AND A REALITY CHECK FROM THE ORACLE OF OMAHA
The power grid failure that occurred during the February 2021 Texas freeze has shed a bright light on the contributory impact that poorly structured direct subsidies for renewable power sources can have on an electrical grid during a weather event. In an earlier analysis of power plant reliability during the February 2021 Texas Freeze one intuitive reality that I emphasized (related to renewable energy subsidies, investments and regulatory oversight) is that prudent subsidies for renewable power sources should incentivize innovation over volume and should mandate minimal weatherization standards as well as the necessity of redundant power (less subject to the whims of nature) to counter their higher rates of forced outage during extreme weather conditions. The high fixed cost associated with large scale renewable power generation is one of the reasons that overzealous environmentalists have pushed for direct Federal and State renewable power subsidies that are many times greater than for any other energy subsidy. It is the format of the subsidies that should be addressed in a manner that recognizes and accounts for the degree to which renewable energy sources are subject to the whims of nature. Given that wind power has and will continue to replace coal fired base load plants in Texas, (IE. renewable MW generation will increase and coal thermal MW generation will decrease) additional redundant thermal generation less subject to the severe weather will be necessary to maintain reliability. Technological advances are coming that will make renewable power generation more financially viable and somewhat more weather hardened, but not enough to avoid the reality that wind power (blades and turbines), like the wings of airplanes can never be completely immune to extreme weather conditions. The entire paper referred to above, “The Texas Freeze”, can be found at the website Georgeeconomics.com.
Ever since the Texas February freeze the finger pointing and posturing by energy gurus on both sides of the environmental debate have been fast and furious. The global cooling, global warming, climate change, green new deal advocates immediately blamed thermal generation (gas, coal, nuclear) for the failure and the thermal generators simultaneously placed the blame on renewable power. Both sides, with all of their arthritic, crooked finger pointing, fail to address the most critical issue, which is how to insure that configuration of future power generation is designed to be reliable, efficient and cost effective, without political agendas resulting in ridiculously high levels of fixed cost. Clearly all forms of power generation played a role in the Texas February freeze fiasco and all forms of power generation should be subject to minimal weatherization standards. Overzealous agenda driven environmentalists pile up data in a manner that appears to be accurate to the casual reader, but does not accurately address the relative failure of power generating sources during the recent freeze or the best path forward. Most journalists tend to be substantially left of center and will always support the green new deal agenda. ERCOT (Electric Reliability Counsel of Texas) and the thermal power generators produce accurate data, but that data is presented in a format that is useful for regulatory and legislative activities and not is not typically broken down into simple terms for public consumption.
A perfect example of the dichotomy discussed above, the major newspaper in Austin on a single day presented analysis starting on the front page, accurately noting that the repetitive failure of power plants between the 2011 and 2021 weather events is problematic, while buried later in the paper another article just before the obituaries exposes the reality of reliability options going forward. The data that they piled up in the front page article denominates a partial outage or a complete failure of a generating unit as a failure, and given that a majority of Texas electric power plants are thermal generating units the data, in effect, are inaccurate inverse proxy for gas /thermal MW availability during the Texas freeze. As a consequence, I am not sure what that data means other than all sources of power experienced failure and that the problem occurred twice. Partial plant specific outage is effectively presented and tallied as total failure. The most useful data to examine outage and to address future reliability issues is the MW availability from each power source on the electrical grid at the subject time. “The Texas Freeze” report, referenced above, views the Texas February 2021 failure through that lens. The Austin paper’s article (actually a USA Today Network article) sends a skewed
message to the public that presents gas generation in an extremely negative light and does not accurately portray the structural issues facing the ERCOT electrical grid. In addition, nor does it present data in a format that will inevitably be the basis by which the relevant decision makers will pursue future power generation options. As mentioned earlier, buried in the same Austin paper, another article, originating from the Texas Tribune, when you read between the lines, sheds a far more telling light on the realistic future power generating options for the ERCOT electrical grid.
A REALITY CHECK – Should anyone be surprised” – “Lo and Behold”
Always on top of a possible financial windfall Warren Buffet’s Berkshire Hathaway Energy, within weeks of the freeze, presented a legislative proposal via a Texas State Senator to construct ten new gas power plants across Texas, with seven days of liquid natural gas stored on site, to supply emergency power if and when necessary to insure against power failures such as occurred during the Texas February 2021 weather event. For the purposes of this paper I am not looking at the potential financial benefit to Berkshire Hathaway – I am sure it would be mind numbing if the legislation passes. The reality that underlies Berkshire Hathaway’ s proposal is that, at the present time, and well into the future, grid reliability is and will continue to depend on thermal (gas) sources. Factors to consider:
Berkshire Hathaway Energy has substantial investment in the coal and coal generating assets
Berkshire Hathaway Energy has substantial investment in railroads hauling coal
Berkshire Hathaway Energy has substantial investment in gas generation and gas infrastructure
Berkshire Hathaway Energy has substantial investment in virtually all sources of renewable power
(Wind, Solar, Hydro, Geothermal, etc.)
It is obvious that Berkshire Hathaway Energy has the expertise to judge what power generating format will be be most reliable in harsh weather conditions. And, what is more important for dealing with the situation presented by the Texas freeze is that their proposal sheds spells out the logical trade off between renewable and conventional power sources going forward. The article concentrated on the Berkshire Hathaway proposal and push back by the existing gas plant operators regarding the financial damage this proposal, which is designed to legislatively bypass the free market structure that exists, would do to the existing power generators that have operated as free market competitors for many years. Their position is that they should be the ones to supply any additional gas generating capacity within the free market format in which they operate. The most salient point to be derived from the article is not so much the power struggle initiated by Berkshire Hathaway, but that gas is the most reliable source for power generation at the present time and for the foreseeable future.
The minimum life expectancy of a gas power plant is over twenty years and many gas power plants are either in the construction or planning stage. As technology gains improve the financial viability of renewable power the push to replace fossil fuels will increase, and the need for redundant power will also increase (which, in effect, supplies the under pinning for the Berkshire Hathaway proposal). If the direct federal and state subsidies for renewable power are not structured to incentivize innovation and recognize that excessive premature investment in renewable power generation will require inefficient and wasteful redundant power to guarantee reliability, the total capital cost associated with power generation on a nation wide basis over time will be substantially higher than necessary. A poorly paced agenda driven transition from fossil fuel power generation to renewable sources can have a smothering effect on economic growth in the United States with a massive burden placed on businesses and wage earners. Note that the present Administration is proposing actions that will jeopardize our energy independence and our relatively low cost of energy.
Given the Biden Administration’s attachment to the Green New Deal and his clear intention to pursue an overzealous anti fossil fuel agenda within the “Paris Climate Control Agreement”, coupled with China’s ongoing construction of numerous coal fired power plants which he is clearly underplaying (actually completely ignoring), it does beg the question, “which foreign adversary actually won the last presidential election?”. Given that the United States generates only 15% of the world’s carbon emission, the frantic push by the political left to prematurely transition to renewable power generation will not put even a small dent in the world’s level of carbon emission. Consequently, it is blatantly obvious that the political left’s global warming, climate change, green new deal push is dangerous political nonsense that has little to do with an environmental crisis and all to do with the Democrat Party’s socialist inspired agenda. Power grid reliability, unless rational future power generation choices are made, without blind adherence to illogical ideological agendas, will be at risk. The rolling blackouts that are common in California should serve as a wake up call for the rest of the country. Again, China is addressing their reliable power generation needs with coal fuel sources with absolutely no concern about carbon emissions, while the Democrat Party’s blind adherence to the socialist climate change, green new deal agenda, unless held in check, can be expected to compromise the cost effectiveness and reliability of power generation in the United States.