Lauren Craft - Feb 19, 2021

Large-scale power outages this week across Texas and much of the central US -- including some of the country's most energy-rich locales -- have raised new questions about whether the power grid is prepared for the energy transition. The blackouts, which took at least 2 million barrels per day of crude output off the market amid the coldest weather in decades, stemmed from a perfect storm: tightening capacity margins, lax regulations, and frozen gas and wind turbines that starved the grid of much-needed power. But that didn't stop the finger-pointing from beginning in earnest. Some were quick to blame an overreliance on fossil fuels; others attacked the shift toward less-dependable renewables. Yet there was consensus that the deadly event illustrates the need for major policy and market reforms, including more transmission lines to connect different regions, greater energy storage and better contingency planning for extreme weather caused by climate change.

These kinds of policy changes and market reforms are designed to prevent similar crises and prepare the grid for adverse climate impacts in a low-carbon economy. The electricity grid of the future will need to accommodate growing volumes of intermittent wind and solar as well as coping with greater reliance on electric power as a whole, with electricity eyed as a replacement for combustible fuels. The latest blackouts are bound to serve as a test for policymakers at the federal and state levels, with US President Joe Biden determined to decarbonize the US power sector and electrify the nation's transportation fleet.

Even as the Electric Reliability Council of Texas (Ercot) was struggling to bring power back to millions in Texas by midweek, policymakers were already launching probes into what happened and why. The Federal Energy Regulatory Commission and North American Electric Reliability Corp. opened a joint inquiry, while Texas Gov. Greg Abbott declared reforming operations at Ercot -- an independent system operator -- a priority. But it's clear this is not just a Texas problem. Just last year, California experienced extensive blackouts amid extreme heat that took two gas-fired power plants off line and rendered wind energy output inadequate.

These incidents illustrate that vulnerabilities run deep, with exposure for nearly every US state. “It’s important to remember here that the challenge is not just one source or one type of market design,” said Jason Burwen, head of the Washington-based Energy Storage Association. “This is a huge problem that challenges all power resources, all market designs, all of the infrastructure -- because extreme weather of a historic nature, across ever-wider geographic regions, will overwhelm everything.” Along those lines, many are calling for the US grid to become more interconnected through greater investments in transmission lines across regions.

The oil and gas industry has long cited intermittency as the Achilles' heel of renewables in power generation. But fossil fuels failed this week's test, too, as widespread volumes of associated gas were shut in that could have fueled power generation. The bigger issue is a lack of interconnectivity in US grids, which would provide more backup, diversity and redundancy to deal with a crisis. And with climate change causing more severe weather events, the entire industry must adapt and ensure that generating assets and grid infrastructure are more resilient. Onshore wind farms in Scotland, Denmark and northern Germany, and offshore farms in the North Sea take on much harsher weather without problems -- because they were designed for that. So do units in the northern US, where cold weather and harsh storms are expected.

The extreme cold across Texas also raises questions about making other parts of the energy infrastructure more resilient. The Permian Basin in West Texas and New Mexico has been particularly impacted by the cold snap. More than 60% of the gas produced in Texas is associated with oil production, according to the Texas Alliance of Energy Producers. Traders were anticipating severe gas shortages ahead of the long President’s Day weekend of Feb. 13-15, driving natural gas prices at key supply hubs up to unheard-of levels above $300 per million Btu -- more than 100 times their recent levels. Also, the US refinery sector, which is concentrated along the Gulf Coast, has been severely disrupted because much of it is not designed to handle a hard freeze.

As the energy transition unfolds, US power grids will also need to accommodate more decentralized generation, making the job of balancing supply more complex. But these sources -- largely photovoltaic solar and wind at homes and businesses -- also would provide some protection against climate impacts because they are local and reduce dependence upon centralized power generation by utilities.

Lauren Craft is the editor of EI New Energy and a US policy correspondent with Energy Intelligence. Deon Daugherty, Mark Davidson, Bridget DiCosmo and Emily Meredith also contributed reporting.