(Bloomberg Opinion) -- Winter Storm Uri last winter left a psychological scar on Texas. Now, when anything like a Blue Norther heads south, the state gets not just weather updates but weather-outage updates, juggling Fahrenheit with gigawatts. The latest cold front seems to have resulted in some localized blackouts but nothing close to last February's collapse, and now we can expect stories about Texas dodging a bullet. Which is great, but wouldn't it be better to not be so exposed to a crisis in the first place?
The focus on outages reflects the nature of the last disaster, when so many plants tripped offline. It also fits with a longstanding approach to energy that stretches beyond Texas: the imperative to boost supply above all else. But this ignores the demand side, which is weird when you consider that it's half of the equation and that the best insurance against not having enough megawatts is not needing so many. It's also weird when you consider that Texas has many levers to pull on the demand side.
One of the biggest, if not the biggest, concerns how Texas households are heated when arctic air comes knocking. Grid operator ERCOT estimates that the peak load on the system last February was almost 77 gigawatts, far higher than the previous winter peak — higher even than the summer peak, which is unusual in air-conditioned Texas. Much of that surge can be explained by home heating systems running all-out to combat the cold.
Somewhere between 6 and 7 million Texas homes rely on some form of electric heating, especially inefficient electric furnaces — which use electrical resistance to heat air that is then forced through vents — or baseboard heaters. Moreover, this isn't New England, so those homes aren't often well-insulated. Hence, in an arctic blast, heaters get switched on and stay on — provided there's power. And they need a lot of power. Just one baseboard heater can require a kilowatt or more, while an electric furnace may use more than 10 kilowatts. Assuming an average of 5 kilowatts, that's 30-35 gigawatts of demand, roughly half of the entire load on the grid. That's before you get into home water heaters, refrigerators and other appliances, plus the industrial and commercial sectors.
Cutting this load by just 10% would be the equivalent of adding three nuclear reactors' worth of spare capacity — and wouldn't cost anything like building three nuclear reactors (or take as long). The American Council for an Energy-Efficient Economy calculates that a program to incentivize homeowners to replace electric furnaces with efficient heat-pumps could, by year five, save more than 6 gigawatts of winter demand in Texas, roughly a tenth of its typical winter peak load. Based on an average heat-pump lifespan of 15 years, the cost works out to about 7 cents per kilowatt-hour, or 45% less than the average residential electricity tariff in Texas.
And this calculation doesn't capture the full range of potential benefits. The change would also reduce the need to build more generating capacity and associated wires, the cost of which ends up in people's bills. It would also address another, less obvious crisis in Texas: energy poverty.
“The inefficiency of our homes acts like a tax on consumers,” says Doug Lewin, an energy and efficiency consultant in Austin. Despite their tariff being roughly 10% below the national average — one reason that so much electric heating is installed — the average monthly bill for Texas residents is the sixth highest in the country, according to the Energy Information Administration. Worse, in a survey of energy poverty using Census Bureau data, almost 38% of respondents in Texas reported forgoing expenses such as medicine or food to pay an energy bill in 2021, second only to Mississippi. Almost 28% reported being unable to pay an energy bill at least once last year — second to none.
Efficiency would alleviate strain not only on the grid, but also on Texans themselves — whether from post-Uri PTSD or merely opening that monthly bill. It's cheaper than therapy, too.
More from Bloomberg Opinion:
- California and Texas Fail the Power Test Together: Liam Dennin
- Is Europe Stuck With a Permanent Gas Crisis?: Javier Blas
- Singapore's Power Spikes Come Down to Old Habits: David Fickling
ERCOT is the Electric Realiability Council of Texas. Peak demand during Winter Storm Uri in 2021 is theoretical, since supply wasn't there to meet it.
For example, in their joint report into the blackouts ("The February 2021 Cold Weather Outages in Texas and the South Central United States") the Federal Energy Regulatory Commission and the North American Electric Reliability Corp. note that additional home heating demand pushed up the load on the grid by almost 10%, or more than 6 gigawatts, between Feb.13 and 14, 2021.
Source: "Energy Efficiency and Demand Response: Tools to Address Texas' Reliability Challenges", ACEEE, Oct. 2021.
"Survey: Millions of Americans Struggling to Keep Up With Rising Energy Costs", HelpAdvisor, 2022.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal's Heard on the Street column and wrote for the Financial Times' Lex column. He was also an investment banker.
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