrastructure in a post last summer.) The most important thing is to identify the lessons to be learned here and implement a better plan for the future.
In this post, we’ll catch folks up on what happened and why the electricity, gas and water systems in the Lone Star State failed last month. A big shout-out of appreciation to the folks at the Columbia Energy Exchange podcast, UT Prof. Michael Webber’s interview with the Texas Tribune’s Adam Smith, and the Energy Gang for sharing their expert assessments and helping to inform this post — I highly recommended these for people looking to dive deeper!
What Happened?
A strong high pressure system in the Arctic pushed a frigid air mass about 4000 miles south. [1] By Sunday evening (Valentines Day 2021), Texas was covered in snow, and demand for electricity had hit a new winter record — Texans were pulling over 69,000 megawatts (MW) of electricity from the grid between 6–7pm.
That night, natural gas, coal and nuclear power plants started going offline due to freezing conditions. By 1:30am on February 15, there were over 10,000 megawatts (MW) of power plants that were unable to make electricity. The power plant failures continued. With over 30,000 MW of power plants offline, the grid operator ERCOT (which stands for the Electricity Reliability Council of Texas) was forced to start rolling outages to prevent the entire electric grid from collapsing. As of February 16, the Texas power grid had unexpectedly lost over 45,000 megawatts of electricity generation capacity due to the cold snap — 70 to 80 power plants were offline. A total of 185 Texas power plants tripped due to freezing temperatures at some point during the cold snap.
Weather-Related Failures
Power plants went offline for a variety of reasons, many of which are still under investigation. An evaluation of grid failures after the 2014 that took over 9200 MW of power plants offline captures a range of problems with instrumentation and equipment:
At coal-fired power plants, operators also reported that the piles of coal used for fuel “turned to ice chunks” that their equipment couldn’t handle — roughly 5000 MW of coal-fired power went down. Of Texas’s four nuclear power plants, one (1350 MW) went offline due to weather-related problems with a sensor in the feedwater system.
Ice also built up on wind turbine blades and took wind farms offline. Despite some sound bites in the news, the decline in wind power was a relatively minor contributor to the power shortage. On average, Texas produces over 20% of its electricity from wind. However, in the winter, it’s typical for there to be little wind power. [2] To illustrate, the graph below shows the amount of wind energy generated in ERCOT’s territory in January 2021. The wind production drops to less than 2000 megawatt-hours in a given hour (below 2000 MW) on several days, even without a polar vortex. The grid operators know this and plan accordingly.
When the wind is blowing, it is the cheapest form of energy around. However, wind isn’t considered “firm” electric generation capacity — it is “reliably unreliable”.
Still, a significant fraction of wind turbines that could have helped the grid were offline. This isn’t because wind turbines inherently can’t handle cold — Siemens, Vestas and GE will happily sell you wind turbines that can operate in the North Sea, which is cold and wet and terrible all the time. However, the cost of a “cold climate” package adds about 2–10% to the upfront cost of a wind turbine (per Prof Michael Webber), which may not have penciled out if winter conditions are only expected once in 30 years.
A Natural Gas Shortage Compounded the Problem
It wasn’t just frozen equipment that prevented power plants from generating electricity. Natural gas production in the region fell by 20%, restricting supply the natural gas power plants. [3](When there isn’t enough natural gas for both residential and power customers, residential customers get priority.)
Again, the shortage stemmed from equipment not being winterized. Natural gas (and oil) production fell in part because water and other liquids that come up with the gas froze at wellheads and in pipelines. However in some areas, natural gas wells that were still working lost electricity, which is needed to run compressors, pumps, sensors and other equipment. The shortage of natural gas made the electricity blackouts worse — the two problems compounded each other.
Related to this second point, lack of information about the grid meant that critical infrastructure didn’t get power, making things much worse. Some transmission and distribution utilities didn’t have an updated list of critical infrastructure. This meant that in some areas, water treatment plants, communications equipment, and other critical infrastructure lost electricity and went down.
The Electricity and Natural Gas Markets Heated Up
Interesting market events were happening simultaneously. Without going too deep, Texas is a special snowflake when it comes to its electricity market, and how utilities are regulated. Texas’s electricity grid is isolated from the rest of the grid and is outside the jurisdiction of the Federal Energy Regulatory Committee (FERC), which regulates electricity in the rest of the US. The Texas legislature appoints members to the Texas Public Utilities Commission, which is responsible for rule-making and regulating the grid. The Energy Reliability Council of Texas (ERCOT) is an independent non-profit organization that manages supply and demand on the grid, and runs the state’s electricity market. (How Texas’ power grid works)
Unlike the rest of the U.S., Texas has an “energy only” market. Electricity is sold on a real-time basis at the going rate. When electricity becomes scarce, prices spike — this is the main incentive for power companies to invest in new power plants and reliability, to ensure that they are able to operate when prices are high.
The Energy Reliability Council of Texas (ERCOT) manages the energy market in Texas and sets a “price cap” on electricity prices of $9000 per megawatt-hour. This is equivalent to $9 per kilowatt-hour (kWh) — nearly 100X the $0.10–0.14/kWh that Texans usually pay for residential electricity! This cap is almost never reached… when the state set its January 2018 winter peak demand record, prices only briefly topped $2,200/MWh.
All other electric grids also have a “capacity market”. In places with capacity markets, the grid operators pay electricity producers a fee three years in advance based on the amount of power they might need, to ensure it is available. (If they call for it and it isn’t available, the power plant pays a penalty.) There are rules for which types of power plants can participate in capacity markets. It’s essentially a form of insurance.
Interestingly, Texas’s market structure generally helps intermittent renewable energy generators, who can often produce energy much more cheaply than than fossil fuel plants (more on the challenges caused by this here). Texas leads the nation in renewable energy capacity, and has a large queue of additional wind and solar projects planned.
The price of natural gas also skyrocketed during the power outages. Natural gas spot prices rose from below $3 per MMBtu (a MMBtu is a unit of thermal energy) to over $350 per MMBtu at some distribution points. (S&P Global) To make sure that the natural gas power plants that could keep operating would stay “in the black” and keep running, ERCOT increased the electricity price cap even further to $11,000 in some cases. Still, many generators were hit by the high cost of natural gas to supply their power plants.
Bottom line: it will be interesting to see what February utility bills look like and who ends up ultimately footing the bill — ERCOT, electricity generators, or retail customers.
Why Did This Happen?
The short answer is that Texas’s infrastructure was not weatherized to operate in cold temperatures. As a result:
- Firm capacity failed. “Firm” generation capacity are power plants that the grid operator can count on being able to provide power. Natural gas, coal, nuclear, and geothermal power plants are all considered firm generation. Grid operators and regulators assumed that these power plants would be available to meet peak demand (which was within their reserve margin); but they were not.
- Everything failed a little bit, but natural gas failed the most. Over 30,000 MW of firm capacity that ERCOT was counting on went offline, including a whopping 25,000 MW of natural gas, 5,000 MW of coal, and 1,350 MW of nuclear. Roughly 18,000 MW of wind power was also offline, although only a fraction of this was expected to be running in the winter.
Why isn’t the equipment in Texas better weatherized? Occam’s razor suggests that power plant owners and gas well operators felt that it wasn’t necessary, or worth the upfront cost. If the only incentive is to be able to generate power or gas an extra 2 days every 20 years, [4] those economics may not work out. There has also been significant downwards pressure on electricity prices in the last decade from low natural gas prices and the falling cost of renewables.
There is also no clear mechanism for enforcing weatherization standards for the Texas electric grid, despite earlier failures due to cold weather in 2011, 2014, and 2018. Each time ERCOT wrote a report recommending changes that were not implemented. The lack of a capacity market removes one common mechanism for implementing standards and inspections, and it will be interesting to see if this changes going forward. In many ways, the Texas market structure has been highly successful, enabling low cost electricity for industrial users and rapid adoption of renewables.
Natural gas production and distribution is regulated by a different agency, the Texas Railroad Commission. The Texas RRC regulates the oil and natural gas industry including oil & gas production, natural gas utilities and pipelines. It is primarily focused on safety and pipeline integrity, and enforcing federal and state law, and at present doesn’t require winterization beyond maintaining safety. (Ironically, the Texas Railroad Commission no longer has any authority over railroads in Texas.)
Lessons Learned
In essence, the massive failure of the Valentines’ Day freeze was due to oversight and a lack of careful planning. “These power plants are on our list, so they will come online if we ask them to,” and “it might get cold, but it will probably be fine.” Going forward, some power generators will rerun the numbers and decide it’s economical to take a few more winterization steps. If cold snaps continue to happen more often (which seems likely), that cost/benefit analysis may shift for more companies. ERCOT was already planning to increase their reserve margins in the coming years, but if the power plants that are part of these margins aren’t winterized, this won’t solve the problem.
The Texas legislature may (and probably should) consider a rule-making targeted on increasing grid reliability. There are also recommendations from the FERC Report following the 2011 freeze and 2014 ERCOT and NERC reports that could be implemented. Power plants could be required to maintain greater fuel reserves in the winter. They could also could consider some sort of capacity sweetener or add-on capacity market for power plants who demonstrate that they can operate under extreme conditions.
Having up-to-date knowledge of which infrastructure was critical could have reduced water disruptions and the human cost of the outages. Taking this a step further, smart meters could have helped utilities turn off power to non-critical infrastructure more intelligently and fairly. Instead of some areas getting power because they were on the same feeder as a hospital while others were in the dark for days, rolling blackouts could have been implemented on an individual building level to keep everyone’s pipes from freezing.
Related to this, as critical systems become smarter and more connected, cybersecurity becomes increasingly important.
As we continue to electrify more and more critical services, Texas and the rest of the US will need more clean, firm electricity generation on the grid. This could be advanced nuclear, geothermal, or even natural gas with carbon capture. We will also need increased transmission capacity, grid services and storage [5] to manage the increasing amount of clean and cheap renewables.
At the residential level, battery backup systems like Tesla’s Powerwall (14 kilowatt-hours of energy) and others would have come in handy during the outage. (To be fair, so were diesel or gas generators.) Finally, I loved that Ford F150 hybrid owners were able to use their truck engine with its battery and inverter package to generate an impressive amount of power — 2.4 or 7.2 kilowatts — to power critical devices. Maybe when my Prius finally bites the dust…
Notes
- How unusual is this? Matt Lanza helpfully went back and reviewed previous times that Houston, TX has experienced long stretches of freezing temperatures: January 2018, February 2011 (the “Superbowl Freeze”), and December 1989. A cold snap also contributed to Texas utility failures in 2014. New research suggests that these more frequent cold air outbreaks are the result of climate change — warming in the Arctic weakens the jet stream, allowing “unusual intrusions of cold air from the Arctic into the middle latitudes”.
- While Texas has over 33,000 MW of wind power generation capacity, the capacity factor (the % of time that wind turbines are producing power) is much lower for wind than for baseload power. The average capacity factor for Texas wind is between 30–40% (on average, 33,000 MW x 0.35 =~11,000 MW of electricity is being generated by wind turbines in Texas). Texas wind is most consistent in the spring and fall.
- Natural gas production dropped by 16 Bcf/day in the South Central Region, and roughly 4 million barrels of oil refining capacity (one fifth of the nation’s capacity) were knocked out by the cold snap.
- The way some electricity generators and asset managers assess how much to weatherize is to look back at the last 100 years of data, which may lead to underestimating the risk. Updated models based on what we have seen in the past two decades indicate that future weather patterns will be different. These predictions should be factored into future cost / benefit calculations.
- This also underscores the fact that the grid will likely need both short and long term energy storage technologies as the amount of renewables on the grid increases. Lithium-ion batteries are great for storing energy for 4–6 hours (short term) — for example, charging with cheap solar during the day and releasing it in the evenings when demand rises and solar goes offline, or powering your home during a short outage. Other reliable and low-emission technologies should be more cost-effective than Li-ion batteries for long-term energy storage, e.g. to offset seasonal changes in the amount of wind power available, or supply power for multiple days during an emergency. (See Dan’s “Battery” whitepaper!) Fuel cells and hydrogen are also fairly well suited to long term storage.
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