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Big Freeze Threatens Texas With Blackouts as Markets Gyrate
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February 14, 2021
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1:07Now PlayingThe arctic freeze gripping the central U.S. is raising the specter of power outages in Texas and ratcheting up pressure on energy prices already trading at unprecedented levels.
In Texas, where temperatures in Dallas are forecast to be 3 degrees Fahrenheit Monday (minus 16 Celsius), the operator of the state’s power grid warned it may need to resort to rolling blackouts as surging demand for heat strains the electrical system. While outages may occur Sunday, the risk is higher on Monday and Tuesday, when officials expect power demand in Texas to reach a record high.
“We could be in emergency operations as early as tonight,” said Dan Woodfin, a senior director for the Electric Reliability Council of Texas, which runs the grid. “We would expect to be in emergency operations tomorrow through at least Tuesday morning.”
About 800 daily records for cold temperatures have been set in the past week as Arctic air pushes all the way to the Gulf of Mexico, sending gyrations through energy markets. Spot prices for electricity in Texas are expected to hit the grid’s cap of $9,000 per megawatt hour. Natural gas rose to a record $600 per million British thermal units in Oklahoma. And as much as half a million barrels a day of oil output in West Texas may be impacted by well shutdowns that began on Thursday because of the extreme cold.
“It is a pretty brutal air mass,” said Bob Oravec, senior branch forecaster at the U.S. Weather Prediction Center. “The cold air is entrenched across the middle part of the country. High temperatures are amazingly cold, some 50 degrees below average.”
Through early Sunday, the coldest spot in the U.S. was 25 miles east of Ely, Minnesota, where readings fell to -50 degrees Fahrenheit. As of 7 a.m. New York time, 2,653 flights around the U.S. through Monday had been canceled, the majority in Dallas and Houston, according to FlightAware, an airline tracking service.
Temperatures fell so far below forecasts in parts of the central and western U.S. that physical gas prices soared from California to the Rockies, with one hub in Cheyenne, Wyoming, reaching as high as $350 per mmBtu, according to traders who asked not to be identified because the information isn’t public.
Heating and power plant fuel traded for as much as $195 per mmBtu in Southern California. If day-ahead electricity prices are any indication and the weather forecasts are even partly accurate, the run-up in energy prices isn’t over.
In Houston, there are long lines to refill household propane canisters. Itinerant, roadside firewood are largely out of supplies.
A mix of freezing temperatures and precipitation threatens to paralyze wind farms in Texas. That would be devastating for power plants with contracts to provide a certain amount of electricity at specific times if they need to instead buy it on the spot market to meet their obligations. At the moment, that power is exceedingly expensive.
“When wind-turbine blades get covered with ice, they need to be shut down,” said Joshua Rhodes, a research associate at The University of Texas at Austin who focuses on energy.
About half of Texas’s wind turbines were inoperable Sunday morning because of ice and cold. Yet those that are running are cranking out more power than forecast for this time of year, Woodfin, grid operator Ercot’s senior director, said during a briefing Sunday.
Power plants that are only partially operating could be pinched by high prices, too. Projects that commit to provide 50 megawatts of energy in a given hour but only produce 20 megawatts may need to buy the difference at the market price, said Lee Taylor, chief executive officer of RESurety, a clean-energy analytics firm.
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