Column: Don’t Blame the Weather for Texas Power Shortages: Kemp

Power lines are seen during a heat wave with forecast temperatures of 102 F (39 C) in Dallas, Texas, U.S. June 12, 2022. REUTERS/Shelby Tauber

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LONDON, July 13 (Reuters) – Since early May, the Electric Reliability Council of Texas (ERCOT) has twice called on homes and businesses to limit their consumption during peak hours to avoid power shortages and power outages.

ERCOT has issued conservation alerts more than four dozen times since 2008, most recently on July 10, when it called on customers to reduce consumption between 2 p.m. and 8 p.m. local time on July 11.

State officials tend to blame the problem on extreme weather, but the fragile state of the power grid has been caused by the inability to connect enough reliable generation to meet soaring demand growth.

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Most of the increase in electrical load is due to the rapid growth of the state’s population and economy over the past 20 years rather than weather-related issues (https://tmsnrt.rs/3RxV44w).

The state’s resident population has grown from 21.3 million in mid-2001 to 29.5 million in mid-2021, according to estimates prepared by the U.S. Census Bureau.

Retail electricity sales to residences, commercial properties, industrial sites and transmission providers jumped to 427 billion kilowatt hours in 2021 from 318 billion in 2001.

The compound annual growth in electricity sales (1.48%) was almost the same as the compound growth in the state’s population (1.64%).

Population and economic growth account for almost all of the load growth; unusually cold winters or hot summers account for only a small part of the variability.

Repeated energy crises and calls for conservation show how reliable generation growth has not kept pace with load growth, resulting in eroding generation margins.

The problem is compounded by the isolated nature of the state grid, which has very few ties to neighboring states, and is therefore unable to distribute the normal variation in generation and load over a wider area.

GOOD WEATHER SYSTEM

Insufficient production margin is masked when weather conditions are mild and close to long-term averages (in the same way that the problems of a poorly capitalized bank are masked when the economy is booming).

But when temperatures get unusually cold or warm for the time of year, the added pressure pushes the system to the brink of failure (in much the same way that thinly capitalized banks fail when the business cycle slows down).

In winter, the problem centers on poor weatherization of generator sets and the fuel system, which can prevent supposedly reliable production from starting when it is most needed.

In summer, there is insufficient surge generation capacity and demand flexibility to ensure that the system can be safely balanced as temperatures rise.

The problem is not the weather but the design of the system itself, insufficient capacity to cope with load growth and the inability to operate the network within conservative limits.

ERCOT’s potential generation margin shortfall this summer was identified by regulators in a review two months ago (“Summer Reliability Assessment,” North American Electric Reliability Corporation, May 18).

To a large extent, the problem reflected a long-term political choice to operate an energy-only market rather than an in-state capacity market in order to reduce costs.

The energy market alone provides electricity on average cheaper but at the cost of recurring shortages leading to calls for conservation and sometimes blackouts.

ERCOT has come to rely on conservation alerts as normal operating procedure rather than an exceptional emergency measure (“ERCOT Issues Conservation Appeal to Texas and Texas Businesses,” July 10).

Periodic calls for conservation and the risk of occasional outages have been the price to pay to keep production capacity and costs down; curation calls became a feature rather than a bug.

John Kemp is a market analyst at Reuters. Opinions expressed are his own.

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Editing by Barbara Lewis

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