Thursday, February 18, 2021

How Did a Cold Freeze Result in Texas Becoming the Venezuela of Supplying Energy to Local Customers?


Venezuela, home to the world’s largest oil reserves, is a case study in how central planning can cause difficult to imagine economic failures.

Starved of adequate investment and maintenance under central planning, Venezuelan oil output has declined to its lowest level in decades. This has led to output slumping in 2020 to as low as 339,000 barrels a day at one point. At its peak, Venezuela produced 3,453,000 barrels per day.


source: tradingeconomics.com

Iran and Nigeria have had to supply Venezuela oil.

This outrageous situation is playing out in a mini-version in Texas during the current cold freeze. There are rolling blackouts in a state that is a huge energy producer. It is causing millions to freeze.

As usual, at the epicenter of the problem is a central planning agency. In Texas, it is called the Electric Reliability Council of Texas. One thing you can count on is that government agencies are the exact opposite of what they are named. Social Security, as it runs on fumes, is really social insecurity. Who really knows how it will survive and in what form? The Department of Defense is really the Department of Offense. And the Electric Reliability Council of Texas, the energy regulator in Texas, is certainly the exact opposite of reliable. 

I talked to several energy experts to understand what a free market in energy would look like but not one could seem to get their head around the concept of a free market in energy. Every one of them was "ERCOT did this wrong" or "ERCOT needs to do this."

They just could not think in terms of anything but statist energy solutions. When I point blank asked them, "What would a free market in energy look like if it was only between an energy provider and a customer?" I was greeted with silence and, eventually, a point was made on a different subject.

Here is what we know for sure.

It has been all about blunt instrument statist regulations by ERCOT. The regulatory agency took a blunt instrument risk for all in Texas that appears to make little sense--and will certainly result in some freezing to death.

Alex Epstein, author of The Moral Case for Fossil Fuels, makes the best points on what has gone down:

  • The TX focus on wind has come above all at the expense of coal, which has the resiliency advantage (along with nuclear) of being able to store large quantities of fuel onsite; gas mostly requires "just in time" delivery from pipelines.
  • [Wind created energy is very unreliable].To lessen the price increases from "unreliables" governments try to get away with as few reliable power plants online as they can get away with. TX is no exception. The Public Utilities Commission of TX has called their grid's margin for error ("reserve margin") “very scary.”
  •  Additionally, the expense and distraction of accommodating "unreliables" takes away money and focus from resiliency. In CA this meant not maintaining power lines. In TX it may have meant not focusing enough on making the reliable power plants resilient enough to winter weather.
  • We know how to produce enough low-cost, reliable electricity for every situation. You just build a whole bunch of reliable power plants, including those with on-site fuel storage--such as coal and nuclear. You place a premium on reliability and resilience. That's it.
  • TX is having an electricity crisis during bad winter weather because it did not focus enough on building reliable power plants and infrastructure--because it was obsessed with getting as much unreliable wind/solar electricity as possible. Let's all learn from this mistake.
Remember, the Green New Deal nutjobs will blame everything on "climate change" including the current Texas weather, but cold weather is not a new phenomenon in Texas. It doesn't stay below freezing for extended periods like it does in, say, Chicago but that doesn't mean it doesn't get real cold from time-to-time.


And no one should forget the below-zero Christmas Eve 1989 NFL football game where the Dallas Cowboys capped a 1-15 season with a 20-10 loss to the Green Bay Packers. It was so bitterly cold that the toilets in Texas Stadium froze. 

Bottom line, Texas has dealt with cold in the past. It appears that ERCOT is playing a political game to direct funds to expensive, subsidized and what Epstein calls unreliable energy sources.

It is difficult to think that reliable energy producers would not protect their energy delivering infrastructure if they weren't regulated by the political ERCOT which directs funds to windmills.

The below kind of thing never happened in past cold snaps:

Texas doesn't need a commission to study what went wrong. It needs to stop buying into Green New Deal propaganda and to stop subsidizing the politically connected windmill operators. 

Things need to be returned to energy providers and customers to deal with, without blunt instrument agencies in the middle run by the politically connected who are the next worse thing to Nicol├ís Maduro when it comes to energy overlords.

-RW

14 comments:

  1. Texas, remember, COVID is still a risk, so continue to wear masks and maintain six feet distances from one another.

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  2. Electricity is going to get a lot more expensive.

    Probably the South Texas Nuclear Project

    EN Revision Imported Date: 2/17/2021

    EN Revision Text: AUTOMATIC REACTOR TRIP DUE TO LOW STEAM GENERATOR LEVEL

    "At 0526 [CST] on 02/15/2021, Unit 1 automatically tripped due to low steam generator levels. The low steam generator levels were due to loss of Feedwater pumps 11 and 13 (cause unknown).

    "Auxiliary Feedwater and Feedwater Isolation actuated as designed. All Control and Shutdown Rods fully inserted. No primary or secondary relief valves opened. There were no electrical problems. Normal operating temperature and pressure (NOT/NOP) is 567 degrees F and 2235 psig.

    "There were no significant TS LCOs entered.

    "This event was not significant to the health and safety of the public based on all safety systems performed as designed. Unit 2 was not affected. Decay heat removal is being controlled via Steam Dumps. [Auxiliary Feedwater is supplying water to the Steam Generators.] Offsite power is in the normal electrical lineup.

    "The NRC Resident inspector has been notified."

    Unit 2 was not affected and remains at 100% power.

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  3. Excellent article by RW. This is truly scary: "I talked to several energy experts to understand what a free market in energy would look like but not one could seem to get their head around the concept of a free market in energy. Every one of them was "ERCOT did this wrong" or "ERCOT needs to do this." When the so-called experts are this clueless, there is little hope for correction without catastrophe.

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  4. Many social democrats and anti-capitalists will call the situation in Texas a result of a deregulated market. This is not correct. What needs to be understood is the electricity market in Texas is a bizarre quasi-market. It is a public/private chimera with ERCOT as the non-profit monopoly entity subject to regulation from Texas Public Utility Commission and several dozen different companies generating and distributing electricity. I don't know if this is still the case, but ERCOT set prices for electricity for years. Any market subject to price fixing will be skewed and that's part of what happened. This is not to say that if the power market in Texas was more free market it would have been perfect. Any outlier event like this that affects a 265,000 square mile area would have caused problems whether public or private. The bottom line is that this is the result of poor planning and ERCOT and its leadership should be held accountable. ERCOT had a report of recommendations that said to weatherize and modernize it's grid ten years ago due to a lesser freeze in 2011. I am concerned that with a misunderstanding of what happened people will try to regress to a public utility solution or worse, join the national power grid. Personally, I would like to see the grid even more decentralized and split into a dozen different ones, with people even going so far as to getting into home batteries or generators as a fail-safe measure. But who knows what will happen?

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  5. "OMIGOD this has never happened before!!!"

    https://www.youtube.com/watch?v=fJOxDYt8pM4 Listen to the first 5 minutes or so...

    "Didja know it can get cold in the winter?"

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  6. The infrastructure is also not maintained as well as it used to be. Companies are more worried about hiring employees based on racial preferences for your beloved non-whites than they are about sheer competence. Look at Washington D.C.'s Metropolitan Area Transit Authority, which is known for delays, safety concerns and cost overruns. It's staffed with over eighty percent blacks. Coincidence? Apply this nation wide and you can get an idea why the USA is slipping into third world status.

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  7. In the early 1980's, South Texas and northern Mexico had almost a week of temperatures in the teens where even some shallow saltwater bays froze just enough to cause a fish kill but not walk on. I don't recall losing power or water during that time.

    And when I say South Texas, the citrus farms in the valley area near Brownsville, Texas almost lost their crops. Maybe the Florida growers had issues to at that time.

    In my area, they tore down a perfectly good power plant and I believe one exist but I'm not sure if it is used.

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  8. The root cause is a centrally planned and controlled grid (ERCOT). However, I'll admit it is difficult to wrap my head around a "decentralized grid". I'll agree a private solution would be better in the long run but getting there is messy. Perhaps everyone should provide his/her own power supply; or, if not the personal residence, the neighborhood.

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    Replies
    1. Why couldn't you have private sector grids?

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    2. I'm all for it, Mr. Wenzel! My lack of creativity doesn't mean it can't be done, of course. The sceptic would say you'll see 12 sets of power lines paralleling highways each carrying a competitor's electricity to your house, but I could also see how a single source grid supplier (divorced from the state) could provide more reliable power than the status quo. Let's say Company X owns the distribution system, but the power is produced and transmitted to this distribution system by Company's A, B, C, & X. Company X would sell power to the end user and buy it from the least costly source (or use the power it produced).

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    3. Just make sure there is absolute free market, that way your utility providers can shut off your electricity and water when they find out you have different opinions than you do.

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    4. Because government is never vindictive.

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  9. Paul Hansen - not if you have contracts with them which stipulate penalties for failure to deliver power. That's the free market way.

    (Of course you can get cheaper "disconnect at will" power supply - for example if you have your own back-up generator - and in fact this tier of supply does exist for industrial users.)

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