The narrative this week has quickly shifted from stimulus hopes, vaccines, and virus mutations to what is now known as the Texas Freeze--and the energy market has been turned upside down as these low temperatures continue to rock the Lone Star State that is woefully underprepared for such a rare event.
And everyone--particularly those suffering the effects of the catastrophic freezing temperatures--understandably wants to know who to blame, aside from Mother Nature.
Temperatures in Dallas, Texas, have sunk to below zero. While typical for a state such as Michigan, where attics and water pipes are insulated, snow plows and generators are standard issue, and residents know what to do to keep their pipes from freezing, Texans are understandably not accustomed to such inclement weather. Neither is their energy infrastructure.
The catastrophic result of the Texas Freeze cannot be overstated.
If you want to see what the freezing temperatures mean for Texas residents, one need only to take a stroll through Twitter this week.
The highways are an utter mess.
Which is fine for Tesla drivers, because what with electricity prices reaching astronomical levels due to power shortages, a single Tesla charge costs Texans about $900 right now.
We’d bet this woman, whose car was frozen in place when a water pipe burst above her vehicle, isn’t going anywhere, either.
So, Texans are hunkering down in their homes. In their cold and dark homes. As the weather forces Texas residents to stay at home, power and water outages that have affected millions of homes are wreaking havoc across much of the state.
As the power fails, be it via rolling blackouts or simply outages, water pipes are freezing and uninsulated homes are likely not much warmer than the outside. In somewhere like Michigan, residents experience power outages frequently enough to know that they need to be prepared. Water lines are not exposed and are insulated. Homes are insulated well. Residents have generators. The counties and municipalities have snow plows and salt trucks and drivers on call to manage the roads. Related: Oil Prices Soar As U.S. Oil Production Plunges 30%
Texas has none of those things, simply because they do not routinely experience this weather. So, instead of cranking up that generator or throwing another log in the fire, Texans are suffering.
Of course, everyone in the north knows that you should let your faucets drip to keep them from freezing. Only…
And if you think it’s bad now, just wait. It’s about to get worse. After the weather warms, that’s when thawing pipes that cracked during the freeze begin to spew the thawed water. Everywhere.
Get Ready for the Largest Insurance Claim Event EVER
It will be, according to the Insurance Council of Texas, the largest insurance claim event in history.
But the horrors of the Great Texas Freeze of 2021 don’t stop with a local energy crisis of epic proportions: Texas residents are also stuck waiting in lines for food.
Exporting the Texas Crisis
Texas exports a fair amount of oil and natural gas--and a fair amount makes its way south to Mexico. But the crisis has forced the state to hold onto what little natural gas and oil it can produce for itself--in a sense, exporting part of its crisis to Mexico, where the natural gas shortage is acute.
Texas Governor Greg Abbott (R) today issued an order that prevented all natural gas producers to stop selling to anyone outside Texas. The order will last until February 21. It’s likely that this will cause a crisis in Mexico, who relies on gas to generate about 60% of all its power.
The Blame Game
Everyone wants to know why Texas is so underprepared for these freezing temperatures. Wind turbines froze and are unable to generate power. The fossil fuel crowd has wasted no time in seizing this as an opportunity to show how renewables are unreliable and limited.
Renewable supporters, on the other hand, have been quick to point out that natural gas pipelines have frozen, refineries have shut down, and millions of barrels of crude oil production has been shut in.
Fossil fuels loyalists are using this as a platform for warning the world against the horrors of what would be the Green New Deal, while the renewables crowd is rallying around what they see as proof that we need the Green New Deal--now.
When absolutely everything is frozen, both arguments seem irrelevant.
Either way, Texas officials are in the crosshairs.
Texas Senator Ted Cruz, for one, has had to eat some crow--a lot of crow. In what has now become a pot and kettle scenario, Cruz has had to apologize for his past criticism of California’s failure to keep its power on. (Don’t feel too bad for Senator Cruz, because he’s now chilling in Cancun.)
— Ben Rickert (@Macro_Investing) February 18, 2021
But it’s not just the media and politicians flinging public accusations. The blame game has spread into an official probe into ERCOT--Texas’s grid operator. Texas Attorney General Ken Paxton has started an official investigation into the grid operator, saying its management had “slipped and fallen on their faces” in their mishandling of the deep freeze.
Learning from its Mistakes…. Or Not
This isn’t the first cold-spell to rattle Texas. In 2011, an Arctic cold front triggered below-freezing temps in Texas. Things froze. Power plants shutdown. Blackouts ensued. Sound familiar?
The 2011 freeze in Texas proved something: Texas isn’t built for the cold. Related: Biden’s Energy Plans Threaten Alaska’s Oil Ambitions
"Infrastructure in Texas isn’t built for extreme cold,” K.C. Boyce, Vice President of human insights firm Escalent’s energy division told Oilprice about the current crisis. “Sensors and equipment such as nuclear generation turbines - which are housed inside buildings in northern states - are installed outside and exposed to the elements in Texas. When the temperatures dropped, those instruments froze, knocking capacity offline.”
“Infrastructure in Texas isn’t built for extreme cold.”
For the 2011 precursor, ERCOT’s own postmortem report brought to light the trouble with frozen infrastructure and equipment that interfered with power production. In other words, they knew. And yet, here they are again.
Adding to the problems of frigid temperatures that Texas infrastructure that wasn’t designed to withstand, the state’s grid is independent for the most part. That’s great for the state’s independence from the federal government. Not so good for crises.
“Texas's electric grid is a system designed for summer peaking conditions. Harsh winter conditions forced resources offline that were expected to be available,” Mark James, a senior research fellow at Vermont Law School’s Institute for Energy and the Environment, told Oilprice.
But as always, every crisis has to have its winners and losers, and it won’t be enough to lay the blame squarely at Mother Nature’s feat. The losers are, most certainly, the residents of Texas. The winners are yet to be decided because this is a game of using a crisis “opportunity” to collect as much political capital as possible, and it will play out with high visibility in the energy sector. It is, after all, Texas.
By Julianne Geiger for Oilprice.com
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