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The Texas Power Crisis, New Home Construction, and Electric Heating – Energy Institute Blog

12 min read

No U.S. state has constructed as many new houses as Texas over the past decade and most of them use electrical warmth.

There’s loads of blame to go round for the lethal energy outages in Texas final week. A lot of the eye, appropriately, has been targeted on the availability facet — from energy plant outages, to freezing pure fuel pipelines, to lowered wind and nuclear era.

However in right this moment’s weblog I wish to deal with electrical energy demand. How is it potential that Texas demand was in a position to attain 69 gigawatts within the winter? 

To grasp this you must return just a few years. Popping out of the nice recession, Texas launched into an unbelievable binge of recent housing building. No U.S. state has constructed as many new houses as Texas over the past decade, and most of those houses use electrical warmth.

 

Go Huge or Go Residence

Texas leads the nation in new residence building. Between 2010 and 2019, 1.5 million new housing items have been constructed within the state. Over this time interval the inhabitants of Texas grew 15%, including nearly 4 million folks. 

To place this in perspective, that is nearly twice as many new houses and twice the inhabitants progress as California, a state with over 10 million extra folks. Among the many top-20 metropolitan areas with essentially the most new houses in 2019, California solely has a single metropolis (Los Angeles), in comparison with Texas with 4 (Houston, Dallas, Austin, and San Antonio).

This sample isn’t a coincidence. Texas approaches its housing market very like it approaches its electrical energy market with a heavy emphasis on the free market and minimal authorities laws. An often-used index of residential land use laws ranks Texas cities among the many best locations within the nation to construct new housing, whereas rating California cities among the many hardest.

 

Feeling The Electrical Warmth

Now mix this housing progress with a long-running historic pattern towards electrical heating. In 1950, lower than 1% of Texas houses used electrical energy as their main heating gas. Electrical heating in Texas has elevated steadily since that point, reaching 8% in 1970, 40% in 1990, and 61% in 2018. Since 2010, 62% of houses in-built Texas use electrical heating.

Why a lot electrical heating? The single most essential issue is low electrical energy costs. The typical residential worth for electrical energy in Texas is lower than 12 cents per kilowatt hour, beneath the nationwide common and manner beneath states like California (19 cents),  Massachusetts (22 cents), and Hawaii (32 cents).

Texas’ local weather can also be conducive to electrical warmth. Throughout a standard yr, Texas households expertise fewer than 2000 heating diploma days in comparison with, for instance, over 9000 in Minnesota, so electrical heating with its decrease capital and set up prices is a extra economical possibility.

 

Add in Historic Low Temperatures

Now take the 7 million houses in Texas with electrical heating, add in record-low temperatures — in some circumstances reaching 100-year lows — and also you get report breaking winter demand ranges for electrical energy. Texas final week was colder than Alaska, with temperatures in Dallas hovering within the single digits. 

Houses in Texas are usually much less well-insulated than houses in colder elements of the nation. Sure, it will get scorching in Texas, however the typical indoor/out of doors temperature differential on scorching days tends to be a lot smaller than the standard temperature differential on chilly days, so houses in colder elements of the nation are insulated to a better normal.

Consequently, a single residence can simply use 5000 watts for heating. Many Texas houses use rather more, however 5000 watts could be the equal of half of a 10KW electrical furnace, or two 2500 watt baseboard heaters, or a bit of greater than three 1500 watt transportable heaters. Many houses in Texas are additionally being constructed with warmth pumps. Typically warmth pumps are extra energy-efficient than electrical resistance heating — however these effectivity advantages shrink significantly throughout very chilly climate.

7 million houses multiplied by 5000 watts yields 35 gigawatts!  Usually, these items could be biking on and off, however with polar vortex situations most of this gear would have been operating full out. Add this to electrical water heating and the remainder of residential load, plus industrial and industrial, and also you get to 69 gigawatts.

 

An Alternative for Dynamic Pricing

Assembly this progress in electrical heating is a severe problem and it’s fairly clear that the Texas market final week was less than the duty.  As I mentioned earlier than, it appears appropriate that many of the consideration has been targeted on failed alternatives to weatherize energy vegetation and different supply-side issues.

However there was additionally a missed alternative on the demand facet. Texas has retail selection for electrical energy, however the overwhelming majority of Texas prospects face electrical energy costs which are too static, too rigid, and don’t reply to market situations. Economists have been advocating dynamic costs for many years, however adoption has been gradual. 

Living proof. Whereas wholesale costs within the Texas market climbed final week to $9,000/MWh, the overwhelming majority of electrical energy prospects in Texas continued to pay retail costs near $120/MWh, barely 1/one centesimal of the true marginal price.

Not seeing these excessive costs, Texas customers had little incentive to preserve. You had a feast or famine — with tens of millions of customers at an all-you-can-eat buffet — whereas tens of millions of others confronted tragic blackouts and, basically, an infinite worth.

If everybody as an alternative had turned their thermostats to a cold, however manageable, 65°, this might have actually helped the state handle the emergency. As Severin Borenstein identified after the California energy outages final August, even modest changes to the thermostat can save loads of electrical energy.

Dynamic pricing permits prospects to pay decrease costs all through 99% of the yr, in trade for going through a lot larger costs when provide is tight. Quite a few research have documented that dynamic pricing yields substantial demand reductions (right here, right here, right here, and right here).

You will have examine households who paid huge electrical energy payments final week. 29,000 out of Texas’ 11+ million prospects purchase their electrical energy from Griddy, a retailer that fees prospects wholesale costs for a month-to-month charge of $9.99/month. This can be a very excessive model of dynamic pricing. The proof exhibits that you just don’t want such excessive worth adjustments to encourage conservation. Furthermore, it’s easy to include hedging into retail contracts to guard prospects from these outcomes.

With 28GW of compelled outages in Texas final week, it’s unlikely that dynamic costs alone may have closed the hole between demand and provide. However dynamic pricing is the quickest and least expensive approach to construct flexibility into the market, and may play an essential position shifting ahead.

 

Sustain with Power Institute blogs, analysis, and occasions on Twitter @energyathaas.

Advised quotation: Davis, Lucas. “The Texas Energy Disaster, New Residence Development, and Electrical Heating” Power Institute Weblog, UC Berkeley, February 22, 2021, https://energyathaas.wordpress.com/2021/02/22/the-texas-power-crisis-new-home-construction-and-electric-heating/

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