Electricity prices soar in West Texas as shale drilling expands

(AP Photo/Gerry Broome)
(AP Photo/Gerry Broome)

The Texas shale boom has led to record growth in the demand for electricity in West Texas, experts said in at the Gulf coast Power Association panel on Wednesday afternoon.

Oil and gas worker camps and drilling activity have dramatically increased demand for electricity in previously unpopulated parts of Texas, including the Eagle Ford and the Permian Basin regions.

The growth has left transmission and utilities scrambling to keep up.

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For example, Oncor, which provides the transmission lines for the territory around Midland, Abilene and Odessa, added 247 megawatts to its system in the last three years, a thousand percent increase over the 22 megawatts added from 2006 to 2009.

Utility representatives said they also are investing heavily in infrastructure in these regions to meet the huge leap in demand.

“You can just see the exponential growth in the transformer infrastructure and capacity that we have added in the last year,” said Robert Knowles, senior distribution planning engineering for AEP Texas, a utility that operates in South Texas.

The demand has skyrocketed local prices  in the interim — electricity prices have reached as much as 10,000 percent higher in the Midland area compared to Houston or Dallas prices in the last year.

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Hooking up the new oil and gas infrastructure is dramatically more expensive because it is not developing in places with well-established existing electric lines, according to David Woody, senior manager of distribution planning for Oncor.

Land costs are one of the most significant drivers of these prices, especially in securing the right of way for new distribution lines.

“Landowners are wanting to make quite a profit,” Knowles said.

And while there are laws that could access land by claiming public interest, utilities say that they would rather pay higher prices than use this strategy.

“It is our preference not to go through the condemnation process,” said Greg Boggs,   vice president of Sharyland Utilities, which operates in the Midland area. “But these costs are part of what is required to get people up and running.”

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Old equipment also challenges these utilities, including outdated transformer systems. Solutions to these challenges include mobile substations, which can be rapidly deployed to the needed areas and are versatile. But these substations are limited and are not intended for long term use or to serve new loads, Knowles said.

“These systems are for temporary outages,” Knowles said. “If I have tied up all my units and I have a failure in another area, what do I do?”

It normally takes about 36 months to build a new transmission line or substation, but utilities are trying to speed up the process to trim this time frame down to about a year, Knowles said.  Better communications with companies planning to move into the area and increase the needed load could help improve this process.

But as utilities for these regions grow, demand for capable staff is intense, making staffing issues an additional challenge for local utilities.

“Part of the problem is that the oil field also needs those people,” Knowles said.