Texas faces blackouts amid rocketing power prices as Arctic freeze covers central US
Operator warns of rolling cuts as electrical system buckles under surging heat demand
New York/Boston/Los Angeles — The arctic freeze gripping the central US is raising the spectre of power outages in Texas and ratcheting up pressure on energy prices already trading at unprecedented levels.
In Texas, where temperatures in Dallas are forecast to be -16°C, the operator of the state’s power grid warned it may need to resort to rolling blackouts as surging demand for heat strains the electrical system. While outages may occur on Sunday, the risk is higher on Monday and Tuesday, when officials expect power demand in Texas to reach a record high.
“We could be in emergency operations as early as tonight,” said Dan Woodfin, a senior director for the Electric Reliability Council of Texas, which runs the grid. “We would expect to be in emergency operations tomorrow through at least Tuesday morning.”
About 800 daily records for cold temperatures have been set in the past week as Arctic air pushes all the way to the Gulf of Mexico, sending gyrations through energy markets. Spot prices for electricity in Texas are expected to hit the grid’s cap of $9,000 per megawatt hour.
Natural gas rose to a record $600 per million British thermal units in Oklahoma. And as much as half a million barrels a day of oil output in West Texas may be affected by well shutdowns that began on Thursday because of the extreme cold.
“It is a pretty brutal air mass,” said Bob Oravec, senior branch forecaster at the US Weather Prediction Center. “The cold air is entrenched across the middle part of the country. High temperatures are amazingly cold, about 50 degrees [Fahrenheit, or 10°C] below average.”
Through early Sunday, the coldest spot in the US was 40km east of Ely, Minnesota, where readings fell to -45°C. As of 2pm, 2,653 flights around the US through Monday had been cancelled, the majority in Dallas and Houston, according to FlightAware, an airline tracking service.
Temperatures fell so far below forecasts in parts of the central and western US that physical gas prices soared from California to the Rockies, with one hub in Cheyenne, Wyoming, reaching as high as $350 per million British thermal units (mmBtu), according to traders who asked not to be identified because the information isn’t public.
Heating and power plant fuel traded for as much as $195 per mmBtu in Southern California. If day-ahead electricity prices are any indication and the weather forecasts are even partly accurate, the run-up in energy prices isn’t over.
In Houston, there are long lines to refill household propane canisters. Itinerant, roadside firewood are largely out of supplies.
A mix of freezing temperatures and precipitation threatens to paralyse wind farms in Texas. That would be devastating for power plants with contracts to provide a certain amount of electricity at specific times if they need to instead buy it on the spot market to meet their obligations. That power is exceedingly expensive.
“When wind-turbine blades get covered with ice, they need to be shut down,” said Joshua Rhodes, a research associate at The University of Texas at Austin who focuses on energy.
About half of Texas’s wind turbines were inoperable on Sunday morning because of ice and cold. Yet those that are running are cranking out more power than forecast for this time of year, Woodfin, grid operator Ercot’s senior director, said during a briefing on Sunday.
Power plants that are only partially operating could be pinched by high prices, too. Projects that commit to provide 50MW of energy in a given hour but only produce 20MW may need to buy the difference at the market price, said Lee Taylor, CEO of RESurety, a clean-energy analytics firm.
Wholesale power for delivery on Sunday traded at anywhere from $3,000 to $7,000/MWh in some places, triple the records set in some places on Saturday and a staggering 2,672% increase from Friday at Texas’s West hub. Average spot power prices traded around $1,500/MWh on Sunday afternoon, according to data compiled by Bloomberg.
“Spot prices are expected to hit $9,000 on both Monday and Tuesday,” said Brian Lavertu, a trader for Active Power Investments. “Power is going to be wild through Tuesday.”
Traders said they’ve never seen electricity trade on Texas’s grid for thousands of dollars for such a sustained amount of time. They drew comparisons between this week’s price surges to the records set on the Midwest grid in 1998, and to the California energy crisis that sent power prices skyrocketing and blacked out hundreds of thousands of homes and businesses two decades ago.
Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.
Please read our Comment Policy before commenting.