(Bloomberg) – The Arctic freeze hitting the central US has gradually come to a standstill in Texas, increasing pressure on energy prices, which are already trading at unprecedented levels.
The operator of the state’s power grid has ordered transmission companies to reduce the voltage on the system while people push up heaters. Interruptions will be implemented for up to 45 minutes at a time for neighborhoods and small businesses. Major industrial customers have previously switched off the power under pre-agreed emergency plans. In Houston, the city’s major utilities said most customers would be affected there, with interruptions likely to last longer than an hour.
“Energy conservation is critical,” the network operator, the Electric Reliability Council of Texas, said in a message on its Twitter account on Monday. ‘We call on Texans to put safety first at this time. Traffic lights and other infrastructure may be temporarily without power. ”
About 800 daily records for cold temperatures were set in the past week as the Arctic air pushed as far as the Gulf of Mexico, sending the energy markets. Winter storm warnings, advice and watches range from New Mexico to Maine, with temperatures in Fargo, North Dakota, dropping to about minus 18 Fahrenheit (minus 28 degrees Celsius) early Monday. “It’s an incredibly busy watch and warning card,” said Bob Oravec, a forecaster at the U.S. Weather Forecast Center.
Earlier, electricity prices at the West Pivot in Texas exceeded the $ 9,000 per megawatt hour limit, up 3,466% from Friday, according to data compiled by Bloomberg. LNG exports from the U.S. also declined to freeze-closed ports and wells, and oil production also took a hit, with traders estimating several hundred thousand barrels a day in Texas likely to be affected. Intermediate futures in West Texas rose as much as 2.5%.
The storms will largely miss major cities along the East Coast, Oravec said. Although there may be avalanches and ice in New York and Boston, most of the congestion will occur Monday through Tuesday in the state of New York and inland New England.
Cool temperatures and a hurricane of storms in the US follow other instances of extreme winter weather sweeping ports and boosting energy markets in Asia and Europe. Texas, which is not accustomed to the full rage of winter, gets a great taste. President Joe Biden declared a state of emergency and mobilized federal aid to help local response.
In Houston, there are long queues to refill household propane containers and firewood has been sold out. The National Weather Service says the city can pick up as much as 5 inches of snow overnight, as well as ice and snow. It is hit Wednesday by another storm bringing ice and sleet.
The Dallas-Fort Worth area can drop from 10 to 15 inches of snow overnight. More snow may follow on Wednesday. “It’s going to be a cold week,” said David Roth, a forecaster at the U.S. Weather Forecast Center. “The southern plains have a cold pattern and it’s going to take a while before they break out.”
The extra demand from consumers in response to the cold seems to be catching on a lot in the local US energy market, and chaos has reigned over the past few days.
Ercot expects power demand to peak on Monday and Tuesday and break a record set during a 2019 summer heatwave. “We will expect to be in emergency operations until at least Tuesday morning tomorrow,” Dan Woodfin said. a senior director at Ercot.
In the natural gas market, spot prices have also risen to extreme levels in some areas. Prices in Oklahoma have risen more than 4,000% since Wednesday. According to one trader in Cheyenne, Wyoming, the British thermal unit showed prices up to $ 350 per million, according to traders who asked not to be identified because the information was not disclosed. By comparison, the fuel received low single digits at both locations a week earlier.
Frozen turbines
A mixture of icy temperatures and precipitation threatens to paralyze wind farms in Texas. It would be devastating for power stations with contracts to supply a certain amount of electricity at specific times if they would rather need it on the market to meet their obligations. At the moment, the power is extremely expensive.
“When wind turbine blades are covered with ice, they have to be closed,” said Joshua Rhodes, a research fellow who focuses on energy at the University of Texas at Austin.
About half of the wind turbines in Texas were unusable on Sunday morning due to ice and cold. But those in progress are increasing more power than predicted for this time of year, Woodfin of Ercot said during a briefing.
Power stations that only partially work can also be squeezed by high prices. Projects committed to delivering 50 megawatts of energy within an hour but delivering only 20 megawatts may have to buy the difference at the market price, said Lee Taylor, CEO of RESURety.
Among the other markets moving in the cold:
The traders said gas in Chicago reached $ 220 per million British thermal units. Physical gas fetched as much as $ 300 in a Texas center. Oklahoma gas prices fluctuated between $ 50 and the highest of $ 600. muted amid lighter temperatures, estimated to be between $ 4 and $ 12 on Friday, the price data compiled by Bloomberg shows.
(Updates that are impacting Texas’ energy markets throughout.)
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