Cost of winterizing Texas electricity grid worth the expense, Dallas Federal Reserve says
Energize Weekly, April 21, 2021
The cost of weatherizing the Texas electric power system – which faced a major collapse during a February freeze – could run into hundreds of millions of dollars, but the expense would be worth it, according to a Federal Reservice Bank of Dallas analysis.
“Our analysis indicates winterizing for extreme winter weather events appears financially reasonable,” Federal Reserve economists said in a report released April 15.
Texas was battered by a series of winter storms, between Feb. 10 and Feb. 20, bringing snow, ice and freezing temperatures that left 4.5 million homes and businesses, served by the Electric Reliability Council of Texas (ERCOT), without power.
“The power outages led to widespread damage to homes and businesses, foregone economic activity, contaminated water supplies and the loss of at least 111 lives,” according to the Federal Reserve study. “Early estimates indicate that the freeze and outage may cost the Texas economy $80 billion–$130 billion in direct and indirect economic loss.”
The Federal Reserve economists, however, focused on a more targeted figure, the value of lost electric load. During the 70.5 hours of the mid-February freeze, there was an average load shed of 14,000 megawatts (MW).
The analysis calculates that power lost along with value of the lost load added up to $.4.3 billion.
The price tag on weatherizing the power system – from natural gas well to generating units and the grid – could be more than $400 million a year, according to the analysis.
So many natural gas wells froze that production dropped precipitously, with Texas production down 45 percent Feb. 13 to Feb. 17. The drop adversely effected pipeline operators and natural gas turbines, which provide 53 percent the system’s electricity.
As electricity generation was cut, so was power to the oil and gas fields processing plants and the compressor stations moving gas through pipelines. During the storm, 38 of the state’s 176 gas processing plants were shut down due to weather conditions, further pinching supplies.
“This created a death spiral for electricity generation,” the report said.
Winterizing oil and gas wells will cost between $20,000 and $50,000 per well and would have to be done every year as new wells are drilled. The Federal Reserve estimated the cost as $85 million to $200 million, depending on the number of new wells.
The one-time cost of winter upgrades for ERCOT’s 162 natural gas-fired units – a move that was recommended after the last state’s winter power failure in 2011, would be about $95 million.
The most effective technology for weatherizing wind turbines is blades with internal warming equipment to prevent them for icing up. But that adds $400,000 to a unit when installed at the factory, and retrofits on Texas’ 13,000 wind turbines are not feasible.
“However, upgraded blade coatings, cold-weather lubricants and de-icing drones would mitigate ice formation in most instances at lower cost,” the analysis said.
Using the estimate of subzero temperatures threatening the Texas power system, winterizing measures and other actions should not exceed $430 million annually (a tenth of the cost of lost load from a winter load loss).
“Based on our analysis, the most reasonable solutions to prevent winter storm blackouts are within the bounds of being economically justified,” the Federal Reserve economists said.