(Bloomberg) -- Texas began rolling power blackouts for millions of households for the first time in a decade as an unprecedented Arctic freeze wrought chaos in U.S. energy markets.
The operator of the state’s power grid ordered network operators to reduce strain on the system as people crank up heaters to try and keep warm. Power supplies to residential neighborhoods and small businesses are expected to be cut for up to 45 minutes at a time throughout Monday. In Houston, the city’s main utility said that most customers there would be impacted, with outages possibly lasting more than an hour.
“Energy conservation is critical,” the grid operator, the Electric Reliability Council of Texas, said Monday in a message posted to its Twitter account. “We urge Texans to put safety first during this time. Traffic lights and other infrastructure may be temporarily without power.”
These are the first mandated blackouts during winter since 2011 when a similar bout of freezing weather knocked out swathes of generating units. Spikes in electricity demand usually happen in summer in Texas when air conditioning use rises.The extreme cold has caught the energy industry off guard and the system is failing to cope.
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 shockwaves through energy markets. Winter storm warnings, advisories and watches stretch from New Mexico to Maine, with temperatures in Fargo, North Dakota, dropping to about minus 18 Fahrenheit early Monday.
Grid data show electricity load plunging by about 12 gigawatts in a matter of minutes which is equivalent to 4.2 million of people losing electricity supply. The rolling blackouts were deemed necessary even as peak evening demand was easing.
Frigid temperatures and a parade of storms in the U.S. follow other instances of extreme winter weather this year that have snarled ports and upended energy markets in Asia and Europe. Texas, which isn’t accustomed to winter’s full fury, is getting a big taste. President Joe Biden declared a state of emergency, mobilizing federal assistance to aid local response efforts.
Ercot is expecting power demand to hit an all-time high on Monday and Tuesday, breaking a record set during a summer heat wave in 2019. “We would expect to be in emergency operations tomorrow through at least Tuesday morning,” said Dan Woodfin, a senior director at Ercot.
The power crunch is being compounded by a lack of wind generation to help ease the load with output almost halving to 5.1 gigawatts from earlier. Wind turbines may freeze in bitterly cold weather, reducing efficiency and the blades can ultimately stopping spinning.
Earlier, spot electricity prices in Texas’ West hub surpassed the grid’s cap of $9,000 per megawatt hour, a 3,466% increase from Friday, according to data compiled by Bloomberg. LNG exports from the U.S. also plummeted after the freeze shut ports and wells, and oil production also took a hit, with traders estimating a few hundred thousand barrels a day of output in Texas had likely been impacted. West Texas Intermediate futures rose by as much as 2.5%.
The Arctic blast is threatening to crimp crude supplies and unleash a rush for everything from propane to heating oil, fuels that are used in mobile heating devices.
Odessa, one of the largest oil producing areas in the Permian Basin, still has power. While San Antonio has lost power with rolling blackouts lasting 10-15 minutes, according to sources on the ground.
In Houston, there are long lines to refill household propane canisters and firewood is selling out. The city may pick up as much as 2 inches (5 centimeters) of snow overnight, along with ice and sleet, the National Weather Service said. It will get hit by another storm bringing ice and freezing rain Wednesday.
The Dallas-Fort Worth area could get from 4 to 6 inches (10 to 15 centimeters) of snow overnight. More snow could follow Wednesday. “It is going to be a cold week,” said David Roth, a senior branch forecaster at the U.S. Weather Prediction Center. “The southern plains are in a cold pattern and it is going to take a while for them to break out of it.”
Frozen Turbines
A mix of freezing temperatures and precipitation threatens to paralyze 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. At the moment, 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 who focuses on energy at The University of Texas at Austin.
About half of Texas’s wind turbines were inoperable Sunday morning because of ice and cold. Yet those that are running are cranking out more power than forecast for this time of year, Ercot’s Woodfin said during a briefing.
Power plants that are only partially operating could be pinched by high prices, too. Projects that commit to provide 50 megawatts of energy in a given hour but only produce 20 megawatts may need to buy the difference at the market price, said Lee Taylor, chief executive officer at clean-energy analytics firm RESurety.
The storms will largely miss major cities along the East Coast, Bob Oravec, senior branch forecaster with the U.S. Weather Prediction Center said. While there could be some snow showers and ice in New York and Boston, the bulk of the accumulation will be in upstate New York and interior New England Monday to Tuesday.
(Updates with impact on Texas energy markets throughout.)
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