Daily on Energy, sponsored by EFP: What makes Texas’ power grid unique

The state is the only one in the Lower 48 with its own power grid, managed by the Electric Reliability Council of Texas, and that independence has simplified the regulatory process and allowed for success in building out transmission lines key to growing use of renewables.

But now, some analysts are asking whether Texas’ island-like status has contributed to the state’s power crisis caused by unprecedented cold.

Since it is disconnected from the larger regional grids of the East and West, Texas is unable to bring in power from other states to fill gaps in demand. The state’s deregulated electricity system also works differently than capacity markets run by wholesale power market operators such as PJM.

In capacity markets, power companies are paid to make sure they have extra capacity for there to be enough generation to meet periods of peak demand. In Texas, electricity customers only pay for the power actually provided, which means generators aren’t getting the returns necessary to incentivize investments in power plant upgrades or new infrastructure.

“Our system relies on high prices [during periods of high demand] to encourage companies to build new power plants,” Jess Totten, who served 23 years on the staff of the Texas Public Utility Commission, told Josh from Austin, where he said it was 12 degrees fahrenheit this morning.

“The price signals need to be strong enough to bridge the gap between the minute-by-minute fluctuations in price of electricity and the decades-long investments that power plants require,” said Joshua Rhodes, a researcher at the Webber Energy Group at the University of Texas at Austin.

ANALYSTS SAY NOTHING COULD HAVE PREPARED TEXAS — READ ON BELOW…

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MORE ON TEXAS…

Unprepared for freezing temperatures: Analysts said nothing could have prepared Texas for the current crisis. The grid, which runs mostly on natural gas and increasingly, wind, is built to handle the state’s hot and humid summers when demand for power (air conditioning) usually peaks.

Wind turbines that froze were not weatherized against that possibility, as would normally happen in colder states that rely on wind. The same issue applies to natural gas turbines at power plants. Gas production is also falling because wells are freezing, causing plants to shut down because they can’t access the fuel they need.

“You only design for what you expect to happen,” Rhodes said, saying it would not make sense for companies to invest in weatherizating their equipment against cold weather.

ERCOT generally relies on wind for less than 10% of its total winter capacity, with the bulk being natural gas and to a lesser extent, coal (which is also vulnerable to freezing).

But 40% of homes and businesses in Texas also rely on gas for heating, leaving less for power plants.

“The gas and electric grids are interrelated and both are taxed beyond what they are designed for,” Rhodes said.

All fuels are affected: While wind is underperforming for this time of year, a third of the thermal fleet (gas, coal, and nuclear) that Texas relies on for the other 90% also went offline.

“People are looking for someone to blame, and folks who have their own hobby horses on different energy sources are trying to blame wind or gas or whatever,” said Josiah Neeley, a senior energy fellow at the R Street Institute, who lives in Austin. “The problem is not the fuel source. It’s that this is Texas, and everything is not set up for extreme cold.”

Neeley told Josh he does not blame the Texas model for the power shortage, but he and the other analysts said the state will undoubtedly explore reforms as climate change makes extreme weather events more likely.

“Going forward, we will have to have a conversation in Texas on how we should be planning for these types of things if a weakened jet stream is going to send cold Arctic masses down this far,” Rhodes said.

BIDEN’S NEXT BIG PIPELINE DECISION: President Biden‘s pending decision whether to shut down the controversial Dakota Access oil pipeline could deepen early tensions between environmentalists and unions that endorsed him, Josh reports for our magazine out this week.

Lliberal lawmakers, celebrities, and indigenous leaders have asked the president to shutter Dakota Access, which critics warn would trigger more backlash than his decision to revoke the permit for Keystone XL since the pipeline is already operational.

“That would set a huge new precedent,” said Robin Rorick, the vice president of midstream for the American Petroleum Institute. “It creates a situation where it’s death by 1,000 cuts for the pipeline industry.”

The Dakota Access situation is unique: Biden has an opportunity to act because two federal courts have found its environmental review under the Trump administration to be deficient. The Trump administration declined to enforce a stoppage while the Army Corps completes a new review. Biden could handle it differently.

“Dakota Access lacks permission to be where it is, so why wouldn’t Biden do this?,” said Christi Tezak, managing director of ClearView Energy Partners.

The jobs question: There aren’t as many direct jobs associated with Dakota Access since it’s already operational. Most Keystone XL jobs were in construction. But the oil industry counters that a shutdown would harm oil producers in the Bakken shale basin just as demand has started recovering.

Collin Rees, a senior campaigner with Oil Change U.S, says the Biden administration must lean into specific solutions for lost oil jobs, such as providing a plan for workers to plug abandoned wells. “They need to be taking concrete steps on jobs and being honest about what the transition away from fossil fuels entails,” he said.

REPUBLICANS PLAN TO CAMPAIGN AGAINST LOST PIPELINE JOBS: House Republicans are practically salivating at the chance to use Biden’s move to reject the Keystone XL pipeline as a 2022 campaign cudgel against Democrats, the Washington Examiner’s Kerry Picket reports.

“House Democrats are going to pay the price for their job-killing, anti-energy agenda,” said Rep. Tom Emmer of Minnesota, chairman of the National Republican Congressional Committee, the GOP campaign arm.

“The polling we did last cycle showed us in places like Texas, New Mexico, Oklahoma, just how devastating this job-killing, anti-energy agenda is,” Emmer added. “That’s why we won.”

BIDEN’S BIG CLIMATE QUESTION…WHAT TO DO ABOUT GAS? Biden’s aggressive goal to completely decarbonize the power sector in the next 15 years brings him directly in conflict with natural gas, the resource that has largely driven U.S. emissions reductions to date.

Biden faces a landscape where the low-hanging fruit for utilities — retiring coal-fired power and replacing it with cheap gas — has largely been picked. Now, Biden will have to figure out how to decarbonize or eliminate that natural gas, a tougher challenge.

And Biden’s goal of zero-carbon power by 2035 leaves no room for unabated natural gas to stay on the system, energy analysts and environmentalists told Abby.

Environmentalists say the dramatically lower prices of wind and solar energy mean the Biden administration can be more ambitious with emissions mandates. The Biden team also won’t be fighting power companies as vigorously as the Obama administration was, as many utilities now have their own goals to slash their emissions down to zero by 2050.

Power companies, though, have more immediate concerns about grid reliability, and they’re already warning the Biden administration not to box out natural gas.

More on Biden’s predicament in Abby’s story posted this morning.

ADVANCED NUCLEAR PROPONENTS ASK BIDEN FOR HELP: A coalition of diverse groups supporting new small nuclear power technologies released a report this morning pushing the Biden administration to make it a part of its clean energy and climate goals.

Advanced nuclear power has the potential to achieve commercialization, cost competitiveness, and rapid global deployment in 2030, says the report from the Nuclear Innovation Alliance, which was endorsed by the American Nuclear Society, Bipartisan Policy Center, ClearPath, Third Way, and more.

For these technologies to play a part in Biden’s 100% carbon-free electricity by 2035 goal, the report says the dozens of U.S. companies working on advanced reactors must coordinate with the government, U.S. allies, environmentalists, and labor, to create support for a “robust” domestic industry.

“Given the long timeframes for nuclear technology development and the short timeframes for climate action, policy pathways must be developed now,” the report says.

Recommendations for policy include: Administration prioritization of nuclear energy domestically and abroad by appointing nuclear-focused positions in White House offices; more federal R&D investments; promoting public-private partnerships for demonstration projects; ensuring efficient regulatory reviews; directing DOE to analyze how advanced reactors can supply non-electric sectors, such as heating, hydrogen production, and industrial processes; strengthening and broadening existing state-level renewable portfolio standards to include advanced nuclear; and elevating nuclear energy in U.S. foreign policy and climate diplomacy to compete with Russia and China.

JAGUAR’S SWITCH TO ALL ELECTRIC VEHICLES: Jaguar, a luxury car manufacturer, announced yesterday it will transition to all electric vehicles by 2025, the Washington Examiner’s Jake Dima reports.

Thierry Bollore, the CEO for Jaguar Land Rover, a British company owned by the Indian corporation Tata Motors, also said that the business is “exploring opportunities to repurpose” one of its plants as rumors swirl that it may be used for battery production. The Land Rover division of the brand, which has netted substantially more revenue, is set to release an electric vehicle model by 2024.

NATURAL GAS SETS DEMAND RECORD: Sunday and Monday set the record for the largest two-day demand for natural gas, amid the extreme cold weather, according to data from the American Gas Association.

The gas group said 151.7 billion cubic feet of natural gas was delivered in the U.S. on Sunday, and 149.8 Bcf was delivered Monday. The prior two-date record was set Jan. 30 and 31 in 2019.

MEANWHILE, COLD WEATHER SLASHES OIL OUTPUT: The freezing temperatures in oil producing states such as Texas and Oklahoma led to cuts in oil production by more than 2 million barrels per day, Bloomberg reports, citing oil traders and company executives.

The traders and executives said production losses were especially large in the Permian Basin, and they expect output to slowly return as temperatures begin to rise.

DEMOCRATS PRESSURE BIDEN TO DELIVER ON ELECTRIC VEHICLE PLEDGES: More than a dozen Senate Democrats, led by New Mexico’s Martin Heinrich, are calling on Biden to take immediate action to follow through on his promise to electrify the federal government’s fleet, including by directing the U.S. Postal Service to switch to electric delivery vans.

The USPS is months away from finalizing its Next Generation Delivery Vehicle acquisition, and current bids for the fleet include gas-powered and hybrid options “that would lock in 25 years or more of USPS gasoline consumption,” the senators wrote in a letter Friday. They are asking Biden to direct the USPS to issue a stop order and instead move toward electrifying its fleet.

The senators are also asking the Biden team to order the General Services Administration to buy hundreds of thousands of electric vehicles “based on competitive bids for multi-year contracts” which they say would allow manufacturers confidence “to expand and invest in production.” The GSA should also invest in building out charging stations in all federal buildings and on federal lands, the senators said.

In addition, the senators argued the federal government must adjust its procurement practices to consider the total cost of owning vehicles, as opposed to simply the sticker price. The latter approach, they said, disincentivizes the government from buying electric vehicles, even when agencies could save more money over time given the often lower operating costs of electric models.

GEORGIA GOVERNOR ASKS BIDEN TO VETO BATTERY TRADE DECISION: Republican Gov. Brian Kemp is calling on Biden to block a ruling last week from the International Trade Commission banning the imports of certain lithium-ion batteries from SK Innovation.

The ITC barred SK Innovation imports for 10 years after deciding it stole trade secrets from rival LG Chem, though the trade commission gave Ford and VW a few years of cushion to switch suppliers. Kemp, though, said the ruling jeopardizes 2,600 clean energy manufacturing jobs that would have been created in his state, as SK Innovation had plans to manufacture batteries there in a $2.6 billion facility.

Biden has “the opportunity to support thousands of hardworking Georgians — and their communities — who would benefit from SK Innovation’s continued success in our state,” Kemp said Friday, according to local news station WRCB. Biden must decide whether to veto the ruling within 60 days.

OFFSHORE OIL AND GAS SALE POSTPONED: The Biden administration’s Bureau of Ocean Management on Friday indefinitely suspended a planned lease sale for offshore oil and gas development in the Gulf of Mexico.

The move is part of Biden’s executive order last month to pause new leasing on public lands and waters as the administration reviews the future of the federal oil and gas program.

The Rundown

Reuters 150 years of spills: Philadelphia refinery cleanup highlights toxic legacy of fossil fuels

Wall Street Journal Interior secretary nominee on collision course with oil industry

Wall Street Journal Green hydrogen plant in Saudi Arabia aims to amp up clean power

Bloomberg Bill Gates shows how hard it can be to divest from fossil fuels

Washington Post There’s an invisible climate threat seeping from grocery store freezers. Biden wants to change that.

Calendar

THURSDAY | FEB. 18

11:30 a.m. The House Energy and Commerce Committee’s Energy Subcommittee will hold a remote hearing titled, “A Smarter Investment: Pathways to a Clean Energy Future.”