Winterizing the Texas energy infrastructure makes economic sense, the Dallas Fed said.
Analysis from the Dallas branch of the Federal Reserve Bank said that winterizing electric generating units in Texas for extreme winter weather events “appears financially reasonable.”
The analysis came in the wake of a prolonged winter storm in mid February that killed more than 100 people and knocked out power to millions of customers served by the Electric Reliability Council of Texas (ERCOT) grid.
Natural gas-fired power plants were especially impacted by the weather, as were wind turbines. Solar generation—although a small percentage of the state’s overall energy mix—contributed in the later days of the crisis, once snow and cloud cover cleared. Energy storage has not yet been deployed in sufficient amounts to contribute in a meaningful way.
The Dallas Fed said that while industry sources reported gas production difficulties occurred as wells and other installations froze, a larger disruption began when power was cut to the wells, processing plants, and compressor stations that move the gas into and along major pipelines serving power plants.
It said that during the storm, 38 of Texas’ 176 gas processing plants shut down due to weather conditions and electricity service disruption. The state’s natural gas production fell 45% between Feb. 13–17 at the height of the storm.
The bank said that early estimates indicate the freeze and power outages may cost the state’s economy $80 billion–$130 billion in direct and indirect economic loss. Estimates of insured losses range from $10 billion to $20 billion.
The bank said that “every source of power generation failed during the storm,” and that measures to avoid future disruptions range from winterizing power plants to addressing the “efficacy of intermittent renewable generation.”
It said that a large and “perhaps inexpensive fix” would be to prioritize electricity delivery to natural gas infrastructure. It said that if power plant and pipeline operators improved coordination to identify and monitor the gas infrastructure, “some of the problems experienced during the freeze could be prevented.”
The Federal Energy Regulatory Commission (FERC) and North American Electric Reliability Corp. (NERC) determined in a joint study following a nearly identical outage in February 2011 that winterizing equipment for Texas gas plants could cost between $50,000 and $500,000 (in 2011 dollars) per plant. Assuming those cost estimates remain valid and adjusted for inflation, the bank said that installing FERC’s/NERC’s recommended equipment on all 162 gas-powered plants in Texas could cost up to $95 million today.
It said that winterizing Texas’ 13,000 wind turbines carries other challenges. Blades with internal warming equipment installed at the factory can cost $400,000 per unit, making retrofits to existing turbines “infeasible.” It said, however, that upgraded blade coatings, cold-weather lubricants, and de-icing drones would mitigate ice formation in most instances at lower cost.
Although the total cost of the winter storm could exceed $100 billion, the bank said that the costs of winterizing electricity production “should be viewed within the perspective of value of lost load.” Using a VOLL estimate of $4.3 billion, and accounting for the once-a-decade frequency of subzero temperatures in Texas, the bank said that winterizing measures and other actions should be equal to or less than $430 million annually.
It concluded that “the most reasonable solutions to prevent winter storm blackouts are within the bounds of being economically justified.”