Severe power cuts in Texas highlight energy security risks related to extreme weather events

Exceptionally cold weather hitting the United States has provoked an electricity shortage in Texas, with extensive power cuts affecting over 4 million customers. The crisis was a combination of factors as cold weather drove up demand and hampered supply from the gas system and from power plants. The outages are far larger and much longer lasting than the rotating cuts during the exceptionally hot weather in California last August.

The cold weather had three main impacts on the Texas power system that led to this situation:

• Much higher electricity demand: Cold weather is driving electricity demand far higher than normal. High temperatures in Dallas were -9° C on February 15, 25° C cooler than the average temperature in February. As 60% of Texans heat themselves with electricity, winter power demand is very sensitive to temperature changes. The unusually cold temperatures led to new winter peak records rivalling the summer peak. Market prices hit the cap of USD 9 000 per MWh.
• Lower natural gas production: Most of Texas’ electricity demand is met with natural gas. When demand rises, nearly all the incremental supply comes from gas-fired power generation. But the cold weather hampered gas production, with frozen gas wells contributing to a 20% cut in South Central’s gas production. As a result, there wasn’t enough to supply the system’s gas generators.
• Generation equipment outages: The unavailability of natural gas resulted in gas generators declaring their resources unavailable (for a total of up to 31 GW). Some wind turbines were also frozen cutting their potential output (about 2.5 GW to 3 GW on average for 15‑16 February) although low wind was a more significant issue. Coal plants are operating 40% below rated capacity, and one of the four nuclear facilities in the state was shut down due to weather-related loss of feed water pumps.

Texas has a power shortage because it has a gas shortage. Given the key role gas‑fired generation plays in many power systems today, resilient power systems depend on resilient natural gas systems. For the future, system planners will need to take account of increasingly extreme weather that is both hampering the supply of power and fuel and driving up demand. This should include modern planning criteria to encompass a broad range of threats to the power system. This will be particularly important as electrification of heating grows as part of clean energy transitions, underscoring the importance of efficiency in limiting demand growth.

Extreme temperatures are putting today’s power systems in transition to fresh tests. Avoiding major outages in the electricity systems is also crucial to ensure solid societal support for clean energy transitions. Market designs and regulations need to improve to make the best use of existing assets and to encourage new investments both in supply and demand for flexibility and capacity adequacy.

The IEA has been focusing greater attention on electricity security as shown in its first comprehensive electricity security report, “Power Systems in Transition”, and stands ready to support its member and partner countries’ efforts for building secure, affordable and sustainable electricity systems.

The Electricity Reliability Council of Texas (ERCOT) called a Stage 3 emergency on 15 February and began rolling power cuts that affected 4 million customers. It shed as much as 27 GW of load, or about 35% of forecasted demand. These conditions continued through 17 February, with a slight easing on 18 February as milder temperatures reduced demand. Demand was projected to reach near all-time records on 15 February, but rotating power cuts and the response of other customers resulted in effective demand that was up to 27 GW below forecast.

ERCOT has stated that 16.5 GW of customer demand was shut off due to energy supply shortages (load shedding) for most of 15 February and remained near this level until midday on 17 February before easing to 6 GW in early 18 February. Using these figures, the amount of load shedding in the system for 15-16 February is conservatively estimated to be around 800 GWh. The difference between forecast and actual load is another rough estimate of shedding and other extreme measures taken by customers. That figure reached 27 GW at 9 pm on 15 February and totaled 500 GWh for the day.

In comparison, the California rolling power cuts lasted about two hours and resulted in about 1.5 GWh of lost load. Using these figures as rough estimates, the level of outage in Texas on 15-16 February was over 500 times higher than in California during last summer’s load shed event.

Neighboring systems are also suffering rolling power cuts, as the Southwest Power Pool (SPP), whose system  includes parts of Texas, Oklahoma, Arkansas, Missouri, Kansas, Nebraska and South Dakota, called for 15 00 MW of load cuts at 10 am, and Midcontinent ISO (MISO), whose system includes parts of Texas, Louisiana, Arkansas, Missouri, Illinois, Indiana, Michigan, Wisconsin, Minnesota, Iowa and North Dakota, was forced to call rotating power outages for a short period on the morning of 15 February. Power outages in northern Mexico reached nearly 5 million customers as well. 

Current demand levels are wildly above even the most extreme forecasts. The day-ahead forecast peak for 15 February stood at 74.5 GW, which is almost 10 GW above the previous all-time winter peak of 65.9 GW on 17 January 2018 and 7 GW above the extreme weather forecast load in the most recent seasonal assessment. The all-time peak in any season was 74.8 GW on 19 August 2019. Market prices hit the USD 9 000 per MWh cap and have remained there.

Temperature sensitivity to demand is high in Texas, especially at very cold temperatures due to the use of electricity for space heating. As this is a region that is not regularly exposed to extreme cold but usually extreme heat, buildings are designed with systems to reflect this, including lower efficiency heating systems and lack of passive solar heating.

Generator performance of all types have suffered in the low temperatures. Generation from coal-fired power plants was 60% of rated capacity on 15 February, a shortfall of 6 GW. One of the four nuclear units in the state went out of service in the morning of 15 February. Gas‑fired generation has a rated winter capacity of 55 GW but output dropped to 31 GW on 15 February due to issues throughout the supply chain – freezing wellheads, pipeline derates and generator equipment failures all contributed. Wind generation was about half of its 6.1 GW seasonal rating. 

Texas has 25 GW of installed wind capacity and expected average output of 6.1 GW in February. Output on 15 February averaged 3 GW – or about half of that expected and fell as low as 0.65 GW in the early evening – 2.6% of maximum output. Wind performance improved on 16 February to an average of 3.8 GW but still fell short of expectations. Wind generation was affected by low wind speeds and freezing components. 

As a consequence of cold temperatures, natural gas demand in the continental United States increased by over 15% between 6 February and 15 February, with gas deliveries reaching a two-day record on 14-15 February. Residential and commercial sectors and the power sector accounted for over 70% of total gas demand.

In Texas the power sector was the most important driver of demand. Natural gas accounts for 53% of the generating capacity in ERCOT. It is mainly gas generation that meets the majority of the increase during periods of high demand, and demand for gas for power in ERCOT more than tripled – between 6 and 15 February – a demand increase close to 4 billion cubic feet (bcfd) (or 110 million cubic meters). Unfortunately, while the cold weather drove up the demand for natural gas in the power sector, it also reduced the production of natural gas so that there was not enough gas to supply the increased needs of power generators. It was the shortfall in gas supply that led over half of the natural gas capacity in Texas (31 GW) to be unavailable, leading to rotating cuts. This insatiable demand drove natural gas prices to unprecedented highs. Prices at key hubs in Texas such as Katy and Waha settled above USD 200/MBtu, whilst intraday prices at the OGT hub in Oklahoma soared to an historical record of USD 999/MBtu on 16 February 2021. Henry Hub prices rose to USD 16.95/MBtu –the highest level since February 2003. 

Dry gas production in continental United States fell by over 15% between 5 February and 15 February, primarily due to wellhead freeze-offs, reported across key producing regions. Freeze-offs typically occur when water produced alongside raw natural gas crystalizes due to low temperatures and blocks off the producing well. The drop in production was particularly dramatic in the South Central region, including Texas, and especially impacting the gas output from the Permian basin, the Haynesville and Fayetteville plays, where freeze protection of wells is uncommon. It is estimated that as a result of wellhead freeze-offs, net pipeline receipts in the South Central region dropped by 20% between 6 February and 16 February. 

Upstream underperformance had a direct impact on regional pipeline systems, as lower supplies resulted in a thinner linepack which reduced short-term balancing capabilities of pipeline operators. It has been reported that several gas pipelines and processing plants in Texas had to shut down and/or limit their operations due to freezing. In addition, certain pipeline companies experienced horsepower issues at their compressor stations, further reducing the physical deliverability and operational flexibility of the gas system. Over thirty gas pipelines have declared force majeure and/or issued operational flow orders, which effectively restricted upward nominations of shippers and, as such, limited incremental gas supplies to customers.

In addition to pipelines, certain storage sites experienced a rapid drawdown that significantly reduced the volumes of working gas and, consequently, pressure levels, leading to curtailed operations at some. For example, the Keystone Gas Storage facility in the Permian issued a force majeure notice in the morning of the 15 February for an 8-hour‑long outage that reduced its withdrawal rate to just 35% of the technical capacity. The force majeure was lifted in the afternoon, however, withdrawal rates remained subdued, just above 50% of the technical withdrawal capacity due to low cavern pressures.   

The decline in natural gas supplies to the ERCOT market area effectively led to the shut-in of an estimated 31 GW gas-fired power generation capacity on 15 February and was the main reason for the capacity shortfall.

Gas deliveries to Mexico have also fallen. Since 12 February, the Federal Electricity Commission of Mexico requested the declaration of operational state of alert in the wake of lower gas supplies. On 15 February, pipeline imports from the United States were 1.2 bcf/d (over 33 mcm/d) lower than expected, affecting 6.9 GW of gas-fired power generation capacity. This resulted in power cuts affecting 4.7 million customers in northern Mexico.

Feedgas flows to US LNG terminals practically halved between 8 and 15 February, falling to their lowest levels since Hurricane Sally in September 2020. Freeport LNG has reportedly shut Train 1 on 15 February due to sever weather conditions. On 16 February, the governor of Texas requested Freeport LNG to curb LNG exports from Train 2 and 3 amid natural gas feed shortages in the state. LNG producer Cheniere Energy has reportedly also curbed operations at the Corpus Christi LNG terminal to reduce demand for feedgas.

ERCOT lacks strong interconnections with its neighbors, with DC connections of only 820 MW with SPP and 430 MW with Mexico. This increases the burden on in-state resources to be able to cope with unforeseen events like the current cold snap. There is no connection with MISO South to the east or to the utilities in the west, which would diversify load and resource balancing. MISO includes significant coal-fired generation capacity, which makes up 50% of its generation mix.

ERCOT also relies on its energy-only market design to ensure resource adequacy, as opposed to formal capacity markets. The high price cap of 9 000 USD/MWh is expected to attract sufficient resources to achieve its reliability standard, but there are no other mechanisms that incentivise resource adequacy. As a result, ERCOT has the lowest reserve margin of any region in North America.

Reliability standards attempt to balance the costs of reserving capacity that is mostly idle against the benefits of enhanced electricity security. The low reserve margin dictated by the market design in ERCOT has kept wholesale energy prices lower than other regions, and it is close to optimal, according to their calculations. In addition, the presence of capacity mechanisms has not removed the risk of costly outages in other systems such as PJM. But additional resource adequacy mechanisms, like capacity markets or strategic reserve payments that keep firm supplies from exiting the market, might be justified for security of supply reasons.

The experience in Texas and the US Midwest follows on challenges recently faced by the power systems in Japan and last summer’s rotating outages in California. It is clear that extreme temperatures are putting today’s power systems in transition to fresh tests. Policy makers should attempt to build resilient systems that increasingly take into account extreme weather events by examining their systems from end to end. This should include modern planning criteria to encompass a broad range of threats to the power system.

While the situation is not resolved in Texas, there are already three clear lessons for electricity security related to the reliability of the natural gas system, the challenge of more extreme weather, and the increasing role of electricity for space heating.

• In Texas and in many power systems today, a resilient electricity system requires a resilient natural gas system. This is particularly so for Texas, which has an energy system with a high penetration of electricity in space heating and a large share of gas-fired generation despite an increasing share of variable renewables in the power generation mix. As more power systems become reliant exclusively on natural gas to provide incremental supply in extreme temperatures, the reliability of the gas system becomes critical for electricity security. The resilience of those energy systems will depend to a great extent on the robustness of the physical deliverability of the gas network – which should become a key parameter for electricity security assessments in the coming years.
• System planners need to ensure that power systems are resilient to increasing weather extremes. The past is increasingly less predictive of the future. Power systems are facing new weather extremes that are challenging the performance of all types of generating resources and networks. In Texas, while the shortfall in the gas system was critical, coal and nuclear plants also experienced outages, and wind generators significantly underperformed expectations. In other events, damage to grid has hampered electricity security. Increasingly, planners should examine the best data and modeling in order to anticipate the potential for stressed conditions that may occur outside of historical peak periods.
• Energy systems with heavy dependence on electricity for space heating will be challenged by exceptionally cold temperatures. High dependence on electricity in space heating can result in strong market volatility when the energy system faces exceptionally cold temperatures. This will become more important as electric space heating becomes more widespread as part of decarbonisation strategies. Electrification of end uses should go hand in hand with energy efficiency, including weatherisation of buildings, passive solar heating, and other measures. This will help to moderate peak demand as systems become more reliant on electricity.

The rolling cuts in Texas are a reminder that electricity security cannot be taken for granted. It must remain a top priority for policy makers, especially as electricity becomes more important for the entire energy system with increased electrification of many sectors and threats to energy security evolve and multiply and as clean energy transitions accelerate. Avoiding major outages in the electricity systems is also crucial to ensure solid societal support for clean energy transitions. Market designs and regulations need to improve to make best use of existing assets and to encourage new investments both in supply and demand for flexibility and capacity adequacy. The IEA has been focusing more on electricity security as shown in its first comprehensive electricity security report “Power Systems in Transition”, and stands ready to support its member and partner countries’ efforts for building secure, affordable and sustainable electricity systems.  

The authors are grateful for the many valuable comments received from colleagues across the Agency and, especially, for the support from Jean-Baptiste Dubreuil and Peter Fraser.