explain the electricity crisis and what happens next


In the days and weeks following the February power outages in Texas, fingers were pointed in all kinds of directions: Those generally against renewables identified a state overly dependent on wind farms, while others blamed a lack of oversight of energy markets.

The fact is, Texas was hit by three harsh winter storms in 10 days, the state’s electrical infrastructure was not sufficiently prepared for such a vicious cold snap, and more than 4.5 million homes and businesses were left without power for several days.

The damage from the power outages is estimated to have cost an estimated $ 195 billion, far exceeding the $ 125 billion in damage caused by Hurricane Harvey in 2017, making it the costliest disaster in the world. Texas history.

Meanwhile, natural gas suppliers, pipeline companies and commodity traders have benefited greatly from the crisis. Due to the demand for heat, wholesale electricity costs have increased 400 times the normal amount and natural gas prices have been propelled to record highs.

More than 100 people have died during the blackouts, and the state itself was about four minutes away from a total grid collapse that would have left tens of thousands at risk of freezing to death. That such a cataclysm could happen in Texas naturally worries political leaders around the world.

If the great state of Texas can be brought to its knees by adverse weather conditions, what does that mean for developing countries with less advanced energy grids?

What went wrong in Texas?

Temperatures in Dallas have dropped to -2 ° F. The city of Austin remained below freezing for six days, at a time when temperatures are normally expected to average in the mid-1950s. a city in the southernmost point of Texas and adjacent to the border with Mexico, did not exceed the freezing point for nearly 48 hours after the cold snap.

For the first time in its history, every county in Texas was subject to a winter storm warning at the same time.

In the early hours of Monday, February 15, ERCOT – the Texas Electric Reliability Council, which operates the Texas power grid – initiated blackouts across much of the state. Extremely cold weather had arrived in the state a few days earlier, which had pushed demand for electricity to record levels.

This extreme cold had also caused the shutdown of state power plants due to equipment freezes or fuel depletion. A boom in demand for gas heaters would have been difficult to manage anyway, even without the cold weather interrupting gas production and pipeline services.

All of the state’s options for power generation – wind, natural gas, coal, and nuclear – have failed.

Texas is the only state in the United States to operate its own power grid without federal oversight, and the state does not require electrical equipment to be winterized to protect against prolonged periods of extreme cold.

While this has been thought through before – and probably makes sense after this year’s crisis – cost has always been a prohibitive factor. Texas last felt extreme cold a decade ago, so effectively winterizing the power grid was seen as an unwarranted major expense to protect against something so rare.

Consumers pay the price

The astronomical rise in wholesale electricity costs in the Lone Star State has forced utility bills into the thousands of dollars – consumers who could keep their lights on during the crisis were hit with bills in the range of $ 15,000 for luxury.

Energy bills that show off water and reduce savings have obviously not been well received. Lisa Khoury, a resident of Chambers County in Houston, Texas, filed a class action lawsuit against electricity supplier Griddy Energy after being billed $ 9,546 for electricity covering 19 days in February. The bill was 40 times higher than its usual range, and Griddy was accused of overcharging his clients thousands of dollars in times of crisis.

In March, Griddy became the third Texas energy supplier to file for bankruptcy following winter storms, and Texas Attorney General Ken Paxton confirmed that more than $ 29 million in unpaid bills would be forgiven in as part of the company’s bankruptcy plan.

Customers like Khoury fell victim to what had been a relatively new offering in the Texas energy market. Where most of the state’s consumers enjoy fixed rate plans and pay a fixed bill for the electricity they use, Griddy and other providers offer variable plans in which consumers pay wholesale prices.

These can be attractive in times of low demand, when low costs are reflected directly in consumers’ bills, but in times of high demand, prices can skyrocket.

“Hit the jackpot”: leaders revel in the benefits

While most energy companies have sought to be silent as the crisis has driven prices to record highs for fear of seeking to profit from the woes, some executives are letting go.

“This week is like hitting the jackpot with some of these amazing prizes,” Roland Burns, president and chief financial officer of Comstock Resources, reportedly said during a call to investors, drawing much criticism for saying the silent part. out loud.

In terms of market winners, the picture has become clearer as quarterly earnings reports have been released in the months following the blackouts.

Gas supplier Energy Transfer said in its quarterly results that it expects gains totaling about $ 2.4 billion from the one-time impact of the storms in Texas. The company was able to sell what it had in stock during the period when prices were peaking.

Some Wall Street companies that had bet big on the energy sector raked in millions when Texas went dark. According to Bloomberg, Goldman Sachs traders could profit around $ 100 million from the crisis.

Bank of America has also reportedly made hundreds of millions of dollars from transactions related to the Texas energy market, although the bank said any income would be offset by losses and reduced investment from other business investments. of Bank of America in Texas. Reuters reported that Bank of America owed Brazos Electric Power Cooperative nearly $ 480 million, which filed for bankruptcy over the outages.

Why are other countries affected?

Texas produces more electricity than any other state in the United States. The fact that he could turn gloomy in front of Mother Nature generated some unease. We know that climate change is making extreme weather events more common and severe enough to push critical infrastructure to its limits, as happened in Texas.

As countries around the world struggle to upgrade or outright transform their energy supply networks, the incident in Texas has sounded the alarm bells. Institute for Energy Economics and Financial Analysis said the Texas crisis has implications for Bangladesh, which is considering increasing its dependence on LNG imports as an alternative to its pipeline of coal-fired projects.

The Institute has warned that the fallout from the Covid-19 pandemic and the events in Texas have exacerbated the risks inherent in LNG imports. For Bangladesh, which already faces large electricity subsidies and potential price increases, these risks could be too great as reliance on LNG imports would come at the expense of domestic energy security.

Incidents like the one in Texas show how energy security depends not only on capacity, but also on infrastructure. The Texas power grid is isolated from surrounding grids, limiting the ability to import electricity from neighboring markets. It could promote an overhaul of future energy infrastructure, especially in regions of the world that are subject to severe weather phenomena.

A zone of opportunity for new technologies?

Battery storage systems are obvious contenders for storing excess energy when it can be produced, and pumping that energy into the grid during times of higher demand or lower generating capacity.

While incidents like Texas in February may be out of reach for most current battery systems – preventing the blackouts that left 4.5 million people in the cold and dark would have required an emergency battery backup. prohibitive in size and prohibitively expensive – small networks could potentially benefit from installing battery storage systems to meet at least part of a peak in demand.

The other potential proposal is for microgrids – smaller grids that are connected to the larger power grid but able to operate independently. When the regional grid experiences problems, the micro-grid can go offline and allow the local electricity supply to continue while protecting the community or area from effects occurring on the larger grid. When the regional network returns to a stable state, the micro-network can reconnect and contribute to the recovery.

Micro-grids have been used successfully in remote areas to power industrial projects or provide renewable energy to conservation areas. They could be particularly useful for businesses or industrial areas that require energy stability and could offset some of the reduction in economic output caused by power outages.

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