Texas Power Failure: Natural Gas

Takeaways
Published on 25 February 2021

Nakul Nair
Analyst

Executive Summary

Last week, freezing weather plunged much of Texas into darkness and cold as the
state’s energy sectors struggled to cope with the unexpected conditions. Natural
gas, which provides both power and heat in the state, was at the center of the
events. This note assesses the role of gas in the energy crisis and provides historical
context for the weather.

By the Numbers

+90%
Gas deliveries to power plants in Texas grew by 90% versus the 30-day rolling average in the
last two weeks.

$6 billion
Estimate of the total cost to winterize all wells in the Permian basin

99.6%
February 2021 was colder than 99.6% of all months since the year 2000.
 Change in gas supply and demand to the Gulf Coast

Source: BloombergNEF regional gas fundamentals monitor

Note: Does not show net imports, storage change or LNG demand.

The winter storm was a black swan event. The week ending Feb. 21 was the coldest single
week in Texas in the past 20 years. Furthermore, February had a larger departure from average
temperatures than 99.6% of all months since the year 2000.

There is historical precedent for extreme weather events cutting off natural gas supplies and
exacerbating electricity shortfalls. Despite this, the Electric Reliability Council of Texas (Ercot)
did not consider fuel supply in its resource adequacy planning, a huge oversight that
exacerbated the blackouts. Building additional gas storage facilities and winterizing
production assets is required to avoid this situation in the future.

Despite regional gas production falling by 6 billion cubic feet per day, or 50%, overnight,
the market functioned efficiently in diverting fuel supplies to demand centers. Feedgas
demand into liquefied natural gas (LNG) terminals decreased by 50%. The supplies were
instead delivered to cities for heating and power plants for electricity generation. The former
grew by an average of 40% and the latter by 90% for the week of Feb. 15 when compared to
the 30-day rolling average.