Houston we have a problem

Hurricane Beryl struck Houston last Monday, knocking out power to more than three million electric utility customers in the sweltering summer heat. Hurricanes, while occurring with increasing frequency and force, are still relatively rare in terms of the devastation they wreak on a given electric utility’s service area. There are things that management routinely prepares for and executes, and there are severe weather events that are unexpected, no matter how accurate the forecasts. In the latter case, management can only react. It cannot retroactively “harden” its distribution system after the lines are down and the poles are lying in the street. That’s why hurricane recovery always occurs in the context of a crisis. The public image of the utility and its top executives is instantly elevated and suddenly subject to public scrutiny. The news presents stories of angry customers, eager for information about power restoration efforts or frustrated by the lack of them. From a business perspective, there are few upsides and considerable downsides to all this extra scrutiny. There is an asymmetry here: Timely power restoration is expected but not rewarded, while prolonged delays are met with scorn from customers, regulators and politicians. Houston-based Centerpoint, with nearly a million customers still without power, is experiencing all of this right now. The latest storm in Houston raises the following questions:

1. Are there technological solutions that could reduce the impact of these adverse weather events or, in other words, that could increase the resilience of the network? – And the answer is yes, there are essentially two approaches to grid hardening, but both are unpopular. The strategy favored by utilities is to bury transmission lines underground, which results in high reliability but at a high price. Pacific Gas & Electric is pursuing this strategy to increase grid resiliency in fire-prone areas. The estimated cost is in the tens of billions, and the program provides significant rate base growth, which in turn boosts utility profits. The other approach, solar and battery microgrids that essentially bypass the wireline, also increases resiliency but, being privately funded, adds little to the utility’s rate base and profit growth potential. For this reason, it is often maligned by utilities, regardless of its utility in an emergency, and is not seen as being in their economic interest.

2. Is there a deeper problem here? – We believe the answer is yes. Due to global warming and climate change, our built environment is increasingly inadequate to maintain the infrastructure we need in our daily lives. Electricity is essential. We believe that access to electricity is almost the definition of a contemporary or modern lifestyle that includes on-demand heating, hot water, air conditioning, lighting, and refrigeration, not to mention charging ports for phones and iPads. A severe weather event with a prolonged restoration of service that leaves an area without electric service for weeks or months (admittedly, this is an extreme case) essentially forces the residents of that service area to live as they would in the 19th century. Can our technological society afford to (and should it?) endure the disruptions caused by natural events?

3. Would a Texas/ERCOT grid with better interconnections with other neighboring systems be better able to handle adverse weather events? — The short answer is no. It doesn’t matter how many thousands of megawatts of electricity are available from neighboring utilities if most of the state’s power lines are down. However, the state has dramatically increased its expectations for future electricity needs and is likely to encourage more baseload electricity generation from fossil fuels. If the Texas legislature continues its plan to build more power plants (likely gas-fired) without regard for grid resiliency, then all we can say is that there may be power, but it’s unlikely to get to people, at least not when they need it most.

As for the obvious question: “Will it happen again?” we think the answer is equally obvious.

By Leonard Hyman and William Tilles for Oilprice.com

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