Reposted from Dr. Judith Curry’s Climate Etc.
By Planning Engineer
The story from some media sources is that frozen wind turbines are responsible for the power shortfalls in Texas. Other media sources emphasize that fossil fuel resources should shoulder the blame because they have large cold induced outages as well and also some natural gas plants could not obtain fuel.
Extreme cold should be expected to cause significant outages of both renewable and fossil fuel based resources. Why would anyone expect that sufficient amounts of natural gas would be available and deliverable to supply much needed generation? Considering the extreme cold, nothing particularly surprising is happening within any resource class in Texas. The technologies and their performance were well within the expected bounds of what could have been foreseen for such weather conditions. While some degradation should be expected, what is happening in Texas is a departure from what they should be experiencing. Who or what then is responsible for the shocking consequences produced by Texas’s run in with this recent bout of extreme cold?
TRADITIONAL PLANNING
Traditionally, responsibility for ensuring adequate capacity during extreme conditions has fallen upon individual utility providers. A couple decades ago I was responsible for the load forecasting, transmission planning and generation planning efforts of an electric cooperative in the southeastern US. My group’s projections, studies and analysis supported our plans to meet customer demand under forecasted peak load conditions. We had seen considerable growth in residential and commercial heat pumps. At colder temperature these units stop producing heat efficiently and switch to resistance heating which causes a spike in demand. Our forecasts showed that we would need to plan for extra capacity to meet this potential demand under extreme conditions in upcoming winters.
I was raked over the coals and this forecast was strongly challenged. Providing extra generation capacity, ensuring committed (firm) deliveries of gas during the winter, upgrading transmission facilities are all expensive endeavors. Premiums are paid to ensure gas delivery and backup power and there is no refund if it’s not used. Such actions increased the annual budget and impact rates significantly for something that is not likely to occur most years, even if the extreme weather projections are appropriate. You certainly don’t want to over-estimate peak demand due to the increasing costs associated with meeting that demand. But back then we were obligated to provide for such “expected” loads. Our CEO, accountants and rate makers would ideally have liked a lower extreme demand projection as that would in most cases kept our cost down. It was challenging to hold firm and stand by the studies and force the extra costs on our Members.
Fortuitously for us, we were hit with extreme winter conditions just when the plan went in place. Demand soared and the planned capacity we had provided was needed. A neighboring entity was hit with the same conditions. Like us they had significant growth in heat pumps – but they had not forecasted their extreme weather peak to climb as we had. They had to go to the overburdened markets to find energy and make some curtailments. The cost of replacement power turned out to be significantly greater proportionately than we incurred by planning for the high demand. They suffered real consequences due to the shortcomings of their planning efforts.
However, if extreme winter had not occurred, our neighbor’s costs would have been lower than ours that year and that may have continued many years into the future as long as we didn’t see extreme winter conditions. Instead of the praise we eventually received, there would have at least been some annoyance directed at my groups for contributing to “un-needed expenditures”. That’s the way of the world. You can often do things a little cheaper, save some money and most of the time you can get away with it. But sometimes/eventually you cut it too close and the consequences can be extreme.
The Approach in Texas
Who is responsible for providing adequate capacity in Texas during extreme conditions? The short answer is no one. The Electric Reliability Council of Texas (ERCOT) looks at potential forecasted peak conditions and expected available generation and if there is sufficient margin they assume everything will be all right. But unlike utilities under traditional models, they don’t ensure that the resources can deliver power under adverse conditions, they don’t require that generators have secured firm fuel supplies, and they don’t make sure the resources will be ready and available to operate. They count on enough resources being there because they assume that is in their owner’s best interests. Unlike all other US energy markets, Texas does not even have a capacity market. By design they rely solely upon the energy market. This means that entities profit only from the actual energy they sell into the system. They do not see any profit from having stand by capacity ready to help out in emergencies. The energy only market works well under normal conditions to keep prices down. While generally markets are often great things, providing needed energy during extreme conditions evidently is not their forte. Unlike the traditional approach where specific entities have responsibilities to meet peak levels, in Texas the responsibility is diffuse and unassigned. There is no significant long term motivation for entities to ensure extra capacity just in case it may be needed during extreme conditions. Entities that might make that gamble theoretically can profit when markets skyrocket, but such approaches require tremendous patience and the ability to weather many years of potential negative returns.
This article from GreenTech media praises energy only markets as do many green interests. Capacity markets are characterized as wasteful. Andrew Barlow, Head of the PUC in Texas is quoted as follows, “Legislators have shown strong support for the energy-only market that has fueled the diversification of the state’s electricity generation fleet and yielded significant benefits for customers while making Texas the national leader in installed wind generation. ”
Why has Capacity been devalued?
Traditional fossil fuel generation has (as does most hydro and nuclear) inherent capacity value. That means such resources generally can be operated with a high degree of reliability and dependability. With incentives they can be operated so that they will likely be there when needed. Wind and solar are intermittent resources, working only under good conditions for wind and sun, and as such do not have capacity value unless they are paired with costly battery systems.
If you want to achieve a higher level of penetration from renewables, dollars will have to be funneled away from traditional resources towards renewables. For high levels of renewable penetration, you need a system where the consumers’ dollars applied to renewable generators are maximized. Rewarding resources for offering capacity advantages effectively penalizes renewables. As noted by the head of the PUC in Texas, an energy only market can fuel diversification towards intermittent resources. It does this because it rewards only energy that is fed into the grid, not backup power. (Side note-it’s typical to provide “renewable” resources preference for feeding into the grid as well. Sometimes wind is compensated for feeding into the grid even during periods of excess generation when fossil fuel resources are penalized. But that’s another article. )
Traditional planning studies might recognize that wind needs to be backed up by fossil fuel (more so under extreme conditions) such that if you have these backup generators its much cheaper to use and fuel them, than to add wind farms with the accompanying significant investment for concrete, rare earth metals, vast swaths of land …. . Traditional planning approaches often have to go to get around this “bias” of favoring capacity providing resources over intermittent resources.
When capacity value is rewarded, this makes the economics of renewables much less competitive. Texas has stacked the deck to make wind and solar more competitive than they could be in a system that better recognizes the value of dependable resources which can supply capacity benefits. An energy only market helps accomplish the goal of making wind and solar more competitive. Except capacity value is a real value. Ignoring that, as Texas did, comes with real perils.
In Texas now we are seeing the extreme shortages and market price spikes that can result from devaluing capacity. The impacts are increased by both having more intermittent resources which do not provide capacity and also because owners and potential owners of resources which could provide capacity are not incentivized to have those units ready for backup with firm energy supplies.
Personal Observations
Wind and solar have value and can be added to power systems effectively in many instances. But seeking to attain excessive levels of wind and solar quickly becomes counterproductive. It is difficult to impossible to justify the significant amounts of wind and solar penetration desired by many policy makers today using principals of good cost allocation. Various rate schemes and market proposals have been developed to help wind and solar become more competitive. But they come with costs, often hidden. As I’ve written before, it may be because transmission providers have to assume the costs and build a more expensive system to accommodate them. It may be that rates and markets unfairly punish other alternatives to give wind and solar an advantage. It may be that they expose the system to greater risks than before. It may be that they eat away at established reliability levels and weaken system performance during adverse conditions. In a fair system with good price signals today’s wind and solar cannot achieve high penetration levels in a fair competition.
Having a strong technical knowledge of the power system along with some expertise in finance, rates and costs can help one see the folly of a variety of policies adopted to support many of today’s wind and solar projects. Very few policy makers possess anything close to the skill sets needed for such an evaluation. Furthermore, while policy makers could listen to experts, their voices are drowned out by those with vested interests in wind and solar technology who garner considerable support from those ideologically inclined to support renewables regardless of impacts.
A simpler approach to understanding the ineffectiveness of unbridled advocacy for wind and solar is to look at those areas which have heavily invested in these intermittent resources and achieved higher penetration levels of such resources. Typically electric users see significant overall increases in the cost of energy delivered to consumers. Emissions of CO2 do not uniformly decrease along with employment of renewables, but may instead increase due to how back up resources are operated. Additionally reliability problems tend to emerge in these systems. Texas, a leader in wind, once again is added to the experience gained in California, Germany and the UK showing that reliability concerns and outages increase along with greater employment of intermittent resources.
Anyone can look at Texas and observe that fossil fuel resources could have performed better in the cold. If those who owned the plants had secured guaranteed fuel, Texas would have been better off. More emergency peaking units would be a great thing to have on hand. Why would generators be inclined to do such a thing? Consider, what would be happening if the owners of gas generation had built sufficient generation to get through this emergency with some excess power? Instead of collecting $9,000 per MWH from existing functioning units, they would be receiving less than $100 per MWH for the output of those plants and their new plants. Why would anyone make tremendous infrastructure that would sit idle in normal years and serve to slash your revenue by orders of magnitudes in extreme conditions?
The incentive for gas generation to do the right thing was taken away by Texas’s deliberate energy only market strategy. The purpose of which was to aid the profitability of intermittent wind and solar resources and increase their penetration levels. I don’t believe anyone has ever advanced the notion that fossil fuel plants might operate based on altruism. Incentives and responsibility need to be paired. Doing a post-mortem on the Texas situation ignoring incentives and responsibility is inappropriate and incomplete.
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‘Anyone can look at Texas and observe that fossil fuel resources could have performed better in the cold.’ And it isn’t as if they weren’t warned after 2011, is it?
ERCOT needs to connect to other grids and winterise as recommended.
If you want to address peak demand then grid scale storage and demand response will help you as much if not more than more gas peaker plant, which will usually sit idle.
another disaster from extreme weather meeting an incompetent power company… see also California (and South Australia also was down to weather and incompetent management of wind, not ‘because renewables’)
As you’ve already been reminded, all adjacent grids had their own problems at the time.
“ERCOT” set the Texas power grid up to fail and it has done so, spectacularly. They will now screech for more money to be pissed away on wind mills and solar panels, all while blaming everyone else for what they created, a disaster.
Well worth reading. Especially Capacity Market vs Energy Market.
Adding a simple label to a complex subject is what is needed for apples to apples comparison.
SUV vs compact. Capacity vs mileage. Unless you can afford 2 cars you get the SUV for those time you need the extra room.
The problem of capitalism not being to realistically assess risk and assign a monetary penalty
to those advocating and exploiting have merely found a style of arbitrage. If the public could short the enterprise that is reaping the cost cutting advantages of ignoring risk, the problem
might be partially fixed. Risk has both opportunity and risk sides of the coin. Is there no way to punish the guilty, and prospectively discourage excessive risk taking within the investment instruments? Maybe this event is so black swan that it would not work. Like the 2008 real estate bubble with all those non performing sub primes out there, some people did sniff out the rat, but powerful political forces put the thumb on the scale, and no correction was possible before the bubble burst. Here too the people who invest and control resource allocation do to respond to a civil religion, and if they acted out of pure self interest maybe more focus would have been placed on the risk posture. Picking up pennies in front of the steamroller.
Unclear what you are trying to say, please edit/rewrite.
In a free market supported by defense and justice systems, people have choices and will shun poor performers while telling many other people why.
Breach of contract is an option sometimes, I don’t know the legal argument behind a pulp mill in BC suing the natural gas company that cut off its supply after pipeline failure a couple of years ago.
(One of the two big pipes from NE BC to SW BC and WA state exploded, the company reduced pressure in the other until it could be inspected.
I have not heard of the cause of the explosion, but obviously the two pipes were too close together for best reliability.
Pulp mills are not easy to start up, nor to shut down, especially if they are producing paper. The transmission company cut off heavy users like kilns.
Some users have developed alternative sources of energy, pulp mills notably burn wood fibre they aren’t using for making pulp, a cement plant in SW BC will be using dried sewage sludge.)
I explain ways people change their use and avoid monopolist wannabes, in http://www.moralindividualism.com/monopol3.htm.
Well, there is a huge question of motivation to ensure no big outages in severe weather situations, which for freezing temperatures and icing conditions is when energy is most needed.
(Cold kills more people and does more damage than hot.)
TX had wind turbines without de-iced blades, natural gas piping valves that froze, petroleum infrastructure troubled by cold, etc.
Of course the NG valves and refineries have fuel readily available to heat sensitive parts, but they have to be ready to use it safely in the absence of electricity.
There’s also something odd about the electricity system in TX, which the controlling operation feared would have long term outages if generators tripped off line, so they took some offline. Well known including from a fiasco in NE US and Quebec is monitors that are too sensitive so trip connections open prematurely. Utility has to figure out what is going on before trying to bring them back online.
And transmission lines in Quebec had a feature of a guard wire below the hot wires, to which they shorted when they drooped under load of ice on the wires.
And transmission line towers have to withstand ice and extra longitudinal load from iced or broken wires.
And many other things to do. For example:
Regulation is a problem because utilities have to justify expenditures. At one time BC Tel would take operators off its switchboards and have them cool their heels in the break room, so that its response time would not seem too good thus the regulator would deny it money. At that time its operators were the emergency operators, dealing directly with callers in trouble, often life threatening. The telephone company had better values than the regulator.
The critical data in understanding the weatherization problem with wind/gas turbine co-location in Texas is hidden by not splitting out large scale natural gas plants with the gas turbine backup co-located with the wind powered turbines.
Whenever conditions or equipment failures prevent the wind turbines from operating (an occurrence less common in west Texas than most anywhere else, but still common) these natural gas powered turbine engines kick in. Follow the data and you can see natural gas production skyrocketing as wind power collapses.
With eleven thousand windmills scatted through the backroads of west Texas, thousands of these backup generators needed to be resupplied… by road… to keep the natural gas figure at its peak. Something made impossible by the extreme weather. What portion of the natural gas falloff starting on the 16th was due to these backup generators running out of gas, and what portion was caused by disruptions to traditional natural gas powerplants?
Preventing future failure would require knowing the difference between the two natural gas methods of power generation.
Well said but if you’re going to make it an economic analysis consider this. A 50kw hydroelectric generator costs under $4k. They’re not much bigger than a large suitcase. 30 of those would make 1.5MW at a cost of $120k. A GE 1.5MW windmill costs $2.5 million, plus singificant construction and engineering costs and a bunch of concrete to stand on. So even at peak operation, it’s energy comes at 25x the cost of hydro.
Not only is hydro renewable, windmills almost never work at peak output because of the sustained winds required for this. Meanwhile rivers always flow and rarely freeze. When is the last time the Rio Grande froze or dried up? Literally never. You could do a remote stretch of river with hydro gennys and you’d hardly notice them. They definitely wouldn’t kill any birds. They would actually pay back their installation costs and be far more dependable. So even the most devoted Renewables devotee should be able to see that they have been scammed by the same old cronyism. The economic comparison between the two is no comparison. Anyone legitimately hoping to see renewable become viable should be all in on hydro because it is orders of magnitude more viable. But oh yeah, GE CEO Jeff Immelt was Obama’s ‘Science Czar’. And thus his company got preference for using your money as wastefully as possible. The outcome never mattered. So for all the authors thoughtful analysis, he’s fooling himself if he actually thinks it was ever about planning, strategy, meeting demand or ANYTHING MORE THAN A RIPOFF BETWEEN CRONIES. In fact this analysis is so thorough I’d say he’d be a great candidate for Energy Secretary. Save for the fact that he clearly has no idea how politics work.
Can these suitcase-sized hydro generators be paralleled to the grid? If they can’t, they wouldn’t be useful here.
Probably not. They have no way to sync to the grid for frequency and phase.