Hi, it's West Kasova. We're taking a break this week, so here's one of our favorite episodes you might have missed and an update. Record heat means electricity demand in Texas has reached all time highs about a dozen times since June. Surprisingly, though the Texas grid has shown few signs of stress. One big difference solar generation. It's come in roughly double from last summer, and so much sun means it's been coming in stronger than expected when it's needed most.
It's going to be extremely humid, disrespectfully humid tomorrow.
So here's what's happening about.
One nineteen in Hillsborough, one fifteen in Corsic, fifteen in Waksahatchet one sixteen and four one and Taro one.
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So you get the idea dangerous.
I'm West Kosova today on the Big Take. You think it's hot now, well imagine if the AC went out.
The unrelenting temperature straining the power grid as the state set a June record for energy demand, the historic heat buckling roads from the Lone Star State to Louisiana.
The crippling US heat wave that's smothering Texas and spreading across the South means millions of miserable people seeking relief are doing what you'd expect. They're cranking up the air conditioning, and that is pushing America's aging overtext power grid to the max. With concerns about rolling blackouts or just playing shutdowns.
To say it's a lot of work as a massive understatement, but there is an urgency to deal with this because we do have this very real climate threat and we're racing against the clock.
Nourene Malick reports on the power industry for Bloomberg. She's here to tell us about why our grid is so fragile and what can be done to future proof the system for a world where extreme weather shocks are becoming more frequent, and not just in summer, by the way, these problems are just as bad in winter, and maybe worse. Noreen, you have been writing a lot of stories lately about this unbelievable heat wave across the South and especially in Texas.
Obviously it's making a whole lot of people miserable, but it's putting a huge strain on the energy grid and the ability just to keep up with the demands that everybody has.
Yeah, So Texas is an outlier in the US because demand is growing so fast in Texas, it's one of the fastest, if not the fastest outright. What that means is, over the last several years, they've had a population boom with people moving in from California and other states, and then you've had businesses expanding. On top of that, you've had strong economic growth. And then you've also had bitcoins, which are heavy power users, come in in the last.
Couple of years.
So you've set up this base demand for power is growing, and then on top of that, every time you add heat, it like multiplies how much demand because they're all cranking up their air conditioners. And something you may not know about Texas is that they use a lot of AC
compared to the rest of the country. Like one megawatt, which is a unit of how you measure electricity, can provide power for typically two hundred homes in Texas and the rest of the country that's closer to like eight hundred homes.
And that's all because of air conditioning.
Well, it's just Texas homes are bigger. Somebody wants described to me, there's a lot of big foyers and big homes there. They all use a lot of electricity, but it's also swimming pools. And then of course gadgets and evs are coming online, but that's more newer on the EV side.
And the heat in Texas, even for Texas in the summertime, is pretty extreme.
Yeah, So anytime you have any type of weather driven demand and the amount of electricity or energy.
Use escalates very quickly.
And if you're talking about ninety to eight degrees versus one hundred and two degrees, that may seem like four degrees is not that much, but when it comes to air conditioning demand, the increase is way bigger.
So noreene just to give people an idea of what it means when there's so much demand put on the energy grid. What's happened to energy prices in Texas?
Yeah, so electricity prices are extremely volatile. Just in the first fifteen days of June, we've seen prices go from like forty dollars per megawatt hour you know, normal demand, to forty five hundred dollars when it was an extremely hot day for several hours.
From forty one dollars to over four thousand dollars in one day.
Yeah, I mean it's not impossible to see that type of swing within a day, but then also across days. So the way power is priced, it's pri on a five minute basis hourly basis, so there's a lot of way to splice it. So the average for the day was not four thousand, It was probably a few hundred dollars. But then there are certain hours around six seven pm where it was four thousand dollars per megat hour.
And the reason why energy prices for natural gas, which is what the grid mostly operates on, are so high is I guess it's sort of akin to uber surge pricing. When everybody is looking for an uber the prices go up, and if everybody wants your energy, you get to charge more for it because there's no other place to go.
Natural gas is the number one driver, and then you also have wind and solar. But what happens is exactly what you're saying, when you have those high demand periods, the price of electricity is set by the most expensive unit. So let's say on an average day, like if you're thinking about uber, everyone's driving like a hond or a camera.
That's pretty fuel efficient. But let's say during rush hour, in a thunderstorm or a heat wave, I guess in Texas you have to like bring out the Lamborghinis and Ferraris. Those are not fuel efficient, but everyone gets paid the price of the Ferrari in a Lamborghini, even if it's just some of the megawatts used.
So when it surges like that, how much more does it cost? In total?
It can cost billions of dollars over the course of days because you're pricing this every five minutes, every hour.
Yeah, it quickly adds up.
It takes time to filter out to customers depending on how they get builled. Texas households may have locked in a six month power rate, so that sets their price, say like ten cents per kilowatt hour. Some power retailers will have fine prints. Well, if there is a rally in gas or power prices in real time, we will push on those costs to you right away. For others, there's a lag. Customers will eventually pay for all of this. It just depends on how soon.
And so Texas has been taking all kinds of measure to try to cut energy usage, asking people not to use as much. Is that realistic?
So the Electric Reliability Council of Texas or ORCOTT, which is what the state grid operator is called, has been more proactive and they have been putting out weather watches like this is the first summer they started putting out a weather watch to warn people of tight conditions, asking consumers to make cuts where it was safe to turn up their thermostat to help keep the grid stable and avoid a shortage.
Another thing you report, which I thought was interesting, you mentioned bitcoin miners which have moved into Texas and they use a ton of energy running those big hot supercomputers. They have slowed down and kind of stopped operations sometime.
Yeah, so bitcoin mining is really interesting because these are basically computing centers. They look like data centers from the outside, but obviously very sophisticated machines on the inside. But they have the capability to turn on and off really quick quickly. There's about two thousand megawatts of bitcoin mining in Texas. That's the equivalent of like, let's say, two large nuclear plants, and so they see high power prices in the thousand dollars range, it makes sense to shut down and not
operate because they're not using that much. But at the same time, not only are they saving money, but some of that is actually participating in a grid program where they get paid to curtail. And that's when Urkott, the grid operator, tells them, hey, can you like ramp down a little bit or a lot so that we can reduce stress on the grid and send that power to somebody else.
We're talking about natural gas power, but you know, Texas has a lot of sun, Texas has a lot of wind. How much can those forms of renewable energy we talk about all the time help.
Out in the current heat wave, Actually solar is doing really well. It's maxing out. It's considered to have a summer capacity of like more than twelve thousand megawatts, so when the sun is shining mid morning to like when the sun sets, it's operating pretty much close to max capacity. And that's been a real benefit for the grid. If you think about twelve thousand megawatts versus like record demand, which was eighty thousand megawatts last year a little more
than that, that's a significant chunk. And then wind has actually been low in the middle of the afternoon. That has actually been one of the reasons that supply is really tight in RKOT.
They now have so much demand.
Growth that they actually need renewables to kick in to keep the lights on. A regulator recently told me that Urkott is beholden to the breath of God. That basically means if the wind picks up and it's supposed to get stronger, then that gives more bandwidth for Urkott to like operate the grids safely and not really worry.
And of course sun just goes down every day, so at night you're never going to have that solar power.
Actually the riskiest part of the day Historically, you know, the grids have always been set up to deal with peak summer demand the hottest hour of the day, and
that was usually like five or six pm. But now since we have solar, the risk has actually shifted to late afternoon when the sun is starting to set, or the evening hours when there is no sun, and that's really when you need everything else to like ramp up quickly or be strong, and so that risk can actually be at like seven, eight or nine pm.
Noreen, we're talking all about Texas just because so big and so hot, but it's also hot across the South, and Texas is a bit of an outlier because they run their own power grid. What are other states experiencing right now and how are they dealing with it?
Yeah, so Texas is unique because not only do they run their own power grid, but they have very few links to other grids, so they have to kind of be self sufficient. But the nearby grids are also facing stress. The one directly to the east and it kind kind of like has a slice of Texas and goes all the way to the Great Lakes is the MISO Grid, the Mid Continent Independent System Operator.
They have actually put out an.
Alert for operating the grid conservatively in their southern region, which includes Mississippi, Arkansas, Louisiana, these different grids. When they see a heat event coming, they will tell any power plant or operator of transmission lines or other infrastructure to cancel all maintenance so that basically everything is lined up and ready to go. And so that's like a first call to arms.
So the storage problem, which is one of the reasons why we have these big spikes in energy prices because there's no buffer, is something that other states are starting to look at. You right about New York, which I guess is testing out this giant battery.
New York's largest battery is about seven point five megawatts, and it's a four hour battery. If you ran that battery out for four hours at full capacity, that would be enough to charge one point five million phones. It makes a difference in extreme weather events, but it's the tip of the iceberg.
And I guess that's a really big point that you also write about, which is that the US Department of Energy says the US is far behind in building what we need to keep up with increasing demand.
Yes, so the energy transition is not going as fast as it needs to be. The Energy Department has estimated that about thirty to fifty gigawatts of clean energy is built a year, and that pace needs to quicken to ninety gigawatts. There's a lot of people in finance, in developers, venture capital, policy makers on a state federal level trying to find a way to make it easier to connect
these projects so that they could be connected faster. It's going to take some time to figure this out, and the concern is can you put all these pieces together, get through all the red tape To.
Say it's a lot of work.
As a massive understatement, there is an urgency to deal with this because we do have this very real climate threat and we're racing against the clock.
After the break, even with the heat, the power industry is racing for winter.
A snowstorm and brutal cold hit an unprepared energy system and left nearly five million customers in Texas, North Dakota, Arkansas, Louisiana, and Mississippi in the dark. Power companies in affected states had to resort to rolling power blackouts to save their networks from collapsing, leaving households and businesses without power and heat.
Norien. Here we are sitting in the middle of the summer talking about heat. But one really interesting thing you write is that the heat is only part of the problem, and maybe not even the biggest. It's when winter comes. It seems a long way off, but it's the cold that often puts the biggest stress on the energy grid.
Yeah, and actually, how this summer plays out is going to directly determine what happens next winter. And what I mean by that is the summer months are when you refill all the natural gas inventories. You know, the last couple summers, demand has been super high for natural gas being burned by power generators, and so that limited the amount of inventories that were there ahead of winter. So if we're burning through that gas now, there's going to be less ready in stockpiles for next winter.
And I want to ask you about one big storm that you write about which serves as the kind of moment where the energy industry realized they needed to do something, and that was Winter Storm Elliot in December twenty twenty two.
Winter Storm Elliot was a really big wake up call because most of the attention at the time was focused on like Kentexas survive this after the winter Storm Uri like two years ago. And what happened was the greatest risks emerged on the East coast. Elliott was a fast moving winter storm that moved across from like the northwest across the central US and it hit the East coast on December twenty third, and the storm moved so quickly it caused temperatures on the PJAM grid, which stands for
historically Pennsylvania, New Jersey and Maryland. It was the cornerstone of what is now the largest US power grid, which stretches basically from New Jersey to the northern edge of North Carolina and out to Illinois. It serves more than sixty five million Americans. The storm caused temperatures to fall by twenty nine degrees in twelve hours. That was the
fastest drop in temperature in history for that grid. If you had a slower moving storm and you knew it was going to get cold, would have power plants that would have time to find fuel or to make preparations.
This was so fast moving.
It was at the start of a three day holiday weekend, when you know people are already on vacation, and so there were not enough people around. Trading floors at natural gas desks were closed. This is typical every weekend and every long weekend, but when you have an extreme weather come in, it creates a scramble.
And so what happened to all those people who were supposed to be on the receiving end of all that gas powered electricity.
What was difficult about this storm is that the failures were really widespread. In terms of the causes. The gas industry was probably the best indicator that there was trouble to come. Because gas prices are really reactive to weather events. They tend to look at a forecast two weeks out in advance, and then if that forecast is reaffirmed every day and is still as by the time you were five days, three days or the next day out, gas
prices just like go off the charts. And so what happened in the US and in Pjam gas prices started rallying ahead of time. So that was a good sign and that thing that there could be trouble or that there were tight gas supplies. It was on the morning of December twenty third.
It was still.
Fifty degrees in places like Pennsylvania, but you saw power generators start to drop off the grid. And one of the concerns we heard was that the rally in gas prices was higher than power prices, and so if they decided to run on December twenty third, they would have been operating at a loss by the time temperatures dropped, especially on December twenty fourth, that's when you actually started
to see significant drops in gas production. The Appalachian regions, which is the Marcellus and Utica shale, dropped Significantlyica fell by about half and Pennsylvania fell by about twenty percent. Anytime you see gas production falling off, so there's less gas going onto pipelines and there is high demand on the other side, which is homes, businesses, and power plants tapping those pipelines more, it creates a pressure imbalance.
Describe what you mean by pressure issues for people like me who don't understand the technical aspects of delivering gas through a pipeline to a power plant.
When you're expecting a cold weather event, pipeline operators will do something called line pack. That's when they basically increase how much gas is being pumped into a pipeline system, and then you want to make sure that it evens out like over like long distances. But if you can pump these molecules and they're more condensed.
You have higher pressure.
The idea is you use the pipelines as a storage system, so when demand comes online, you are already instantaneously to tap that. Utilities we heard were taking a lot of gas off the system because homeowners and businesses were turning up their heaters. That means that they're taking off gas at a faster rate than it can be put on, and so that changes the difference in pressure and that can create instability. It's like if you're in a traffic jam.
If suddenly you have a car that starts and stops in the middle, it creates like this halted flow of traffic. But if everyone just drives at ten miles per hour, you'll all just suddenly keep moving in a flow and the exits will keep flowing out if there's no other accidents on the end.
And so the danger is if there isn't enough gas coming through, then you lose that pressure. So they have to keep up a constant supply.
Yeah, if the pressure gets too low, you cannot run power plants at some level. That happened during winter Storm Ury in Texas. There was a sudden drop in gas. They couldn't maintain the pressure and power plants have to shut down, and that contributed to the blockouts.
And in this winter storm Elliott in December, you right that there is this scramble to try to find gas to keep it flowing into the plant, to keep up this pressure.
So there was a mad scramble because the gas industry operates on a different schedule from the power industry. When you're thinking about buying power for the next day and the day ahead market, your day starts at midnight and is you know, for the full twenty four hour it's for that one day, but the gas day starts at
ten am. So on Friday, December twenty third, if you had a problem at like nine am that you suddenly needed gas, you actually had to have that secured on Wednesday because that would have fallen into that day ahead schedule for a gas So that is a fundamental issue that exists every day and is a problem every weekend. But you know you don't have a high demand day. You know there's ways around it. There's enough spare supply to like tap into. The other problem is this is
a three day weekend. The gas industry basically shuts down every Friday. There are always traders and like some folks around that can help you fill in for a last minute fuel, but for the most part, people are out for the weekend. And then on top of that, this was a holiday weekend, so they were on vacation for real, but also like for three days, So if you were trying to buy gas for like Christmas, which is on Monday, you had to know what that demand was going to
be on Friday. When you have a fast moving storm, it's always hard to predict what actually is going to show up. Usually demand on a holiday weekend is week The fact that demand came in really strong was another surprising factor, and that added to the scramble.
So this is obviously a pretty extreme example, but I think a lot of people listening to this will be pretty surprised to hear just how it kind of catches catch can it can be to keep all of our lights on how common an occurrence is this.
I've covered gas for a long time and then covered power, and I remember gas every weekend were like, our price is going crazy. It's an issue every weekend and every long weekend. A power generator executive testified at the Federal Energy Regulatory Commission at a mid June meeting, saying the Intercontinental Exchange, which is where you buy a lot of your spot gas purchases if you are a power plant, is telling folks that for the upcoming July fourth holiday,
you have to buy your gas on Friday. The point that this executive was making was that if there was an extreme weather event, then that would create another big round of uncertainty and another scramble.
If things got severe.
When we come back, what can we do to bolt up the grid and of divert all these troubles? What are the companies actually doing to try to fix this boom and bus cycle that seems to happen with great regularity.
So the boom in bus cycle is kind of like subdued or you can ride the waves like on a normal day on extreme weather events. There have been a lot of efforts in the last decade. This is not a new issue to increase coordination communication with the gas industry the power industry. Because power is considered a public good and you need to keep the lights on to keep the economy running. There are standards that power generators utilities have to follow to ensure that they can operate
throughout the year and especially during cold weather events. Now there's a lot of criticism that those standards don't go far enough, but the gas industry does not fall under that realm of oversight, and there have been calls that the gas industry needs to have weatherization standards and needs to communicate more, disclose more information with the power industry.
You've talked about PJM and how they've faced some of these problems. What does the company say about this.
PJM is technically a corporation, but it's considered a quasi government agency appointed by the federal government to run this thirteenth state grid. They have said that the large number of outages driven by natural gas plants was unacceptable and that a large portion of them were because of equipment outages versus gas availability.
Norim is there concern that we're going to start to see more and more of this happening across the country.
That's certainly the fear.
I spoke to Mark Christi, who is a commissioner on the Federal Energy Regulatory Commission, which is the agency that oversees.
The power industry.
He's been warning about these reliability concerns and concerns related to the gas deliverability issues for over a year now, but then when we spoke with him recently, he said that these concerns are accelerating because you can't save power like in a barrel of oil.
The power grid.
Has to be balanced every minute of the day.
It's very specific.
If you lose that balance too much for too many minutes, the grid is subject to failure. That's what almost happened in Texas in twenty twenty one.
What Winter Storm Elliott was.
It was a warning that you cannot say that you have a lot of extra power plants on the grid and you'll be okay.
They are now taking another look.
And saying, we need to see what actually shows up in these extreme weather events, whether it's in the summer or winter.
Maurine is a power industry looking beyond natural gas to get past some of these problems.
Yes, the power industry is definitely looking beyond gas, but that is a complicated answer because there is no obvious
replacement to natural gas. Natural gas right now is needed to provide a lot of the power on the grid, but as we go forward, as we have more renewables hook up to the grid, gas isn't going to be used as much every hour of the day, but you're gonna need it more and more to step in dependably on those most critical hours when the sunset and all that solar goes offline, or when there's a low wind day.
There isn't enough battery storage to make up for all of that, and you still need to actually like produce power to store in batteries. So the benefit we saw from gas in the last decade is it was easy to replace coal. It was an easy answer. One megawatt from a gas power plant was enough to replace one mega wat from coal and doing so it helped cut costs for consumers because you were tapping this cheap shale gas, but it also had a lot of environmental benefit because
it burns cleaner than coal. We're now at a stage where, given the climate crisis, gas isn't clean enough, and so there are technologies that are being considered, like carbon capture or shifting off of natural gas.
There is a lot of energy.
Part of my pun being put into trying to solve this problem of what does the grid of the future look like. But there is a really hard engineering problem. How do you keep this system running? Like a physics problem. How do you keep this system running and keep the lights on. There's a saying that the power industry likes to use. Gas may only be seven percent of the economy, but it's the first seven percent the entire economy relies on it.
Noreene, thanks so much for talking with me today.
Thank you, it was great.
Thanks for listening to us here at the Big Tay. It's a daily podcast from Bloomberg and iHeartRadio. For more shows from iHeartRadio, visit the iHeartRadio app, Apple Podcasts, or wherever you listen. And we'd love to hear from you. Email us questions or comments to Big Take at bloomberg dot net. The supervising producer of the Big Take is Vicky Bergolina. Our senior producer is Katherine Fink. Our producers are Mow Barrow and Michael Falero. Philde Garcia is our engineer.
Our original music was composed by Leo Sidrin. I'm Weskasova. We'll be back tomorrow with another Big Take