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Posted February 18, 2021

Byron King

By Byron King

The Texas Energy Massacre

Publishers Note: Today, the Whiskey Bar faced an editorial challenge. Run with an active story thats making not just headlines but history Or look back at the life of Rush Limbaugh, who passed away yesterday after 33 consequential years spent shaping American political debate.

We asked ourselves, What would Rush do? We decided that hed discuss serious matters that affect real people. And thats the topic for today.

On Saturday, my colleague Jim Amrhein will offer his thoughts on the late deceased Rush.

*****

Now, lets turn our attention to Texas where everything is bigger, per an old saying. Big state. Big ranches. Big oilfields. Big highways. Big cities.

Now you can add big energy disaster to the list. And no doubt, youve followed the Texas story. It dominates the news.

Its very strange because Texas is ground zero for American energy. The state is endowed with oil, natural gas, coal, uranium, wind and sunshine. Its synonymous with the idea of energy, from prospect to pipeline, from power line to refinery.

Yet right now theres an energy massacre taking place a statewide calamity of darkness and cold. Its surreal and forces you to ponder how can something like this happen.

To be sure, the mess in Texas required a perfect storm in terms of both weather and political-regulatory-industrial foolishness. And now, everything that can go wrong has gone wrong.

The immediate impact is catastrophic, including fatalities and immense property damage. Second and third order effects will roll across the nation and ripple out into the larger world as well.

Well all be paying a big, expensive bill for this for a long time to come.

Lets dig in

First things first, lets blame those iced-up Texas windmills, right? Thats a big, finger-pointing news theme in many accounts.

And despite glib denials from wind farm fanboys/girls, theres much to be said for the failure of this particular power source. Its a harbinger of the looming Green New Disaster to come.

Follow the facts. Look at a map of American wind sites and its obvious that many are in Texas.

wind power

Americas wind power, much of it in Texas.1

Indeed, 23% of Texas electricity generation is based on windmills, although seldom are the power lines juiced up to that extent based just on wind.

Then last week, along came a polar vortex. It wasnt a normal weather phenomenon either. In fact, Texas hasnt been this cold since 1895, per the Almanac.2

Most Texas windmills froze up; over 92% of them. They werent designed to function in cold weather, let alone caked with ice.

Its worth noting that technology exists to winterize windmills if only power companies cared to make the up-front investment. And if only utility regulators built that cost into the rate base.2 It just didnt happen in Texas.

So along with ice and cold, down went the windmill element of Texas electric power. Call it a Texas Windmill Massacre. (Hey, maybe someone will make a movie about it.)

But the windmill angle isnt the whole story. Theres a problem with good old natural gas too.3

Heres a map of Americas natural gas power plants, showing Texas sites.

natural gas

Americas natural gas plants.5

These Texas power plants include primary, hydrocarbon-fueled generators and backup systems. Many have gone down in the past week because gas valves and gas feed lines are frozen. Theyre not winterized, apparently.

Of course, theres technology to winterize pipelines and valves. I discussed it recently in the context of the Alaska Pipeline. This capability has been around for many decades.

But by not winterizing the system, someone was likely saving money in up-front capital investment. And regulators didnt insist on winterization, probably because they didnt want to build that cost element into the rate base either.

The bottom line is that across the Lone Star State, the fundamental power generation system has iced up and collapsed. Its an upstream problem at primary generating sites.

Then again, its actually worse than that

Lets take a broader perspective.

Routinely, the U.S. suffers from events that knock out parts of the electric power and/or pipeline system. Think of hurricanes, tornadoes, massive winter storms, California fires. These cause widespread disruptions and outages.

For example, recall Hurricane Katrina in 2005. It was huge, right? About 600,000 households lost electric power in Louisiana, Mississippi and Alabama. Over 2 million people were affected.

But compared to Texas just now, the power-loss is north of 4 million households due to a winter storm that breaks century-old records. Numbers of affected people are in the range of 10 million, and likely higher.

If you follow Texas news (and who hasnt?), you know that in many places the temps are below freezing. Millions of homes lack electric power, along with hundreds of thousands of businesses.

Unlike with hurricanes or tornadoes, though, the Texas problem is not due to a massive storm that knocked out transmission towers, poles, wires and such. No

The primary, upstream power system has cratered, with cascading failures all down the line. In short, the roof has caved in on Texas power generation and downstream supply.

We discussed how windmills and fossil power plants are offline. And this has led to a follow-on lack of both electric power and natural gas to run compressors along distribution pathways. The outages reach all the way down to household gas service, which is problematic in many areas, as is service to large institutions and industrial users.

Bottom line is that in many places, theres no electric power or hydrocarbon heat. And even bottled gas like propane is all but sold out.

Meanwhile, for want of electric power to run pumps, municipal and private water systems are degraded or shut down in many areas, along with more than a few sewage districts. Couple this with the problem that indoor and outdoor pipes are freezing and bursting, which means that even when systems get back up theyll be a wet wreck.

In the Texas oil patch, hydrocarbon production is collapsing for lack of power to run wells and pumps.6 About 40% of overall U.S. oil production is currently shut in. Follow just this thread, and its no surprise that a long list of large refineries are shutting down.7

At the human level, across the state most supermarkets are stripped bare. Indeed, to give some scale, over 600 Walmarts are closed. In general, food is running out. Some people are living in their cars with the engines running to stay warm.

Dont mess with Texas, they say. Yet right now, Texas is a mess. Its bad and getting worse. The state faces a looming humanitarian crisis.

Were witness to a cascade of long-term failures in politics, economics and regulation.

And dont think that youll be fine if you live somewhere else. Dont think that whats happening in Texas is not your problem.

This Texas calamity will ripple across the nation. Youll see higher prices for fuel at the pump. Your heating bill will likely climb as winter plays out.

Out on Texas farms and ranches, crops are frozen and ruined, particularly citrus. And pity the poor cattle that will die off, the impact of which youll understand when you visit the meat section of your supermarket.

The U.S. is a complex economy, and many roads pass through Texas. But many trucks and rail cars wont make it down the line because of the mess down there. And before long, shelves near you will likely be bare as well.

Under the best circumstances, itll take many months to unscrew things.

But still, how or why are things this hosed up?

Lets follow some more facts

Start big, with a map of the many electric power utility territories in the U.S.:

electric power utility territories

U.S. utility territories, courtesy National Academy of Sciences.8

The U.S. has literally hundreds of utility territories, hosting thousands of power companies. These groups range from giant conglomerates to local power co-ops. The system evolved over more than a century, going back to Thomas Edisons first power plant at Niagara Falls.

The good news is that almost all of these power territories are connected by a system of transmission lines, as we see on this map:

electrical interconnections

North American electrical interconnections, courtesy NERC.9

In general, this continent-scale power grid is divided into three interconnect geographies, as you can see here:

continent-scale power grid

US-Canada/Mexico Grid.10

Primarily, were looking at a U.S.-Canada power interconnect system, although it includes parts of Mexico. And even this map is not complete because Quebec is a story in itself, with massive power flows into New England.

The point is that the Western U.S. is well-interconnected from northern Mexico up into British Columbia. And the Eastern U.S. is well-interconnected from Ontario (and Quebec) out into the Great Plains and down to the border with Texas.

In general, if theres a problem in one region of the U.S. or Canada, grid managers can do whats called wheel power across long distances to keep the lights on.

But Texas has its own power system, run by an organization called ERCOT, the Electric Reliability Council of Texas. The history goes back to the 1930s, when the U.S. began to integrate its grid on a nationwide scale. Texas opted out.

Well, last week the wolf finally came knocking at the door, in the form of a massive weather event. Power systems went down, and ERCOT literally threw switches to shut Texas down. Heres a recent map of the power outages:

map of power outages

From ERCOT (2/16/2021)11

Initially, ERCOT estimated that outages would last a few hours here, a few hours there. The system managers would flip power off and on, and everything would work out all right.

But thats not what happened. In many areas, power supply went down and stayed down. Hours, days and likely a week or more at the rate things are going.

Will ERCOT manage its way out of this mess? Well see.

When the power comes back on (or temps begin to rise), things will thaw out and people will get back to rebuilding. No doubt, the damage numbers will be astronomical.

Along the way, both Texas and the entire country indeed, the U.S. plus Canada and Mexico must take a hard look at how screwed up the continental energy policy is. Because the overall grid is old, with many segments worn out or overloaded on the best of days.

Looking ahead, whats happening in Texas could happen anywhere, if not everywhere.

Look at it this way. Just take the Texas problem and magnify it to national scale by adding large numbers of electric vehicles (EVs) to the demand-side of the grid.

Fixing these problems is not something that you or I can do as individuals. Itll require industry, finance and politics to play nicely together, with the up side of being investable.

Come what may, the U.S. plus neighbors to the north and south must get its collective act together and start fixing broken things, and I mean pronto

Do it before areas even larger than Texas go cold and dark, from sea to sea.

On that note, I rest my case.

Thats all for now Thank you for subscribing and reading.

Best wishes,

Byron King

Byron King

Managing Editor, Whiskey & Gunpowder

WhiskeyAndGunpowderFeedback@StPaulResearch.com

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1 Mapping Every Power Plant in the United States, Visual Capitalist

2 Significant Weather, Texas Almanac

3 Sweden Shows Texas How to Keep Turbines Going in Icy Weather, Bloomberg

4 The Energy 202: Frozen Wind Turbines Aren't Why Texas Can't Keep the Lights On, Washington Post

5 Mapping Every Power Plant in the United States, Visual Capitalist

6 U.S. Oil Production Slumps by Record 40% as Permian Freezes, Bloomberg

7 Biggest Oil Refineries in U.S. Are Going Dark Amid the Cold, Bloomberg

8 Todays Grid and the Evolving System of the Future, National Academic Press

9 2015 December Compiled Presentations.pdf (nerc.com), NERC interconnect,

10 Maps, ERCOT

11 Texas, U.S. Power Outages

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