Enron corner-cutting spirit lives on in Texas

I blame PowerPoint for the Great Texas Freeze and the days-long grid collapse. PowerPoint slide decks prepared for investors in huge Texas “unconventional” drilling programmes and giant Texas wind farms, were full of bold arrows, brief key selling points and project maps that did not mention anything about seasonality.

The history of the Texas energy business is not only that of vast fortunes won, but of fortunes lost. “This has been a terrible place to be selling electricity,” says one power industry analyst, and he is right.

Remember Enron? It collapsed just 20 years ago. Enron was going to dominate gas, power and wind energy trading. It was just one logical step for the crooked E to plan domination of a market in weather.

Then there is TXU, one of the biggest power utility LBOs of all time. There were the merchant power producers, such as Dynegy, Mirant, NRG and Panda.

All these ambitious energy companies wound up in reorganisation. The leaders were too excited by their own visions, and too readily approved by Texas regulators.

Lots of issues were put off for later. For example, what happens to moisture in a gas when it is decompressed in prolonged cold weather?

That did not seem to be an interesting question to Permian Basin gas barons and build-em-cheap wind generator developers. After all, south Texas rarely freezes. Except, when it does, you get a cascade of failing equipment. One gas pipe is jammed by ice, which stops another pipe connection for its heater, which leads to a compressor cutting out and a generator choking into silence. The wind turbines’ electronics sense the grid is losing voltage and disconnect to save themselves.

Everything has to be restarted by hand.

Because the developers were always trying to be the first to take advantage of abundant supplies, they bid against each other for business and ruinously cut prices (and capital spending, along with maintenance) to get market share.

Would connecting to neighbouring states have saved Texas from the big freeze? As one Houston power trader points out, “Even if we had been tied into the Midwestern interstate grid and the Southwestern interstate grid, both were also in emergency situations. They could not have helped if they wanted to.”

Wall Street analysts suggest the Texas power generators should have taken firm pipeline contracts. But the trader retorts that “Even if you have firm contracts in place, they just force majeure-ed you. Storing fuel oil as a back-up for gas would not have helped, since the fuel oil turns into jelly if the tanks are not winterised.”

Utility scale batteries? Those work for hours, or a day or two. But the Texas grid failure was too large and went on for too long for batteries to be a reliability solution.

The Permian Basin oil and gas boom of recent years made Texas even more exposed to unexpected cold. North of a latitude running through Dallas and Fort Worth, oil and gas wells are more likely to be winterised. The Permian Basin is south of the line, and as its gas production increased from 4.4 billion cubic feet/day in 2010 to 16.5 bcf/day in 2020, Texas’ gas supply became more vulnerable to cold weather.

The moisture is what kills you. As gas comes out of a high-pressure Permian well, it goes through a neck into a larger diameter pipe to decompress it to pipeline pressure. In the course of decompression the well gas cools, and water vapour in it can liquefy, or “hydrate”.

To keep that water from freezing and plugging the pipe, the pipe needs to be heated before the pressure drop. It also helps to have injected methanol into the well, usually between October and March, and to have invested in glycol units that can scavenge the water from the gas. Compressed air lines in Texas power plants were also uninsulated, and suffered from moisture turning into ice.

Some wind turbines froze because the owners chose to save a bit of money by not having the insulation and heating fans used further north. Refitting them will be more expensive and less effective than doing it right the first time.

Fixing Texas power in an environmentally sound way will take years. It will also require junking the mindset of frantic development at the expense of detailed preparation for a changing climate.