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Why Power Problems In Texas Aren’t A Green Energy Problem And 5 Actions That Benefit From It

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Millions of people are without power in Texas due to an unusual frost and people without power get angry. The result has been a flurry of views on who is to blame. Texas Governor Greg Abbott went so far as to label a potential Green New Deal as deadly, arguing that future reliance on solar and wind energy would put consumers at risk.

But renewable energy isn’t to blame for the Texas electricity debacle. While the state grid and the way it is managed have some issues to solve, the solutions have little to do with Politics. Texas, on the other hand, has some technical decisions to make to ensure there won’t be a February 2021 repeat.

It is Barrons Look at what is really going on, and what actions might be affected, now and after the crisis.

What is the problem?

The Polar vortexcold northern air that made its way south wreaked havoc on the Texas power grid. Temperatures in Austin fell to single digits earlier this week, a bitter shock to a state unaccustomed to the cold. There have been reports of frozen wind turbines, as well as a limited supply of natural gas, even as demand for electricity peaks due to the cold.

From Wednesday, 46,000 megawatts of power generation were offline in Lone Star State. Texas has roughly 120,000 megawatts of power generation capacity.

It is little difficult to find precise figures, as the composition of electricity production by type changes from year to year depending on demand trends and weather conditions. In addition, data from many government sources is a few years old.

Still, the big picture is clear. Texas has perhaps 74,000 megawatts of line generating capacity, which is below current demand.

This means the Texas Electricity Reliability Council, which operates the state’s power grid, must choose between forcing continual blackouts and overloading the system, like a homeowner trying to run their home on a generator too small. Continuous power outages are the industrial-scale equivalent of unplugging the refrigerator and oven to keep the lights on and prevent damage to infrastructure. Overloading, Ercot said, could be a much bigger problem than that. that the state is currently facing.

Why is Texas the only one in the news?

Texas operates its own power grid, largely isolated from other interconnected US power grids. Isolation keeps Ercot free from federal oversight.

The state has the capacity to import or export electricity, but the quantity is minimal. Ercot can move around 800 megawatts of electricity through interconnections with the eastern power grid and around 400 megawatts of electricity through links with Mexico. The infrastructure to do more is not there.

Who to blame?

There isn’t a single reason the grid fails. More interconnections could be a good thing. And frozen wind turbines must not have frozen. It is a technical and financial choice.

Windmills can be sold, essentially, with a wintering set. But splurging on a fancy parka would be a questionable appeal for anyone living in the Caribbean. Added engineering means additional cost. There is always a trade-off between the risks and the rewards.

Texas is a hot state that experiences cold weather once in a generation, Heather Zichal, CEO of the trade group America Clean Power, Told Barrons. Most of the electricity that was disconnected was gas, coal, or oil. This is an extreme weather problem, not a clean feeding problem.

The American Gas Association, which represents natural gas suppliers, was not immediately available for comment.

Planning is an additional problem. Electricity demand fluctuates depending on the time of day and time of year. Utilities need to make sure they have enough juice for peak periods.

Ercot and other energy organizers estimate how much capacity they need to meet demand. Network operators’ forecasts do not appear to have taken into account the amount of capacity that could be lost due to weather conditions, and the extent to which cold would raise demand.

Referred Ercot Barrons at its daily press briefings.

Now the state has a real problem. Almost every power source in Texas was hammered by the winter storm and none completely resisted, said Jesse Jenkins, assistant professor of mechanical and aerospace engineering at Princeton. Barrons. But Texans depend the most on natural gas power plants, which account for two-thirds of total winter capacity. [Ercot] account to overcome the peaks of winter demand.

The problem with gas begins in the wells of the Permian Basin of Texas. Gathering lines have frozen and the pumps used to extract gas from the ground lack the electricity to run the gas distribution lines can also freeze, as the water in the lines turns to ice, he said. declared. Extremely high demand also caused pipeline pressure to drop, sometimes triggering closures.

What are investors doing?

Investors should be on the lookout. Two utilities with major operations in Texas report profits next week:

NRG Energy

(NRG) and

Vistra

(VST). Investors should watch what the two are saying.

The risk is disproportionate losses. Any mismatch between skyrocketing fuel costs and retail electricity prices, often blocked by agreements with customers, could be a big problem. There is no way to know how utilities are doing yet.

NRG stock has fallen around 7% in the past five days. Vistra shares are up 3%. Stocks of utilities in the

S&P 500

are down around 2% over the same period, while

Dow Jones Industrial Average

is up 1%.

Renewable energy stocks could also be affected. Investors might be worried about political rhetoric like Abbotts, but in the long run, the implications of the Texas issue are likely a small bright spot. Wind turbine suppliers such as

General Electric

(GIVE),

Siemens Gamesa Renewable Energy

(SGRE.Germany), and

Vestas wind systems

(VWS.Denmark), for example, may sell improved and more expensive systems. And efforts to improve the reliability of power grids are good for companies like

Eaton

(ETN) and

Schneider Electric

(SU.France).

All five stocks are up over the past week, with gains of around 2% to 3%.

In the end, Texas may not need more politicians to solve the problem. He probably needs more engineers.

Write to Al Root at [email protected]

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