Oil prices rose early on…
Oil and gas giants have…
Warren Buffett's investment company Berkshire Hathaway has proposed a plan for boosting Texas' energy security: building 10 GW in new natural gas-fired generation capacity.
Bloomberg reports that the proposal involves setting up a company that would build the plants and add emergency gas storage to the offer in a bid to help prevent a repeat of this year's energy crisis caused by the unusually cold weather in late January and early February.
"We really want to make sure that this never happens again. So we're really wanting to partner with the state," Chris Brown, CEO of Berkshire Hathaway Energy Infrastructure Group, told Bloomberg in an interview. "The proposal is simple: state residents should have a reliable source of backup power."
Outages in gas-fired power plants were among the culprits for the energy crisis in the Lone Star state. Some blamed exclusively the state's wind generation capacity, which was also affected by the Freeze. But, ultimately, the cold spell wreaked havoc across all kinds of power generation and caused outages in natural gas production, making emergency supplies impossible.
As a result of the crisis, however, the wind industry in the state has suffered a severe blow, the Wall Street Journal reported earlier this month. The Texas Freeze took out half of the state's wind capacity. This meant that the operators of these wind farms could not fulfill their obligations under contracts they had struck with investors to get financing for the project.
The contracts basically oblige the wind farm operator to supply a certain amount of electricity. If it fails to generate this electricity itself, it needs to buy it on the wholesale market, and prices on the Texas wholesale market reached historic highs amid the Freeze.
The fact that Berkshire is betting on gas and not wind may be telling, as it comes amid a federal push for lower-carbon energy generation. According to the Bloomberg report, the plan would cost some $8.3 billion, with Texas power customers paying a fee to pay for the construction. Berkshire has proposed a 9.3% rate of return on its investment that is pending Texas regulators' approval.
By Irina Slav for Oilprice.com
More Top Reads From Oilprice.com:
Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.