Something strange is happening in the U.S. oil patch. Oil drilling—an activity that has always been energy-intensive—has turned into a massive drain on the grid. The trend is an ironic twist to the U.S. grid problem, which is how to accommodate soaring demand for electricity in a non-inflatable grid.
Last November, the North American Reliability Corp. warned that blackouts could happen in the winter as demand for electricity soars and supply is constrained by coal and gas plant retirements and the variable nature of wind and solar output.
This was the second warning by NERC for the year and the latest in a series of warnings that also featured Federal Energy Regulatory Commission officials telling legislators earlier in 2023 that the grid was becoming increasingly vulnerable because of the transition.
While this was happening—and the portion of wind and solar in the energy mix continued to grow—oil drillers were being pressured by their shareholders and activist groups to reduce their emissions footprint.
According to a new report in the Wall Street Journal, one way that drillers chose to do this was by ditching gas generators in the field for electricity from the grid. But they are not the only industry switching from hydrocarbons to grid connections for their electricity demand. Cue a surge in demand and the realization that the amount of electricity on the grid is not infinite.
Grid constraints have emerged as one of the biggest obstacles to the transition of the United States from a hydrocarbon-powered to an electricity-powered economy. Various estimates have revealed that in order for the Biden administration to hit its target of a 100% low-carbon grid by 2035, the transmission network in the country would need to expand dramatically—in just over ten years.
But even before this could happen, if it could at all in that short timeframe, businesses are being pressured into going electric in order to reduce their emissions. As a result, the grid is getting strained. And oil drillers are starting to build their own power supply infrastructure.
The WSJ reports that oil producers in Texas, New Mexico, and North Dakota are contributing to a substantial increase in electricity sales. At the same time, they are finding out there is only so much electricity on the grid that is accessible to them. This is one reason flaring is getting reduced, in addition to stricter regulations.
According to the WSJ, some drillers are building gas-power plants and using the gas that would have been otherwise flared to generate the electricity they need to power their machinery. It is really a win-win decision. On the one hand, these drillers are emitting less because they are not flaring the gas, and on the other, they get some reliable electricity on site.
Yet, the WSJ report also suggests this is not enough to alleviate the strain on the grid as oil production continues to grow, and so do drillers’ efforts to become smaller emitters. It appears the only way to achieve the latter is to become fully electric-powered with electricity produced by wind and solar farms. And this is where the transmission challenge of the decade comes in to cast a shadow over the possibility of that happening.
The U.S. grid took over a century to build to its current size. Transmission lines take years, even if everyone along the way is okay with them, and many communities are not okay with transmission lines passing over their backyards.
Yet there is a shortage of qualified technicians to build all the transmission lines necessary, which further complicates the matter. It seems that oil drillers will have to keep relying on themselves to secure the electricity they need to boost their green credentials—and utilize some gas they cannot market because there are not enough pipelines to take it from the field to the network or the liquefaction plants along the Gulf Coast.
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By Irina Slav for Oilprice.com
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