Analyst: Weather a poor excuse for Texas power problems

Texas’ electric grid has experienced a couple of hiccups this year that have been blamed on weather extremes.

In February many parts of the state experienced rolling blackouts when dozens of power plants were knocked offline by several days of extreme cold.

And at the end of June the Electric Reliability Council of Texas called on consumers to cut back power use during peak afternoon hours when high temperature coincided with a handful of unexpected plant outages.

The same happened last week when a whopping 3,800 megawatts of power plant capacity went offline unexpectedly.

The February event has been looked at by state regulators, who now say it does not appear market manipulation was behind the outages, while a federal report concluded cold weather was indeed behind the outages, but that there’s more power plant operators could have done to avoid them.

One group of analysts isn’t buying it, however.

McCullough Research, a Portland, Oregon-based firm best known to some for its work turning the light on some of Enron’s electricity market manipulation schemes in that region several years ago, says the weather extremes Texas experienced earlier this year are nothing new.

“The temperatures experienced on both February 2 and June 27 are within the extremes Texas has experienced in the past three years,” the group, led by former PG&E exec Robert McCullough, wrote in a report released late last week (see it below).

Rather, ERCOT’s change to a nodal market late last year — where power flow is monitored and priced based on hundreds of points throughout the state (typically major substations) instead of just a handful of zones — seems a more likely culprit, McCullough says.

Also, so-called heat rate, a measurement of power plant efficiency, has been consistently higher and more volatile than in 2010 than 2011, McCullough said (see the final chart in the report).

“Without fully understanding these mechanisms and their potential effects on the market as a whole, it is difficult to determine whether the emergencies on February 2 and June 27, 2011 were due to artificially-created scarcity compounded by ERCOT’s lack of market transparency,” McCullough writes. “What is clear is that the weather is not the reason for ERCOT’s inability to operate reliably while simultaneously possessing high reserve margins.”

McCullough’s brief analysis raises more questions than it answers, but it does touch on a strain of skepticism that many readers have maintained in the wake of the recent power events.

We’ve asked ERCOT and some industry experts for their take on the piece, so stay tuned …

McCullough on ERCOT Weather Events