Fed urges Texas to ‘winterise’ grid after $130bn storm damage

February’s Arctic blast inflicted as much as $130bn in economic damages on Texas, making the hundreds of millions of dollars in annual investment needed to protect the state’s power grid from freezing temperatures worth the cost, the Dallas Fed said in a report on Friday.

The storm dealt a devastating blow to the state, knocking out power for nearly a week, killing at least 100 people and causing widespread damage to homes, businesses, crops and infrastructure. The Dallas Fed put the economic toll at an estimated $80bn to $130bn.

The storm also exposed a fragile power grid and natural gas supply system that was not able to withstand sustained freezing temperatures — critical equipment at gas and coal power plants failed, wind turbines seized up and gas wells and pipelines froze, resulting in the loss of about half the state generation capacity.

“The cost of annual preparations for extreme and relatively infrequent weather events has proven difficult for policymakers and industry to justify,” said the team of Dallas Fed economists. “Our analysis indicates winterising for extreme winter weather events appears financially reasonable.”

The Texas legislature is debating proposed rules in response to the storm that would require power plants to winterise their facilities and provide funding to cover the cost, with penalties for not doing so escalating to as much as $1m a day.

The newly proposed regulations, part of a sweeping response to the storm, are similar to those that were recommended by federal officials after a similar cold snap caused widespread blackouts in 2011, but were never taken up by Texas state lawmakers or regulators.

Without question, these extreme weather events are coming with greater frequency and intensity and with rising costs and loss of life.

The “shocking aftermath of the February freeze and the widespread power outage demand” another look at the investments, the Dallas Fed said, estimating the total cost of hardening measures at as much as $430m a year.

Winterising the state’s 162 gas-powered plants, many of which were knocked offline during the storm as pipes and other equipment froze, would cost around $95m.

Installing internal warming equipment at the state’s 13,000 wind turbines would be “infeasible”, says the Dallas Fed, but upgrading cold-weather coatings on turbine blades and having more de-icing drones ready to deploy would make them more resilient. Newly drilled oil and gas wells would be more expensive to upgrade at up to $200m a year in added costs, the Dallas Fed estimates.

Texas lawmakers so far have not taken up similar measures that would require the oil and gas industry to protect their equipment from the cold weather, which critics say is a major gap in the state’s storm response.

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Natural gas production plunged 45 per cent during the storm as many wells and pipelines were knocked offline by the freezing temperatures and others lost power, creating a “death spiral for electricity generation”.

Many have urged Texas authorities to strengthen the grid as climate change threatens to bring more intense storms to the state.

“Without question, these extreme weather events are coming with greater frequency and intensity and with rising costs and loss of life” Sylvester Turner, the mayor of Houston, Texas’ biggest city, told a US House hearing on the storm last month.