Senior decision-makers come together to connect around strategies and business trends affecting utilities.

Post

Extreme Weather Meets Deregulated Power Market in Texas

Mahmut Karayel's picture
Chief Science Officer, Partner Alta Bering

Investment Banking, Financial analysis and Risk ManagementTeaching (Applied Math, Optimization, Financial Management, Corporate Finance)Application of optimization and simulation technology in...

  • Member since 2021
  • 1 items added with 158 views
  • Mar 18, 2021
  • 158 views

Latest data indicates that the electricity shortage in Texas was caused by the grid failing due to ERCOT not being able to balance demand and supply of power. Wind generation is not weatherized for extreme conditions, so it was interrupted. Anecdotal evidence and historical experience indicate that Combined Cycle gas was not ready for the arctic weather either.

 
ERCOT February Summary

On the other hand, the load on the system increased due to extreme conditions.

 
Dallas Forth Worth International Airport Weather Report
Data sources: ALTADATAERCOTNOAA

Ten years ago, in February 2011, Texas lived through a cold spell; power was interrupted. Subsequently, the officials and the politicians were warned against extreme risks of extreme weather events.

Practically nothing was done.

In a deregulated market, there is little incentive to spend money to take precautions to protect the end customer. The main incentive is that you will lose the customer. The end customer is not going to go off the grid. Besides, most power sellers make more money during these extreme events. Prices, which are on average $30/MWh, are allowed to go all the way up to $9,000/MWh. Texas market design incents power companies to operate at the brink of a shortage.

  • Balancing is managed by prices rather than a combination of prices and reserves.
  • The system is isolated, hindering imports and exports.
  • There is no incentive to spend money to weatherize power plants against extreme conditions.

Texas consumers normally enjoy good prices. But sometimes, they get five-digit electricity bills. The consumer can exercise some power by letting their elected officials know of their preferences.

Please share your thoughts in the comments section.

Mahmut Karayel's picture
Thank Mahmut for the Post!
Energy Central contributors share their experience and insights for the benefit of other Members (like you). Please show them your appreciation by leaving a comment, 'liking' this post, or following this Member.
More posts from this member
Discussions
Spell checking: Press the CTRL or COMMAND key then click on the underlined misspelled word.

No discussions yet. Start a discussion below.

Get Published - Build a Following

The Energy Central Power Industry Network is based on one core idea - power industry professionals helping each other and advancing the industry by sharing and learning from each other.

If you have an experience or insight to share or have learned something from a conference or seminar, your peers and colleagues on Energy Central want to hear about it. It's also easy to share a link to an article you've liked or an industry resource that you think would be helpful.

                 Learn more about posting on Energy Central »