Posted on 03/06/2014 10:46:31 AM PST by thackney
The booming oil and gas industry in the Permian Basin has created a voracious demand for power in West Texas, one that the grid is struggling to keep pace with, a Texas grid manager said Thursday.
“Growth out in the far West is 20 to 25 percent year over year. It has just exploded and it is all oil field load,” said Brad Jones, vice president of commercial operations for the Electric Reliability Council of Texas, which manages the grid for most of Texas.
Jones was one of several speakers at a morning panel at the IHS CERAWeek energy summit in Houston, speaking about electricity issues confronting Texas.
But a lack of juice has not slowed down production, Jones added.
“Because it is difficult to build transmission and distribution fast enough to meet their needs, many of them are developing their fields and building their own microgrids on generators,” Jones said. “As soon as the distribution lines are built out to them, they move their generators to another location.”
The soaring electricity demand in West Texas is one of several issues Texas is facing, as the demands of the state’s growing population raise concerns about the grid’s reliability, panelists said.
Grid reliability
Jones said that grid managers and regulators are thinking hard about a reserve margin – which provides an extra cushion of electricity — that balances the need for a secure system with managing costs. The issue, he added, raises key policy questions.
A recent study commissioned by the Public Utility Commission that suggested that the grid would be best served having a reserve margin of electricity somewhere between 10 percent and 14 percent.
“We can’t design a system that has no outages, it is just too expensive,” Jones said, noting that even with a 14 percent margin, it’s likely there still would be a power outage once every ten years in extreme weather. “We have to understand what we are willing to accept to achieve these higher efficiencies.”
Other panelists noted that a possible solution — making the reserve margin mandatory — would force Texas to move from its current “energy-only” system to a capacity market. In an energy-only system, generators are paid only for the power they make, while in a capacity system, generators are paid for available plants, regardless of whether they are used.
“If you are going to mandate a reserve margin, you need to create an incentive for generators to build it,” said Steve Schleimer, senior vice president of government and regulatory affairs for Calpine, a generation company.
Pricey power
State regulators raised a market cap on wholesale power from $3,000 per megawatt-hour in 2012 up to its current rate of $5,000 – much higher than in other U.S. markets. It will rise to $7,000 in June and $9,000 in 2015.
At the time, regulators said that the prices were being raised to incentivize generators to build new plants. But Schleimer noted that those prices might only kick in one or two times a year — not enough to justify a rarely used plant.
“Calpine has said they would not invest in new generation in an energy only market, on the hope that it would maybe run once a year,” Schleimer said.
Moving to gas
Panelists defended the growing role of natural gas in electricity generation in Texas, responding to critics who say the state’s grid has become too reliant on the fuel.
As coal-fired generation has fallen from 50 percent to 40 percent of Texas power, natural gas has increased from 15 percent to about 30 percent, according to Schleimer.
While some power producers switched from coal generation to natural gas as the price of gas dropped in recent years, panelists noted that wind has played a large role in replacing coal power.
“We are all for fuel diversity — renewables are going to continue to have a growing role,” said America’s Natural Gas Alliance CEO Marty Durbin, noting that natural gas has helped balance out fuel diversity in Texas. “But there is nothing to show that we are over reliant on natural gas. Even through the coldest winter and the highest demand, the system was robust enough to provide that supply.”
I guess they don’t have enough windmills out there yet.
They talk about this being caused by drill rigs. Don’t know about west Texas, but in the Eagle Ford, every drill rig/frac site that we’ve worked has one or more big trailer-sized diesel generators to supply power for the sites. And this is not just ones out in the middle of nowhere, but right off Interstates with power lines going by.
They’ve got a lot mills up out west but the question may be whether or not they’re actually tied up to anything yet. I know there were quite few a couple years back that weren’t.
Governor Perry, in his campaign attack on Mitt Romney, said there were no Vulture Capitalists in Texas.
Thats exactly what they’re talking about, all electric’s needed for drilling are generated on site. Only time I use electricity is when I put them on a pumpjack and thats the final stage but I can also run an Ajax off the casing gas if I have enough. More than half my wells run off of gas.
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