Texas Power Failure: The Supply

Story
Published on 24 February 2021

Brianna Lazerwitz
Associate, North America Power

Executive Summary

From February 14-19, frigid temperatures caused Electric Reliability Council of Texas
(Ercot) electricity demand to shoot up. The cold also forced nearly half of the
region's generation offline, decimating the supply available to meet the rising load.
Millions went without power for days, and the market set a record for the most
expensive week of power in U.S. history. This note focuses on the supply-side
missteps that contributed to this tragic crisis.

By the Numbers

$50 billion
Ercot power sales between February 14 and 19

48GW
Peak total outages, occurring at 9 a.m. on February 16

-58%
Decrease in Gulf Coast, Permian and Midcontinent natural gas production from February 10 to
February 15
 Ercot real-time load, outages and North Hub power prices, February 2021

Source: BloombergNEF, Ercot

Note: Rolling blackouts began the morning of February 15 and ended on February 19.
Ercot expected load to exceed 75GW on February 15.

The blackout in Texas will go down as one of the events that shapes the U.S. power sector.
Blackouts of similar magnitude have occurred before, but the disaster in Texas stemmed
uniquely from power plant shortfalls compounded by unforeseen and unprecedented winter
demand. Demand hit 69.4GW and was set to run up to 75GW on February 15, but was stunted
by drastic load shedding. For more on Ercot’s massive demand underforecast, see BNEF's
report titled Texas Power Failure: The Demand Story.

Last week was the most expensive in U.S. power market history, topping the overall cost of
the 2001 California energy crisis by more than $1 billion. The mismatch between supply and
demand caused prices to skyrocket to the market’s $9,000/MWh cap for more than 80
consecutive hours. Power sales last week totaled more than $50 billion, tremendous compared
to the $1 billion price tag on power for the entire month of February in 2020.

Ercot’s energy-only market is known to shoot power prices sky-high when demand gets
tight. With more than one-third of the region’s total capacity on outage, any plant that
remained online could sell power at stratospheric prices. Consumers and investors alike will
struggle to cope with this volatility and it will be increasingly difficult to defend the energy-only
market design. For now, many generators have cashed in, but winnings might have been too
good as investors now face the small but real possibility that the market gets completely
overhauled.

The week’s events in Texas showed how the interconnectivity between power and natural
gas systems pose enormous challenges in planning for extreme events. The number of
dependencies between the two systems can be unwieldy in assessing worst-case scenarios.