CHECKING IN

Well let's make that 2025--I'll have more time.

 

 Okay, it has been awhile... but, my resolution is to recommence this blog in 2024, to look back at some of the 10-year-old posts from this blog to see how they stood up against the test of time, and to look forwards, to see what might lay ahead. Cheers!

Revisiting Texas's Electrical Power Predicament—Part 3

I hadn't intended there to be a part 3—but I would like to share three interesting pieces of news that nicely fit in with some themes of this series, and, I have a bit of free time on my hands this weekend to write about it.

The Bankruptcy and Restructuring/Breakup of Energy Future Holdings

Energy Future Holdings, Texas's largest power provider, came into existence in 2007 with a $45-48 billion leveraged buyout of TXU Corporation, as brokered by the likes of KKR, TPG and Goldman Sacks.  Overvaluation of TXU's assets, especially in the face of the subsequent economic depression of 2008 and continued low energy prices (thanks to the fracking boom), has made it impossible for EFH to repay the increasing debt burden associated with the LBO, and now, bankruptcy looks inevitable (see, Greed doomed the TXU buyout).  The recent departure of KKR CEO, Marc Lipschultz, for the Board of Directors of EFH probably signals a likely Chapter 11 restructuring of EFH's assets.

EFH is the parent of three subsidiaries: Oncor, which handles electricity transmission to 3 million customers, TXU energy, the states' largest electricity retailer, and Luminant, which generates about 18 percent of Texas' electricity, at least in the summer months.  Both Oncor and TXU energy look economically viable, and therefore, are attractive subsidiaries to buy. 

As I wrote in Part 2, Luminant owns five of those old coal-fired electricity generating plants, some of which have been getting mothballed during the winter month, and, which are too unprofitable, at least a today's energy prices,  to retrofit to comply with the Clean Air Act requirements.  Those five plants have a name-plate capacity of about 8000 MW which correspond to about 11-12 percent of Texas power generation capacity at any given time during the summer months.

There is speculation (In Energy Future Holdings shakeup, size matters) that a restructuring would go easier if the coal-fired plants were to be split off from Luminant's nuclear and natural gas, and, further speculation, that as part of a restructuring, those coal fired plants will not just get mothballed, but torn down.  I wonder who would want to buy Luminant if the maintenance or retrofitting these five plants was part of the deal (even a tear down of these plants would be very expensive, I think).

If the closure of these five plants were to happen, however, then ERCOT's summer power reserve margins would get blown away.  For instance, a loss of 8000 MW of power generating capacity would drop ERCOT's previously expected reserve margin from 13.6%, for the summer of 2014, to only 1-2%.  Under this scenario, I would expect that that there would be multiple rolling blackouts, and a spike in electricity prices, this summer.

Does the fate of Texas' coal plants and potential permanent loss of 8000MW of power have ERCOT worried or sounding the alarm?   Why no, quite the opposite.

ERCOT'S Revised Load and Reserve Margin Forecast

In a dramatic turn-around from its previous forecast of May 2013, Capacity-Demand-Reverse Report for 2013, in January 2014, ERCOT announced peak demand margins going forwards that implies that the possibility of rolling blackouts is remote.    There is no electrical power predicament after all.  

What happened?

Instead of an annual growth rate in peak electricity of 2-3 percent/year, as predicted by ERCOT last May 2013, ERCOT's new forecast predicts 1.3±0.1 percent/year demand growth for the next decade.  This results in a dramatic increase Texas's expected reserve margin for the next several years. 

What is the reason for this abrupt about-face?  ERCOT explains:

In the past, ERCOT has used weather and economic indicators, such as non-farm employment, to forecast future electric demand. However, the relationship between economic growth and electric demand has changed in recent years. While peak demand growth has slowed to about 1 percent annually, the economic forecasts and non-farm employment statistics used in recent load forecasts have resulted in growth forecast estimates of 2 to 3 percent in the two- to three-year outlook.

This recent trend implies a less direct correlation between these economic indicators and electric demand than in the past. To address this decoupling, ERCOT staff has developed a new load forecasting model that uses forecasted growth rates in customer accounts, or premises, to project future growth trends in each region served by the ERCOT grid.

In short, ERCOT's new model assumes a decoupling between electricity demand growth and economic indicators, such as employment, and instead now looks at growth rates in customer accounts or premises to predict future electricity demand.  

In a another publication describing this new method of future load forecasting (based on a neural network model) ERCOT presented a figure which I think sums up their reason for adopting a new model (Figure 5):

As you can see, starting from the mid 1990s, there has been an increased decoupling between electricity demand and GDP.  ERCOT attributed this to things like increasing efficiency of electrical devices (think light bulbs), declining energy use per customer and improvement in electricity distribution.  But maybe there are other reasons as well.

Based on this new model, at the end of February 2014, ERCOT came out with its latest Capacity Demand and Reserves Report (CDR)—the report being released four months earlier than previous in years.  In particular, a new Summer Summary prediction for demand, capacity and margins, reproduced in Figure 6 below, reflects the new margin and peak demand estimates.

The result of the new model is a prediction of much higher reserve margins than previously forecast.  For instance, the reserve margin (red) is predicted to actually go up to 15.4% in 2015, and, it doesn't drop below 13% until after 2018.  In contrast, the May 2013 CDR (Figure 4) had predicted the 2018 margin to be 9.4%.  Notable, 13.75% has long been considered an acceptable target reserve margin by ERCOT.

With peak demand growth assumed to be 1.3 percent/year, the Feb 2014 CDR predict a peak power demand (blue) of 71806 MW by 2018, which is ~4400 MW lower than the peak power demand of 76186 MW by 2018, predicted in the May 2013 CDR.  

Moreover, this increased margin is in spite of the 2018 total power resources being lowered from 80760 MW, as predicted in the May 2013 CDR, to a predicted 79575 MW in the Feb 2014 CDR.

Brattle Group Report (BGR)

Commissioned by the Public Utility Commission of Texas (PUCT), this report published at the end of January 2014 attempts to estimate the "economically optimal reserve margin for ERCOT’s wholesale electric market."

The bottom line of the BGR is that, from an economic perspective, a reserve margin of 13.75% is "inefficient" because it is designed to meet a one-day-in-10-year load loss event (0.1 LOLE)—a standard to ensure loss of power, on average, only 1 day in ten years.  Instead, the BGR recommends a new reliability standard that would be more "economically optimal."  This new standard, termed, "expected unserved energy" (EUE) standard, weighs the "total system" cost of building more power generation plants to keep the reserve margin high, versus the costs related to a "scarcity-event."  The BGR finds that only a 9-11% reserve margin is economically optimal.  The report estimates that a 11.5% reserve margin, would be insufficient to meet peak loads only once every three years.  On average, a 1600 MW short fall would only need to be curtailed for 2.6 hours on average during such "load shedding" event.

Interestingly, this report was shortly followed by a memorandum to ERCOT from PUCT commissioner Anderson questioning the need for PUCT or ERCOT to take any quick action based on this report:

If the Commission were to adopt a mandatory reserve margin, what Brattle refers to as a “reliability based standard,” they recommend the adoption of the “normalized expected unserved energy” (EUE)⁶ standard because it considers the magnitude and duration of events among its factors.⁷ Adopting a EUE approach would constitute a total redesign of ERCOT’s reliability standard, which should not be done without careful evaluation by the Commission and the ERCOT stakeholders. Analyzing the EUE recommendation should be conducted as part of a truly broad and intensive study of the appropriateness of ERCOT’s reliability standard and resulting reserve margin.

The BGR's assertion that a 10 reserve margin is contrary to the North American Reliability Corporation’s estimate of an acceptable reserve margin of 15 percent—a margin that ERCOT has not been able to attain in the past several years.

Summary and Thoughts

I don't think that it a coincidence that the early publication of ERCOT's Capacity Demand and Reserves Report, and, the publication of Brattle Group Report are being released just as Texas's largest electricity provider, Energy Future Holdings, heads into bankruptcy. 

The new Capacity Demand and Reserves Report suggests much a lower rate of demand growth increase, and therefore Texas, can have "acceptable" reserve margins of 13.75%  for the next several years.  Brattle Group Report goes one further in suggesting that this 13.75% margin is way too high and could instead be 10-11% for "economic optimization." 

Let's just set aside the apparent paradox of ERCOT adopting a new method of predicting demand growth that specifically does not directly consider economic indicators, and, the BGR that specifically recommends lower reserve margins based on "economic optimization."  

To me these two reports may be setting the stage for a restructuring of Energy Future Holdings where those five coal-fired plants are rapidly phased out of ERCOT's power grid.  The ability to eliminate these uneconomical  coal-fired plants would make the purchase Luminant more attractive. 

Still, the loss of 8000 MW of potential power provided by the five plants reduces ERCOT's summer reserve margin to only 1-2 % and that would be a problem. How can we reconcile this?  

It seems like a no-brainer to say that, for at least the near future, at least some of these coal-fired plants have to be maintained and de-mothballed each summer in order to provide an acceptable margin of peak demand.  

But, perhaps now in light of the new CDR and BGR, it will seem more acceptable for some plants to be decommissioned immediately or next year. 

For example, consider the new CDR shown in Figure 6.  According to ERCOT, for 2014, summer resources equals 74805 MW and firm load equals 66179 MW, giving a 13.5% margin.   If one were to eliminate one or two coal-fired plants with a total capacity of about 2000 MW, then resources drops to 72805 MW, and therefore, the new margin becomes 10% which just happens to equal BGR's "economic optimum."  Likewise for 2015, if coal-fired plants with a total capacity of about 4000 MW are eliminated, then the margin again equals 10%.    

In my opinion, not running one to four of these coal fired plants during the summer months would obviously increase the risk of load shedding or rolling blackout events.  Texas only needs to have a summer as hot as the summer of 2011 to test this.  Perhaps from the Battle Group Report author's perspective, cozy in their offices in Cambridge, Massachusetts, the prospects of industrial and residential load shedding and rolling blackouts for several days in August fall within the scope of "economic optimization."   After all, this is estimated to only be for 2-3 hours per day and only occur every 3-4 years.  

I seriously doubt, however, that that the "total system"  economic repercussions of an electricity "scarcity-event" has been fully accounted for in the BGR.  For instance, will businesses still want to relocate to Texas when they hear news of several days of rolling blackouts or load shedding by  industries and residents in the summer months?  Also "economic optimization" does not necessarily mean optimal for human living.  People, especially the elderly, suffer or die in the summer in Texas when the air-conditioning goes out.   Is that considered as part of the "total system" cost?   Maybe, from an economic perspective, who cares, so long as the state government, PUCT or ERCOT doesn't have to pay for it directly. 

And, what about looking further out to more than a few years?  Look again at Figure 6, for 2020 and beyond.  Even with Luminant's coal-fired plants considered as part of the summer resources and assuming only 1.3%/year peak demand growth, the reserve margin was predicted to drop below BGR's "economic optimum" of 10 percent.  What then? 

With the present stricter enforcement of the Clean Air Act and other EPA rules, the prospects building of new power plants that would provide significant base load (i.e., coal, nuclear or even natural gas) in time to mitigate the reserve margin drop look very remote. The price of electricity would have to rise significantly before that would happen, I expect.  But doubling or tripling electricity prices would cause demand to go down.  And, there you have a downwards energy spiral, Texas-style.

Perhaps targeting peak demand growth to customer account growth does make more sense than using employment or other economic indicators.  After all, an unemployed Texan probably moves out of their own residence and moves in with someone else, moves out of state, or, out on to the street.  Consequently, their utility provider account gets closed. Of course, such repercussions of scenarios are really not ERCOT's problem.  Again the this reflects a difference between an "economic optimum" versus a "human optimum."

From a broader perspective, the increasing decoupling between GDP and electricity use (Figure 5), to me, just represents the increasing decoupling of GDP numbers from reality.  That is, the increased churning of digital money between parties all counts towards GDP, which increasingly, has little to do with the real physical world or  the life of the average human. 

Revisiting Texas's Electrical Power Predicament—Part 2

I ended Part 1 with questions about the future of older coal fired electricity power plants and the possibility of replacing plants and expanding electricity demand as Texas's economy and population continue growing.

The demise of coal-fired plants

Back in late 2011, the owner's of Monticello coal-fired plant in Titus County, Luminant, had threaten to shut down or "idle" rather than implement costly upgrades  to put the plant in compliance with the Clean Air Act, and, ERCOT suggesting that they couldn't force Luminant to keep a plant open in violation of federal pollution rules (see e,g,m Texas power grid operator says blackouts possible). 

What happened to these and similar coal fired plants? 

It appears that the Monticello plant was mothballed for the winter of 2012.  The plant capable of producing 1,880 MW, enough to power 0.94 million homes in normal conditions, apparently was not needed in winter months and therefore was not given a “Reliability Must Run” designation by ERCOT.  After re-opening for the summer of 2013, the plant again was mothballed for the winter, and Luminant requested to also mothball its Martin Lake coal-fired plant for the winter (A Changing Market and Dim Future for Coal in Texas).  Martin-Lake has a capacity of 2,250 MW enough to power 1.12 million homes.  Altogether, Luminant owns five coal-fired plants with a name-plate capacity of 8,017 MW—I wonder if eventually all five of these plants will get shut down during non-summer months. 

Although part of Luminant's reason for mothballing the plants is stiff economic competition from power generated by natural gas plants, I think that it is the cost to comply with the EPA rules under the Clean Air Act is what will lead to the eventual demise of all of these plants. 

Indeed, last summer, the DOJ, at the behest of the EPA, filed a law suit against Luminant alleging continued violations under the Clean Air Act, citing the Martin-Lake plant and the Big Brown Power Plant, located near the Dallas-Fort Worth area (Luminant hit with suit alleging Clean Air Act violations).  Luminant has argued for special protection against the Clean Air Act for violations during startups and shutdowns,and  the Fifth circuit agreed, but then, the denial of an appeal to the Supreme Court doesn't bode well for eliminating the possibility of subsequent law suits attacking this theory. 

Additionally, CPS Energy, in San Antonio, appears to on track with its plan to shut down entirely the JT Deely coal-fired plant at the end of 2018, citing as the reason the high cost for environmental retrofits to comply with new emissions requirements. The Deely plant which has a power generating capacity of 871 MW will be replaced with a natural gas-fired plant. 

A new coal fired plant, the Sandy Creek plant near Waco, with a 900 MW capacity, did come online in 2013.  Its opening, however, was only after a settlement with the Sierra Club who had fired a lawsuit against the plant's owner alleging violations of the Clean Act, among other things.  After years of legal battles, as part of the settlement the owners agreed to pay for stricter air pollution controls and to not build coal-fired plants in Georgia and Arkansas.  The Sandy Creek owners are still embroiled in legal battles with a company, NAES, hired to maintain and operate the plant, alleging that NAES's mismanagement damaged the plant's boiler (Sandy Creek power plant owners suing over 2011 boiler incident). 

It is apparent to me that no additional, Clean Air Act Compliant coal fired-plants will be opened in Texas any time soon (if ever)  due to litigation costs, federal regulations and the present low price of natural gas (After White Stallion Power Plant Canceled, Coal Faces Dark Future in Texas). 

A power vacuum

While some see this as "big win for clean air in Texas," and it probably is, I wonder how this will impact Texas's ability to meet its growing power demand. Are there any non-coal power generating projects underway to actually expand the power grid and not just replace the existing capacity produced by the coal plants being mothballed or shutdown? 

In an interesting Forbes article, Will Summer Blackouts Doom The Texas Boom?, Christopher Helman gave a summary of Texas's energy status going forward.  New electrical capacity from Nuclear Power does not appear to be in the cards given the blockage of to two new Japanese Toshiba reactors.  Two 760 MW capacity gas-fired plants owned by Panda Power are scheduled to come on line in 2014, and there is a third plant scheduled to come on line in 2015.  The 540 MW natural gas-fired Ferguson power plant in Llano in 2014 will replace the old 420-MW plant which closed in the fall of 2013.  Such gas fired plant are important to ERCOT for their ability ramp up quickly when electricity demand spikes—something that wind or solar power, or, even nuclear or coal are NOT particularly good at.   Finally, Helman's article talks about another 3,000 MW of wind power set to be built by 2015.  But even if all of this wind power is built, for reasons already discussed in past articles in this blog, on a hot Texas summer day, one might only expect to get ~10% or less of the name plate capacity from wind.

That seems to be about it—about 1,500 MW in 2014, and another 1,000 to 1,500 MW in 2015, depending on how you feel about the wind power contribution you could count on in the summer.

Keeping in mind that at a peak summer power usage of around 67000- 68000 MW, and, the need to grow the capacity by about 2 percent per year, ERCOT's goal should be to add about 1350 MW capacity per year every year, just to keep it's reserve margin about constant.

But ERCOT's own Capacity-Demand-Reverse Report for 2013 shows their expectation of a shrinking reserve capacity, going forwards (Figure 4). 

As illustrated (red circle), ERCOT expects its summer reserve margin to steadily decline from a margin of about 13.6% in 2014 of total capacity to 4.5% by 2023.  For comparison, the North American Reliability Corporation’s acceptable reserve margin is 15 percent, and, NARC estimate of Texas's reserve margin to be 12.9%. NARC indicated that the peak demand growth rate in Texas (about 2.7%/year) is projected to be the highest in the United States.

It is noteworthy that the growth in year-to-year summer peak demand shown in the above table (blue circle) appears to be based on (or is equivalent to) an assumption of demand growth increasing by 3 percent per year (e.g., 72071 x 100%/69807=103 %) for the next few years, and then, suddenly slowing down to less than 1 percent per year by 2021.   I don't know where these projections come from. 

If I take ERCOT's 2014 "firm load forecast," and increase it by a constant 2 percent per year every year, then the reserve margin drops below 0% by 2023.  If I take that same 2014 firm load forecast and increase it by a constant 3 percent per year every year, then the reserve margin drops below 0% by 2020.  Of course, weather is the wild card, and on any one summer day, particularly hot weather could shift ERCOT into emergency load shedding.  We already know from the experience of 2011, and ERCOT's own emergency plans, that coming within ~3.4 percent of power resource capacity would trigger industrial load shedding with rolling blacks outs to follow soon afterwards.  Texas has just been lucky so far.

ERCOT has done two other things in an effort to mitigate Texas's inadequate and declining reserve power margin.

Understanding that Texas needs the summer capacity from the aging coal-fired plants like Monticello, Martin-Lake and Big Brown, ERCOT has raised its price cap on wholesale electricity, presumable to motivate owners, like Luminant, to de-mothball these plants every summer and supply an important part of the based load summer power capacity.  A coalition of these power providers are pushing for some kind of guaranteed compensation in the form of permanent cap increases to keep these plants available for summer use in the years ahead (Rolling blackouts are Texas' future without reform, generators say)

I don't see this as a workable solution, given that in 2014 the EPA wants to implement more stringent rules for CO2 emissions from existing plants, and, none of the existing plants in Texas are in compliance with such limits.  The owners of these plants, like Luminant, find the costs of retrofitting these plants with carbon capture technology "unworkable." (Texas electric grid getting greener even before EPA crackdown). 

If, for example, Luminant decided that it wasn't financially worthwhile anymore to "de-mothball" the Monticello and Martin-Lake  plants for the summer and just leave them closed for the summer of 2014 and beyond, then that would drop ERCOTs power generating capacity by about 4000 MW. The 2014 reserve margin would then drop to 7.8% percent and to only 4.8% by 2016.  I'm not sure who the public would blame for the likely ensuing rolling blackouts—the EPA, Luminant or ERCOT?  Would the Clean Air Act rules be waived after a few summers with extended periods of rolling blackouts and people dying from heat exhaustion?  Perhaps we will see.

The other thing that ERCOT is doing is promoting voluntary conservation.  In 2013 ERCOT introduced a voluntary pilot program, the 30-Minute Emergency Response Service ("30-Minute ERS), for homeowners groups and commercial users to be compensated for cutting their electricity use during times of peak demand when power supplies are tight and prices spike, if, they can reduce power use by at least 0.1 MW within 30 minutes (ERCOT plan rewards electricity cuts during peak demand).  Presumably this option would be implemented at Energy Emergency Level 1, when the grids' reserve margin drops below 2300 MW.   This pilot program is still being tested, but from a November 2013 report with about 1600 potential participants it looks like the 30-Minute ERS could produce reductions of 100 to 200 MW.    

With over 6 million residential smart meters installed across Texas the potential impact of some form of residential power load shedding program is much larger than this.  Residential load shedding would work best if those volunteering for the program simple have their power load shed automatically as needed by the electric utility via a smart meter. For instance, PUC of Ohio is advertising how smart meters will give customers the opportunity to "assist" PUC through voluntary “load shedding” where PUC will send signals to thermostats and other appliances to adjust the devices’ activity until another signal is delivered to restore normal activity. I would think that a special device would have to be installed so that the power company could selectively remotely control these appliances.   But perhaps a smart meter could be used to more grossly limit the total amount of power flowing into individual households.  A smart grid controlling smart meters has been proposed as a solution to mitigate Pakistan's terrible grid problems by Dell.  Pakistan is currently facing a power generation shortfall of 6000 MW which results in 8-12 hours blackouts throughout the country.

Of course, the "carrot" to volunteer for such programs will be a price reduction, or rebate, when and if your power load gets shed (ERCOT will pay homeowners to conserve electricity this summer).   Low income customer will be attracted to this, and, a partial shutdown of certain appliances is certainly preferable to full-scale rotating blackouts.  Those who can afford to pay a higher price for electricity need not worry about such inconveniences—for now.   

Winter power woes

One final note that involves those those coal-fired power plants that are mothballed over the winter and the reliability of the grid.  I expect that mothballing will be a growing trend if natural-gas prices stay low and rules under the Clean Air Act become increasingly stringent and enforced. 

But mothballing a significant portion of the States' steady base load capacity can start to affect power reliabilty during the winter months.  Last November 2013, a cold winter snap caused Texas to have its highest electricity use on record for the month of November of 46,931 MW on November 26. The previous month, October, had also set a new demand record of 54,710 MW for that month.  The absolute magnitude of this amount is paltry compared to the summer month's daily peak usages of 66,000-68,000 MW, but it is during the fall and winter months that power plants either get mothballed or shutdown for servicing.  Still, despite these records set in October and November, I saw no reports of the Texas power grid being stressed. 

A few weeks later on December 6, about 250,000 people lost power in the Dallas Ft, Worth Area during that week—but that was due to downed frozen overhead power lines from a massive storm of freezing rain. Once again there were no reports of the power grid being stressed. 

On Monday, January 6, another cold snap through Texas did cause ERCOT to issue a Energy Emergency Alert and implement “demand response" mitigation with entities that contract to reduce their electric use when needed.  What was the demand level that cause this alert?  Only 55,486 MW—just slightly higher than that October record.  

Power consumption of 55,486 MW was enough to get to an Energy Emergency Alert Level 2, meaning that the reserve capacity was less than 1750 MW.  Texas was probably less than 1000 MW away from rolling blackouts, I suspect.   At the heart of the emergency was the unexpected loss of 3700 MW of power production capacity from two plants that had equipment failures due to the cold weather.  That caused ERCOT to import about 1000 MW of power from the Eastern USA and Mexico and for wholesale electricity prices to hit the cap limit set by ERCOT. 

While the loss of 3700 MW from these two unnamed plants might have been a "surprise," what was not a surprise was the about 10,000 MW worth scheduled plant shut down in capacity for maintenance and mothballing. 

What about the winter wind?  Well that Monday, the wind capacity at ERCOT's disposal was 17 percent of the 10,400 MW nameplate capacity, providing about 1782 MW or 3.2 percent of the grid's total power generation.  (Role of Texas wind power debated after winter emergency; Did Wind Really Save Texas from Rolling Outages?).  I think this just goes to show, once again, that wind can provide some base load capacity but that base load contribution will variable.  There still has to be enough steady base load (coal and nuclear) and variable (gas) capacity to provide a reliable power margin.  In my opinion, as the coal-fired plants get mothballed in increasing amounts, the size and reliability of this margin will diminish.

This Saturday, January 18, ERCOT issued another Level 1 energy emergency alert after yet another expected/unexplained power plant outage of 1200 MW.  As noted by one reporter, Saturday morning was rather unremarkable weather-wise, with temperatures in the 50s°F.  It is hard to imagine that this plant outage was due to equipment failure from cold weather.  Once again, a Level 1 alert is issued when the margin drops below 2300 MW, so the loss of 1200 MW from one plant was enough to drop the grid below this margin.  If this plant had gone out the week before, then there highly likely would have been rotating blackouts in Texas. 

These alerts underscore just how close Texans are living near the margin for rolling blackouts—trying to walk a tight rope between high prices, federal air pollution regulations and a reliable electricity grid.

===========================

This has been my first "free" weekend since October, where I have not either been sick, working, or, both!  I will be back again, to what has become this occasional blog, as time and health permits.  

4-6-2014: clean up some types and add to legend of figure 4.  

Revisiting Texas's Electrical Power Predicament—Part 1

I have written about Texas's electric power situation a few times over the past few years, and now, it's time for an update. 

I wrote about Rolling Blackouts in the South Western USA due to the shut down of multiple electrical power generating plants in Texas during a cold snap in February 2011, with cascading effects on the ability of neighboring state New Mexico's ability to receive pipeline shipments of natural gas and have rolling blackout of there own. 

As I discussed in August 2011 Revisiting Rolling Blackouts in Texas, rolling blackouts nearly reoccurred, as the State faced what turned out to be the hottest summer on record, for Texas and some neighboring states. The body responsible for managing electric power flow for ~85% Texas, Electric Reliability Council of Texas (ERCOT), estimated that the State came within 50 megawatts (MW) of interrupting flows to industrial customers, that is, industrial load shedding. 

In January 2012 I took a more in depth look at Texas's Electrical Power Predicament with a three part series (see Part 1, Part2, Part3).  Back then, my assessment was that there were three factors all conspiring to squeeze Texas's ability to sufficiently maintain or grow it's electric power supply to avoid rolling blackouts:

            1) increasing demand due to growth in population and increasing economic activity;

            2)  the implementation of several rules by the EPA that would cause some of Texas's older coal-fired power plants to shut-down; and

            3) the unlikelihood of alternative electrical energy sources being built in time or have sufficient capacity to meet the expected summer power demand.

Maybe some think that should have added a fourth factor: ever-increasing hotter summers, but, I did not see this as necessary condition to cause an increasing mismatch in electricity supply and demand sufficient to cause rolling blackouts.   All that would be needed are summers as hot as the summer of 2011, a continuation of the population and economic growth trends, the announced closure of certain coal-fired power plants and a lack in adequate growth or capacity in new power sources.  For instance, in some of the scenarios I ran in my earlier series (Scenarios 1 and 2, Part2), assuming exactly the same energy demand as in 2011, predicted the possibility of anywhere from 12 to 17 of industrial load shedding and from 1 to 11 days of general rolling blackouts for the month of August, that could be applicable to 2012 and 2013. 

Happily, these predictions were wrong.  Most of the rest of this article explores the three above-mentioned factors to assess what did not happen to cause the prediction to fail.

Texas's population, economy and forward predictions

One possibility is that Texas's population growth or economic growth have stopped or at least slowed down since 2011 and therefore the expected demand for electric power was not forthcoming.

The data shown in Figure 1 suggest that this has not been the case.

Figure 1 shows Texas’s population and annual GDP (left and right axis respectively) from 1987-2012 and some projections through 2015.  The blue line and symbols corresponds to the Texas GDP based on US census bureau estimates with projections for 2012 and on from USA Government Spending.   The red line and symbols shows Texas's population from the Texas State Library based on US census bureau estimates.  The green line and symbols shows population estimates and projections from the Texas Department of State Health Services).  The vertical line divides the 2012 and earlier data estimates from the projections for 2013 to 2015. 

From 2011 to 2012, Texas's population according to the US census bureau data increased by 1.5 percent/year.   The Texas DSHS estimate is higher at 2 percent/year.   A 2 percent/year population growth rate is closer to Texas's average yearly rate of 1.97±0.63 percent/year (last 20 year average and SD) using the US census bureau data.  Texas's population growth rate is about double the USA's yearly rate of 1.05±0.58 percent/year (last 20 year average and SD).  The Texas DSHS projections for 2013-2015 suggest continued growth rates of 2 percent/year. 

From 2011 to 2012, Texas's GDP was estimated to increase 5.8 percent percent/year.  That is slightly lower than the 20 year average of 6.3±3.3.  The GDP is projected to increase by 4.4 to 5.8 percent/year for 2013-2015. 

Overall then, there are few signs of any significant downturn or slowdown in Texas's population, economic growth, or, in government expectations of growth going forwards.  In a previous post, I showed that Texas's electric generation capacity has been growing at about 2 percent percent/year to match the population growth rate (Part 1 Figure 3).  I would expect that the growth rate is power generation would have to stay at 2 percent/year just to keep up with the population growth rate. 

Texas's summer weather

Another possibility is that there have been cooler summers in Texas and therefore less electricity demand, since in the summer, air-conditioning can account for a substantial amount of electric power use. 

Data reported by the Southern Regional Climate Center suggests that the summers 2012 and 2013 were not particularly hot, at least compared to the summer of 2011. 

Figure 2 shows the average monthly temperatures for Texas for the last 20 years for the months of June, July August and September (caution the vertical scales for each month are not the same). 

The red circles highlight the average temperatures for 2011, which was high for June, July and August, but not so high for September, as compare to the previous years since 1993 or compared to 2012 and 2013.  In contrast 2012 and 2013 average temperatures are closer to trend line for this period. 

So, electric power consumption in Texas benefited from having typical summer temperatures in 2012 and 2013. 

Texas's summer electrical power consumption. 

Of course, Figure 1 and 2 doesn't tell us about daily high temperatures, which typically occur in the mid-to-late afternoon, and would typical be the cause of electrical power demand spikes as people return to their residence and turn on the AC to cool the house down.

To get a better view of this, you have to look at the actual hour-by-hour power loads. 

I still have the hourly load date for the July August and September 2011, but sadly I did not save the data for June 2011, which is no longer available at ERCOT's website.  I am saving the data for June-Sept 2012 and June-Sept 2013 before these disappear as well.

Figure 3 shows the hourly loads for August 2011 (red) August 2012 (green) and August 2013 (blue).  The solid pink line shows ERCOTs estimated capacity to produce electricity (73000 MW), and, the orange line shows the point where industrial load shedding would begin (68344 MW), circa August 2011.

In August 2011, there were several days in early and mid-August that got close (e.g., within 1500 MW or 66844 MW) of industry load shedding in the late afternoon): Aug 1, Aug 2, Aug 3, Aug 9, Aug 18, Aug 19.  The all-time peak for 2011 was 68293 MW at 4 pm Aug 3.  That was about 50 MW away from load shedding.

In contrast, for Aug 2012, only one day reach similar levels: Aug 1 at 66489 MW.  In fact, this was the only day in the summer of 2012 that exceeded 66,000 MW.

For Aug 2013, there were a few more days where power consumption exceeded 66,000 MW: Aug 5, Aug 6 and Aug 7, with Aug 7 being the highest at 67180 MW—that's 1164 MW less than the all time peak day of Aug 3, 2011.

Summary

Even though Texas's population and economy has continued growing at the same pace as in 2011, its power consumption was not as high in 2012 and 2013 as in 2011.  Probably average summer weather, at least cooler than 2011, had a lot to do with this.  For the last two years, Texas has been lucky by having just average summer temperatures. 

One thing that is apparent to me is that Texas is in a race to grow its power generation at least at the same rate as its rate of population increase, with the severity of summer weather thrown in as a wild card.  

So what about those older coal fired power plants that in 2011 were expected to be shut down under the EPA enforced clean air act and various anti-pollution rules?

In part 2, I will discuss Texas's coal-fired plants and other potentially sources of electricity that may or may not be coming in the near future.
==================
January 19, 2014: clean up the legend to Figure 1 and correct some spelling and grammer issues.

Thoughts on living through a period of collapse

This post is based on a collapse scenario that I briefly outline at the outset.   If you have read any posts in this blog over the past few years, then the basis of the scenario will be familiar to you. I will also quote throughout, the words of some thinkers that have informed my viewpoint on what to expect living through this scenario.

The world is entering a period when continued increases in the net amounts of energy available for human use will plateau and then decline.  This is mainly due to our inability to continue to produce fossil fuels (that is, extract and refine, oil, gas and coal), at ever-increasing rates and at an ever-increasing net energy profit.  In particular, a decline in the net energy in the form of petroleum consumption (that is, the consumption of oil or its products), will occur first among the fossil fuels.  A significant decline in economic output will occur concurrently and proportionally to the declining rate of petroleum consumption.  The rate of petroleum consumption decline, however, will vary from region to region, because petroleum made available from domestic production, plus imports, varies from region to region.  Consequently, the decline in the rate of petroleum consumption, and, the economy in general, will be non-uniform. 

What should someone living through the 21^st century expect based on this scenario? 

Expect the economy to trend downwards erratically

There really is a level of denial about the problem we've got.  Conventional economics doesn't factor in this term energy return-on-energy investment.... Unconventional oil mean you have to put in much more energy in to get energy out....This is not an economics issue.  This is an issue of the biophysical characteristics of the reservoirs....The political and business world look at this problem in 20th century economic terms: that somehow, if you put the price up, everything will be solved.  We will find substitution from all sorts of different sources to replace the cheap oil we've been accustom to using. And that is not happening.  We have recession in the US, Europe.  We are desperately trying to get a way out by basically printing money. And it is not working.  ... If you look at what has happen since 2008, the oil industry has poured vast amounts of money into increasing levels of exploration and getting into more expensive sources, and we haven’t been able to lift production.  And so the price of oil has stayed at about $100 per barrel.  And at that price it is very hard to kick-start the economy.  Every time we have got to $100 per barrel previously, the economies of the world have gone into recession.

—Ian Dunlop  ABC RN Big Ideas ASPO-Australia  Australian Oil Vulnerability Risk Management Conference Brisbane  June 4th 2013

There really is no viable replacement for conventional cheap oil, in my opinion. 

Every new potential alternative source, deep off shore oil, tar sands, shale/tight oil, arctic oil etc..., will be heralded by investment advisors, economists, businessmen, politicians and their media outlets as THE thing that will allow the economy to grow to great new highs.  But, the price of oil needed to support the production of these alternative sources of oil will also strangle the economy, and so, the consumption of oil will go down.  As this so-called petro-business cycle, or more aptly, petro-business spiral, continues, the baseline of conventional cheap oil continues to be consumed and depleted.  For each new upwards cycle, the economic recovery will be a little bit weaker than last time because the cost to fuel that cycle will be more and more expensive.

Expect the standard-of-living to trend erratically downwards, and, don’t expect anyone in power to acknowledge that this is happening. 

It's clear that fossil fuels cannot power us forever because our net energy return on fossil fuels is declining, and at the same time, renewables by themselves don’t have the capacity to give us the energy per person that we are accustom today. So, what does this tell us about the future?  It tells us that either we are going to have a future in which there is less energy per person than we have today and that will probably mean a lower standard of living, or, it tells us that we have to use energy much more efficiently and parsimoniously than we do now.

—Joseph Tainter, October 2012 interview on What Now

A declining standard-of-living means a declining gross-domestic product per capita.  This will get manifest as a decline in purchasing power for most individuals, declining employment opportunities, a declining ability to save for retirement, and a break-down of social welfare system. 

Kathy McMahon has referred to this as sucky collapse, and, she's right.  Working  longer hours and/or harder for less pay; taking care of indigent children/parents/relatives, who didn’t know how to live within their means, and now are broke; continually being nickel-and-dimed to death by higher prices for goods and services, increased taxes and government fees, in a word, sucks.

Maybe the elites of society can expect to get an ever-more affluent standard of living, but, for most people, the “American dream,” really is a fantasy. 

Dreams can be hard to let go of.  Most people have not or will not accept that their standard-of-living has declined and is still declining, even as is happens.  And, no one in power wants such awareness to occur, because this would just tighten the steepness of the spiral of economic decline as people correctly react by pulling back on their spending and saving more.  Governments of the world are united in a war against savers by keeping interest rates low.

A downward spiraling economy can be obscured from public view in many different ways. Examples include, printing money, lying or changing the definition of various economic and employment statistics, decreasing the size or quality of goods and services while increasing the price of those goods and service, and, by providing an infinite number of entertaining, mindless, distractions. 

A declining economy and declining standard-of-living are even easier to hide when the decline is not smooth.  Don’t expect a steady decline in the economy or standard-of-living any more than you should expect that petroleum production and consumption rates will steadily decline.  I don’t even except a stair-step shaped decline—more of a saw-tooth pattern. Upward spikes in the petro-business cycle will be reported as periods of “hope,” “growth,” or “green sprouts,” even if that growth is just fake nominal growth due to money printing.  Downward spikes will be reported as “temporary set-backs,” with new highs in growth just around the corner. 

A declining economy and standard-of-living are also easier to hide when different regions undergo economic decline at different points in time and at different rates.  Politicians in charge of a region in steep decline will blame another region for its troubles and then foment anger and hatred of its citizens against the citizens of the other regions with softer decline, thereby deflect anger away from themselves.  

Get used to living simultaneously in two different worlds

The problem with the philosophy of MORE is that MORE, as already noted, doesn’t have any intrinsic meaning. After all, once you have it, you then want—MORE! That’s the American Dream. But the awareness of this dynamic—assuming we ever get to that point—puts us in a particular bind, at least as far as serious social change is concerned. We are finally talking about a kind of conversion experience; and beyond the individual level, which is itself no small achievement, that can only happen when history presents us with a no-win situation. The bald fact is that we cannot maintain the American Dream...because we are running out of resources, oil in particular. The American Dream cannot survive without energy, and lots of it.

—Morris Berman In Praise of Shadows

In psychology, cognitive dissonance is the discomfort experienced when simultaneously holding two or more conflicting cognitions: ideas, beliefs, values or emotional reactions. In a state of dissonance, people may sometimes feel "disequilibrium": frustration, hunger, dread, guilt, anger, embarrassment, anxiety, etc.

—wikipedia entry, Cognitive dissonance

I experience the cognitive dissonance of living in two worlds every day.  I hear media/government reports about how great things are going, and how the “dream” is still alive, but at the same time, see people in the neighborhood or friends and family members getting into serious trouble.  For instance, the US is supposed to be having an economic recovery right now, and, I do see some improvements. 

At the same time, I know of people who have lost their jobs but continue living the same lifestyle, in denial, until they run out of money, or their working spouse gets sick or loses their job, and even then, they continue to live in their house in the same way as before.  Maybe eventually they just disappear, moved out or evicted, I guess.  I know of people that go on lavish vacations and eat out nearly every night, but when a basic appliance or their car breaks down, they have to take out a loan to get it fixed or replaced. 

The Future Has Arrived — It’s Just Not Evenly Distributed Yet

—attributed to William Gibson

Gibson’s 1980s fiction novels were based on a view of the future that extrapolated the trends at the time and this resulted in the prediction of highly technologically complex society forming in some countries, Japan, while other countries, the USA, languished in old technologies.  The differences were not just regional differences in advanced technologies: there were also vast differences in populations within in each region.   In today’s parlance, a small elite class, (“1 percenters”) had access to the latest technology and a larger non-elite class (“99 percenters”) had comparatively little access to technological advances. 

But there has always been an elite class and they have always had first access to the latest technology—in fact this tends to drive and fund technological innovation.  I think that the future that has already arrived, and ongoing, is a shift within the 99 percenters, from middle class to poor class.

It happened 4 years ago, almost a year after the December 2001 crisis. It was a social studies class and this teacher... was explaining the different kinds of social pyramids. ... We even had a text book with those darn, cruel pyramids! The first pyramid explained the basic society. A pyramid with two horizontal lines, dividing those on top (high social class) those in the middle (middle class) and the bottom of the pyramid (the poor, proletarian). The teacher explained that the middle of the pyramid, the middle class, acted as a cushion between the rich and the poor, taking care of the social stress. The second pyramid had a big middle section, this was the pyramid that represents 1st world countries.

...

Then we turned the page and saw the darned fourth pyramid. This one had arrows from the middle class dropping to the low, poor class.

 

“What is this?” Some of us asked. The teacher looked at us. “This is us”

“It’s the collapsed country, a country that turns into 3rd world country like in pyramid five where there is almost no middle class to speak, one huge low, poor class , and a very small, very rich, top class.”

“What are those arrows that go from the middle to the bottom of the pyramid?” Someone asked. You could hear a pin drop. “That is middle class turning into poor”.

—ferfal, Studying the SHTF at the University: Dark omens.

I don’t know exactly what pyramids ferfal was looking at in his class in 2002, but they were probably the so-called, “social class pyramids,” like this.  For a society with a large middle class the pyramid actually looks more like a diamond, with a fat center such as recently attained by Brazil. 

The uneven future arriving is the trend for large portions of the populations in the developed regions North America, Europe, Japan to shift from middle to poor class, with a shift in the opposite direction for the developing countries Brazil or China.  Again, I don’t expect the shift to be smooth and I don’t expect the developing countries will be able to hold onto their gains in the long term. 

I also except the same shift to play out unevenly, at smaller scales, within countries, within provinces/states, within cities, within neighborhoods and within families.

Don’t get too upset, its just human nature

It is important to understand that we did not evolve as a species to be broad scale thinkers, that is, to think broadly terms of time or space.  If you think about the conditions in which our hunter-gatherer ancestors evolved, these were conditions in which they only needed to know their own territory, perhaps the territory of adjacent hunting gathering bands.  And, they had no capacity to understand long term history.  They had only oral accounts, perhaps accurate for two or three generations, and so we never evolved the ability, or the inclination, to think broadly in terms of time or space.  It doesn't come naturally to us.

...

The high complexity that we have today is a fairly recent phenomenon in human history.  Our ancestors lived in much simpler societies. And we tend to equate the term complexity with the term civilization and think of complexity as progress.

...

Complexity is not free. ... There is no free lunch in the world of complex systems. Complexity always has a cost.  We express the cost in terms of currencies like: work, time, labor, many-that's a big one, standing in line at airports, annoyance....whereas in fact the ultimate currency is energy.  All of these come from energy.  Money comes from energy, work comes from energy, even time spent standing in line at an airport takes up your metabolic energy....  So, complexity comes from energy and complexity requires energy. But if complexity requires energy, then why does complexity grow?

...

Complexity grows because it is useful to solve problems. We usually solve problems by developing more complex technologies.

...

As complexity grows, society has to produce more and more energy to "fund" the complexity, to pay for the complexity. Conversely, during the rare periods when humans have had surplus energy—and we are in one of those periods now—that also allows complexity to grow. This relationship is what I call the energy-complexity spiral.  Surplus energy allows complexity to grow, but most of the time complexity grows to solve problems requiring more energy. ... Complexity and energy are the twin keys to the problems we have today and the problems in the future, and, how our societies can’t be as they are today.

—Joseph Tainter, October 2012 interview on What Now

Humans are short term thinkers, and, society certainly doesn’t reward long term thinking or decision-making with a view of historical contexts.  As the size of the group of humans being considered gets larger and larger, the group in the longer term, doesn’t behave too much differently that a group of bacteria when exposed to a new finite supply of energy, say some sugar cubes.  Those cubes are consumed as quickly as possible, the population grows, and when the cubes are gone, the bacterial population drops back down to the level that the environment could support before the cubes showed up.   

Of course, humans are smarter than bacteria, in that we can find hidden cubes of energy, for instance, in the form of cubic miles of oil.  Society as a whole is busily chewing through those cubes of oil, and becoming more complex with each passing year, with little regard to the longer term consequences when the number of cubes available starts to dwindle.  But that’s just human nature. 

If the energy problem can’t be solved, then it will be reframed as an opportunity

Our conversion to a different mental outlook will thus come in the form of a crunch, in which the subdued lights and the quiet shadows...will get praised because we can no longer afford to have the bright lights burning 24/7. The Russian-American sociologist, Pitirim Sorokin, called this the shift from a “sensate” culture to an “ideational” one, and it is this shift that we are now caught up in. If history is any guide, it won’t be a whole lot of fun, because when you’ve been doing something for a long time it becomes very hard to shift gears. It’s a little like detoxing from heroin, I suspect. But there could be a few benefits as well....

—Morris Berman In Praise of Shadows

If Tainter is right, and our complexifying society requires ever-increasing amounts of energy to support it, but, the available sources of energy are in decline, then society is in for a very rude awaking.  And, as Berman says, it won’t be a whole lot of fun.  

Still, collapse has to happen, and so, it will eventually.

Decreasing available energy means that societies will have to de-complexify and become simpler.  It means that new problems will not get solved, or, the solutions will have much higher human costs than they did in the past.

Perhaps economic de-growth will some day be acknowledged as inevitable and celebrated as a great opportunity. 

Who hasn’t at some point, during a crazy hectic day, thought that living at slower pace with more free time on one’s hands for more local community involvement and self-discovery, wouldn’t be a good thing, an opportunity, in fact?  

This sounds fine, but, I don’t think that my grand-parents and great-grand-parents, or their contemporaries, thought too much about the benefits of simple life, or, of self-discovery.  Rather, unless one was in the idle gentry class, I think that people in the not too distant past were just worried about putting food on the table or making their next payment to their landlord or the tax collector. 

I think that idolizing a return to the “simple life” is manifesting a coping feature of human behavior—psychological reframing. 

Reframing is a very useful way of dealing with the trauma of an external problem that just can’t be solved.  A declining standard-of-living due to declining rate of energy production and available energy to consume is exactly such an external intractable problem.  I see the growing media and political attention to the “happiness index” as a form of reframing.

Don’t give up hope: you still may have a purpose

Live as if you were living already for the second time and as if you had acted the first time as wrongly as you are about to act now.

—Victor Frankel, Man’s Search for Meaning

After all of this perhaps you think that you should just head for the hills and bide your time in a bunker until all hell breaks loose and collapse sets in, or, just go on a party binge because there is no tomorrow.

I think taking either of these actions would be a mistake. 

I suppose you can hide in a bunker for a while—until you run out of money or get sick.  Likewise I suppose that you could party—again, until you run out of money or get sick.  But, by then you will be in a much poorer position than now and make yourself a burden on someone else.  Don’t do that.

I expect this decline, for most regions except maybe Africa, to unfold over decades of time, and, people close to you, your friends, neighbors and family, are going to need your help. 

At present those people are probably blind to what is unfolding and why, and, they also are probably not ready to hear about it from you.  It’s just human nature—for most—so just get over it.  There’s not too much that you can do right now to help them see what you can see.  Accept that, and your relationship with those people will become a lot easier.  

So, what can you do?

1) First, you can adopt the purpose or goal of at least avoid making yourself a burden on others by not wasting your time and resources and by saving more. 

Accept it that most likely everyone of working age that you know, including yourself, is probably going to have to face extended periods of unemployment.  In the USA, the average duration of unemployment after losing a job is about 9 months; in Europe, that number jumps to 15.7 months.  I expect these statistics to worsen going forwards, but not in a straight line.   For most of those in their 50s and 60s, once they lose their jobs, then that will be it, unless you have a hobby that you can turn into work, or, have your own business. 

So, don’t give up your day-job just because you feel depressed about the future. 

And, if you unemployed now and eventually find work, keep that job as long as you can and build up a reserve of money to cover your living expenses for at least an extend period of unemployment in the future.  

Accept it that large portions of the population of older people have saved almost nothing for retirement and living on social security or old age pension benefits alone is a pretty Spartan lifestyle.  One interesting SSA statistic is that 23% of married couples and about 46% of unmarried seniors rely on Social Security for 90% or more of their income.  There are also reports that Social Security will “run out of funding” by the early 2030s.   But it has already been since 2010 that payroll taxes are not enough to cover the benefits paid out and so already the government has to borrow or print more money to pay some of these benefits.   The excess payroll taxes not spend on benefits from previous years got spend on other things. 

 

Does anyone still doubt, going forwards, that the promised benefits will be cut back, or, will purchase less then what they do now? 

So, once again, don’t give up your day-job just because you feel depressed about the future, or, because you are sick of your job, or, because you just feel tired.  Hang on for as long as you can, and do the best you can to get out of debt and build up some saving.  Your future self and your relatives will be grateful. 

2) Accept that most people in your life are not going to follow step (1), and, therefore they will need your help–that will be your second purpose.

As Tainter points out, most humans are very poor long-term planners and the idea of voluntarily setting aside money for a period of unemployment or for retirement doesn’t work very well for the vast majority.  Maybe after repeated cycles of downturns and partial recoveries, but never as good as last time, for most people it will finely sink in that we are living in different times, but, I’m not holding my breath.

You probably know people in your life, whose lives already look a financial train wreck waiting to happen, and you know that they are not going to listen to you until it is too late.   When their financial train wreck does occur, you will have to help them. 

The burden of doing this is high.  In my opinion it is, or will be, much harder to decide how to do (2) than just doing (1) because you likely won’t be able to help everyone that needs, or wants, help.  How many people can you afford to assist without putting yourself at risk of become a burden your self?  This is a tough question to answer. 

Here’s another tough question: should there be strings attached to giving help?   In my opinion, help, or continued help, should at least be conditional on a putting a rational budget and saving plan in place.  What I think should be avoid is a display of anger and resentment because of the unfairness of it all—that just isn’t going change anything.  Just be happy that it is not you in need of help and you are capable of helping.