(Bloomberg) – The arctic freeze that hits the central region of the United States has triggered continuous blackouts in Texas and is increasing pressure on energy prices that are already being negotiated at unprecedented levels.
The state’s grid operator ordered transmission companies to reduce pressure on the system while people turned on the heaters. Interruptions will be implemented for residential neighborhoods and small businesses for up to 45 minutes at a time. In the past, large industrial customers had their power turned off in pre-agreed emergency plans. In Houston, the city’s top utility company said most customers would be affected, with outages possibly lasting more than an hour.
“Energy conservation is critical,” said the grid operator, the Texas Electric Reliability Council, in a message posted to his Twitter account. “We ask Texans to put security first during this period. Traffic lights and other infrastructure may be temporarily without power. “
About 800 daily records of cold temperatures were set last week as Arctic air spreads to the Gulf of Mexico, sending spins through energy markets. Winter storm alerts, alerts and warnings extend from New Mexico to Maine, with temperatures in Fargo, North Dakota, dropping to around 18 Fahrenheit (minus 28 degrees Celsius) on Monday morning. “It’s an incredibly busy alert and surveillance map,” said Bob Oravec, senior analyst at the US Weather Prediction Center.
Previously, spot electricity prices in the West Texas hub have surpassed the $ 9,000 per megawatt-hour network limit, up 3,466% from Friday, according to data compiled by Bloomberg. LNG exports from the United States also plunged after the freezing of ports and wells, and oil production was also hit, with traders estimating that a few hundred thousand barrels a day of production in Texas were likely affected. West Texas Intermediate futures were up 2.5%.
The storms will largely hit large cities on the East Coast, said Oravec. While there may be some snow and ice showers in New York and Boston, most of the accumulation will be in upstate New York and in upstate New England from Monday to Tuesday.
Cold temperatures and a parade of storms in the United States follow other cases of extreme winter this year, which affected ports and brought down the energy markets in Asia and Europe. Texas, which is not used to the fury of winter, is starting to experiment. President Joe Biden declared a state of emergency, mobilizing federal assistance to aid local response efforts.
In Houston, there are long lines to replenish domestic propane canisters and firewood is running out. The city can catch up to two inches of snow overnight, along with ice and hail, the National Meteorological Service said. He will be hit by another storm bringing ice and freezing rain on Wednesday.
The Dallas-Fort Worth area can get 4 to 6 inches (10 to 15 centimeters) of snow overnight. More snow may fall on Wednesday. “It will be a cold week,” said David Roth, a senior analyst at the US Weather Prediction Center. “The southern plains are in a cold pattern and it will take a while to get out of it.”
Extra consumer demand in response to the cold appears to have affected many in the US regional energy market, and chaos has reigned in recent days.
Ercot expects energy demand to hit a historic record on Monday and Tuesday, breaking a record set during a summer heat wave in 2019. “We hope to be in emergency operations tomorrow until at least Tuesday morning”, said Dan Woodfin, a senior director at Ercot.
In the natural gas market, spot prices in some areas have also reached extreme levels. Prices in Oklahoma have increased by more than 4,000% since Wednesday. A hub in Cheyenne, Wyoming, saw prices as high as $ 350 per million British thermal units, according to traders who asked not to be identified because the information is not public. For comparison, a week earlier, fuel was reaching few digits in both places.
Frozen Turbines
A mixture of freezing temperatures and precipitation threatens to paralyze wind farms in Texas. This would be devastating for plants with contracts to supply a certain amount of electricity at specific times if, instead, they had to buy it on the spot market to meet their obligations. At the moment, this power is extremely expensive.
“When the wind turbine blades are covered with ice, they need to be turned off,” said Joshua Rhodes, an associate researcher who focuses on energy at the University of Texas at Austin.
About half of Texas’s wind turbines were down on Sunday morning because of the ice and cold. However, those that are working are generating more energy than expected for this time of year, Ercot’s Woodfin said in an interview.
Mills that are operating only partially may also be affected by high prices. Projects that commit to providing 50 megawatts of energy at a given time, but produce only 20 megawatts, may need to buy the difference at the market price, said Lee Taylor, executive director of the clean energy analysis firm RESurety.
Among the other markets that are changing with the cold:
Gas in Chicago reached $ 220 per million British thermal units, traders said. Physical gas was flowing for up to $ 300 at a Texas hub. Oklahoma gas prices fluctuated between $ 50 and a $ 600 hike. Local gas prices in the eastern US remained subdued amid milder temperatures, valued anywhere from $ 4 to $ 12 in the US. Friday, show the price data compiled by Bloomberg.
(Updates impacting Texas energy markets.)
For more articles like this, visit us at bloomberg.com
Subscribe now to stay up to date with the most trusted business news source.
© 2021 Bloomberg LP