Texas's Electrical Power Predicament-Part 1

We have got 600 coal plants, the average age is 40 years old and we put 100 on the shelf.  We are building a few gas plants, thanks to the abundant gas supply, but not enough to even keep up with the decommissioning of coal plants.  We have got 104 nuclear plants, average age over 30 years old, design life 40 years, or, I should say permitted life 40.  Ten years from now, ladies and gentleman, those of you who buy electricity, those of you who use for electricity—GOOD LUCK, because that will determine your future.  GOOD LUCK, because the underlying system is not going to be there based on the path that we are currently on.

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If we stay on the path we are on...we are not going to meet peak demand in summers and winters, in most parts of the nation.  We came close this August, didn't we, in Texas.  And with the draught, if it doesn't let up, and with the wind not doing much in August, because it just doesn't blow on hot summer days on the high plains, when we need it, we could face rolling blackouts, rolling brownouts, even in Texas, where I think ERCOT has done a reasonably good job predicting the future. But a statistic I heard last week really frighten me.  I read in a local paper in Texas, in which a person from ERCOT said that we had already reached 2014 expectations, in terms of demand, in 2011.  Which says the system may or may not fall short, in the very near future, in peak periods. 

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As the nation stumbles into it politically driven future on energy with no plan, no idea, other than a few symbolic words "green jobs "green power" "wind" "solar" "biofuels"—nothing wrong with them, other than that there is very few of them producing electrons.  Ninety-eight percent of the base of our electrical system, ladies and gentleman, comes from coal, gas, oil, nuclear and hydropower.  Ninety-eight percent, and what are we doing in any of those five areas?  Almost nothing to renew the system other than holding it together with band-aids and paper clips.

The path to a 21st century energy system, John Hofmeister, former president of, Shell Oil Company, November 8, 2011  (excerpt from 12:40-16:20 min) 

The title of this article might seem strange given the recent nation-wide 50% drop in electricity prices, apparently due to the glut of natural gas being produced. 

However, I think that there is good evidence to suggest that a combination of growing electricity demand and decreasing ability to produce electricity will put Texas in a very tight position in 2012 and beyond.  It is not just that Texas could face rolling brownouts as intimated by Hofmeister—with as hot as a summer as last year, it is highly likely that Texas will have several days of rolling brown-outs.  The increased risk for brown-outs in the coming years is because of the combination of increased demand because of Texas’s growing populations and economy, and decreased production, because Texas will lose several coal-fired power generation plants.

First, some background on Texas’s growing demand for electrical power consumption, and, its present ability to produce power. 

Electrical Power Consumption in Texas and Likely Future Demand

To get a sense of what is driving Texas’s electrical power consumption, let’s look at its population and GDP growth.  Figure 1 shows Texas’s population and annual GDP (left and right axis respectively) from 1987-2010, 2011 as available (GDP from USA Government Spending; population from United States and Texas Populations). 

Texas’s population and economy are growing much faster than the USA’s. 

For instance, expressed as a yearly change from 1991 to 2010 Texas’s population grew by 2.0±0.6 %/yr and it’s GDP grew by 6.3±3.1 %/yr.  The comparable change in population and GDP for the entire USA over the same period are 1.1 ± 0.6 %/yr and 5.0 ± 2.0 %/yr, respectively.  In terms of population growth, Texas is closer to India's population growth, than the USA as a whole.

Expressed as percentage, Texas’s population and GDP (USD) are both about 8.2% of the corresponding amounts for the USA in 2010.  These percentages are up from 6.8% and 6.4% in 1987, from 1987 to present there has been a linear increase in Texas’s relative proportion of the USA’s population and GDP over this period, as illustrated in Figure 2.

To put the Lone Star State on a global scale, if Texas were an independent country (and some Texans believe this to be the case) it would be comparable to Australia in population (22 million, red triangle, Figure 1) and GDP (1.2 trillion, blue triangle, Figure 1, from: CIA World Fact Book).  According to the CIA, Australia has the world’s 18^th largest national economy, so Texas would be above this. 

Given its robust population growth, you should not be surprised to see that Texas’s annual electrical generation capacity (Mega Watt Hours, MWH) has also increased at about the same rate over this period, as illustrated in Figure 3 (data from EIA State Electricity Profiles 2010). 

Expressed as a year-by-year percentage change, Texas’s growth rate in electrical generation capacity has averaged 1.9±2.1 %/yr.  The standard deviation is high because there have been four years in the 2000s (2001, 2003, 2008 and 2009) where power generation decreased relative to the year before.  These are likely some early signs of hitting peak power generation, in my opinion. 

One more global comparison: according to the CIA World Fact Book, in 2009, Australia produced 232,000,000 MWH of power, which made Australia the world’s 17^th largest electrical power generator (green triangle, along the horizontal axis in Figure 3).  Texas in the same year generated 404,000,000 MWH or 1.75 times more electrical power than all of Australia.  That puts Texas somewhere around 12^th place, slightly below South Korea, and above the United Kingdom (See, Country Comparison Electricity Production, CIA World Fact Book).  According to the CIA World Fact Book, the USA was the top electricity producer in the world, producing 3,953,000,000 MWH in 2009.  Therefore, Texas contributed about 10% to the USA’s electricity production; a little higher than its proportion of the population (8.2%).

Overall then, Texas is a major global electricity producer and consumer, with a growing population and economy.  It is reasonable to expect that power consumption should at least match the 2 percent increase per year population growth rate, perhaps up to matching the 6 percent per year growth rate in GDP.  The historical electrical power generation growth rate of 2 percent per year pretty well matches the former's growth rate. 

ERCOT

Texas can not export or import significant amounts of the electrical power it generates or consumes: it really is a “lone star” as far as electricity is concerned.  Here is how Warren Lasher, Manager of Long-Term Planning and Policy for the Electric Reliability Council of Texas (ERCOT), puts it:

The ERCOT grid is unique in the United States in that it is wholly intra-state and essentially isolated from the two other U.S. grid interconnections (the Western and the Eastern Interconnections). The ERCOT grid is not synchronously connected outside of the state, and there is limited ability for the ERCOT region to import or export electricity. There are 5 asynchronous ties between ERCOT and other interconnections: two linking ERCOT and the Eastern Interconnection (with a combined capacity of 820 MW), and three linking ERCOT and the electrical grid in Mexico (with a combined capacity of 286 MW). Flows on these asynchronous ties are scheduled by market participants. ERCOT can request support from neighboring regions during grid emergency events. Aside from these limited asynchronous ties, from an electrical standpoint, the ERCOT region is an island that must independently ensure its own electric reliability.

Declaration of Warren P Lasher September 21, 2011 (my emphasis added)

As noted by Lasher, most of Texas essentially has its own grid (Figure 4, from Cp 27 of The Energy Report 2008). 

ERCOT, a nonprofit corporation subject to oversight by the State, is responsible for controlling the electric grid for about 85 percent of the state's electricity demand.  ERCOT does the scheduling and dispatching of electricity over the Texas grid, and, manages the money settlement for the sale of that power among wholesale providers and their customers. 

Hofmeister was very complementary to ERCOT, saying that they do a reasonably good job predicting the future.  However, the reality is that ERCOT has had problems predicting summer peak demand for the last few years. 

For instance, in April 2006 the combination of unseasonably hot weather for April, plus several power plants being down for maintenance, caused ERCOT to call an emergency and initiate rolling black out in the Austin area (see, The Blackouts/Brownouts Thread  Rolling Black Outs in Texas; Austin hits triple digits today, rolling blackouts; quoting a story from KVUE News, which is no longer available at the original source).

According to Andrew Elliott, Director of ERCOT Supply for GDF SUEZ Energy Resources (November 8, 2011 speech, ERCOT market fundamentals and indicators), in 2010 ERCOT  predicted a summer peak demand of 64 MW, whereas in reality it was 65.7 MW.  In 2011 ERCOT  again predicted a summer peak demand of about 64 MW, whereas in reality it was 68.3 MW.

As I wrote about in August 2011, (Revisiting Rolling Blackouts in Texas) record very hot weather took the grid within a few MW of causing ERCOT to start interrupting flows to industrial customers and a few thousand MW of instituting rolling blackouts.  Earlier in the year in February, ERCOT did institute rolling black outs after very cold weather knocked out over 50 electricity generating units, taking out about 7,000 MW of power generators.

Exploring The Future (prelude to Part 2)

In my opinion these are the signs of an electricity grid that is being pushed to its limits and doesn’t have much reserve margin for error, especially when plants go down, as they always must do, for repair and maintenance. 

However, it now looks like several new rules under the authority of the Clean Air Act will cause Texas's reserve margin to be even less, thereby increasing likelihood of rolling blackouts. 

If, in 2012 and beyond, several coal-fired power plants are closed down or have reduced capacity, and, Texas has just the same power demand as last summer, how many days with rolling blackouts are we talking about?  And, what if Texas’s power demand in 2012 goes up by 2 percent per year, as we should expect it to—then how many days with rolling blackouts?

Join me next time for Part 2, where I explore these scenarios in detail.