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ASSESSMENT OF ENERGY SYSTEM RELIABILITY FAILURES DURING THE EXTREME COLD WEATHER
EVENT IN THE ERCOT REGION

April 14, 2021
2736

By John Dulude, PE, MBA & Paul Banks, PG


INTRODUCTION

According to Accuweather, the damage costs from the winter storm in mid-February
could be as high as $130 billion in Texas alone. In addition to the extreme cold
conditions, loss of power was a contributor to the massive damages Texans
suffered.

The purpose of this white paper is to serve as an initial overview and
assessment of electrical system reliability failures experienced during the
extreme weather event that occurred within the Electric Reliability Council of
Texas (ERCOT) Interconnection service territory from February 14, 2021 until
February 18, 2021.[1] The Southwest, Midwest, and Northeast experienced an
extreme winter weather event in February 2021. The ERCOT service area underwent
extreme winter weather from February 14 through February 18, 2021, with record
low temperatures for much of the state of Texas. Those extremes created
significant operational (equipment), electrical system (grid), fuel constraints
and curtailments as with liquid natural gas (LNG) pipelines, and market
(pricing) disruptions. A total of 356 generating units or approximately 50
percent of the total generating assets were forced offline during the event
within the ERCOT service area. Frequency was ultimately impacted and registered
below the 59.4 Hz limit for more than four minutes. Load shedding began on
February 15 and reached a peak of approximately 20,000 MW. Load shedding was
required for more than 70 hours before full system load could be restored.

There were likely several triggers for the number of forced outages related to
the extreme weather but generally, they appear to fall into two primary
categories. These categories are 1) the inability of a unit to either start or
maintain operational status related to weatherization, including both fuel-based
facilities as well as renewables—primarily wind—and 2) reduction or loss of
priority reassignment of natural gas for gas-fired facilities. It should be
noted that there has been significant attention focused on wind assets, but the
facts indicate that all resources were substantially impacted with no one
category necessarily more affected than others.

There are more likely other events related to icing of transmission and/or
distribution systems that may have contributed to loss of service/contingent
business interruptions of power, but these are beyond the scope of this paper.

ERCOT is one of nine Independent System Operators (ISOs) in the U.S.[2] and is a
membership-based 501(c)(4) nonprofit corporation, governed by a board of
directors, that is subject to oversight by the Public Utility Commission of
Texas and the Texas Legislature.[3] The Texas Legislature enacted laws which
govern all activities of ERCOT under the Public Utilities Regulatory Act (PURA)
Section 39.151.[4] ERCOT works with the Texas Reliability Entity (Texas RE),
which is the Federal Energy Regulatory Commission (FERC)-approved Regional
Entity for the ERCOT region.[5] In addition, Texas RE has been authorized by the
Public Utility Commission of Texas (PUCT) and is permitted by North American
Electric Reliability Corporation (NERC) to investigate compliance with the ERCOT
Protocols and Operating Guides, working with PUCT staff regarding any potential
protocol violations.[6]

The focus of this paper is to evaluate the event based on initial reports,
identify current processes and procedures that are in place in support system
reliability, identify vulnerabilities from initial reports and data, and to
examine what, if any, immediate actions may be appropriate to accelerate
improvements and mitigate risk for future events. This narrative utilizes an
approach like a typical root cause process to evaluate the response challenges
and failures of the ERCOT electric system during the February 2021 winter event.
This paper should not be construed as a formal, exhaustive, and/or complete root
cause analysis that would encompass a more detailed evaluation of equipment and
operational performance of the ERCOT system.


EVENT SCHEDULE

On February 14, 2021, an extreme cold weather event began to take place in the
ERCOT service area. The event lasted through February 18, 2021. Total available
generation prior to the event was 107,514 MW. By Monday, February 15, 2021, the
ERCOT system shed 20,000 MW of load. The peak loss of generation reached 52,277
MW or 48.6 percent of the total available generation. On Sunday, February 15,
demand for power reached a new high for the ERCOT service area at 7:06 PM of
69,222 MW. From approximately Monday, February 15, through Tuesday, February 16,
very little improvement in generation availability was achieved. By Wednesday,
February 17, there were small gains in net generation; then, subsequently, as
temperatures increased, normal operations and generation capacity were returned
by Friday, February 19. It is important to note that normal operations for ERCOT
does not necessarily entail full power restoration at the delivery point or to
the end user. Simply put, normal operations for the ERCOT electrical grid does
not mean that all industrial, commercial, or retail users had their electrical
service restored at this time but rather, generation and transmission
capabilities had been restored to pre-event levels.


DISCUSSION

 System Resilience & Reliability

There are generally two components associated with grid architecture which were
impacted by the severe weather event: resilience and reliability. Grid
resilience is the ability to withstand grid stress events without suffering
operational compromise or the ability to adapt to the strain. It is largely
about what does not happen to the grid or electricity consumers.[7] Simply put,
resilience is the ability of the electrical system to strain or deform without a
sustained outage.

Reliability, on the other hand, is a measure of behavior once resilience is
broken. The start of a sustained outage is the transition point from the domain
of resilience to the domain of reliability.[8]

During this extreme winter event, ERCOT managed the system to satisfy the
parameters for reliability within the ERCOT regulatory, operational, and market
constraints at the time of this extreme weather event to avoid a total system
failure. Emergency system measures utilized load shedding, to avoid a complete
compromise of the electrical system. While emergency measures may have been
necessary to avoid total system failure, the more significant question is
whether the reliability parameters were appropriate. The loss of electrical
service to more than 4 million customers within the ERCOT service territory
during very unusual, yet not necessarily unique, winter weather conditions
certainly brings into question how reliability parameters were established for
such an event and to what extent the impacts should have been anticipated.

One of the primary components of grid reliability is availability of resource
reserves that can be deployed to the grid during a sustained outage of
generation resources. In the case of this event, both online generation as well
as resource reserves, including standby and backup generation resources, were
affected by the extreme temperatures and were not available to meet load demand.
This, in turn, necessitated load shedding to maintain the real-time balancing of
supply and demand.

System Preparation

Prior to this event, the ERCOT service territory experienced similar extreme
cold weather events during the first week of February 2011 as well as in 1983,
1989, 2003, 2006, 2008, and 2010.[9] The following was summarized in the
Executive Summary of the 2011 FERC Staff report:

“Going into the February 2011 storm, neither ERCOT nor the other electric
entities that initiated rolling blackouts during the event expected to have a
problem meeting customer demand. They all had adequate reserve margins, based on
anticipated generator availability. But those reserves proved insufficient for
the extraordinary amount of capacity that was lost during the event from trips,
derates, and failures to start.”

The report goes on to say:

“The actions of the entities in calling for and carrying out the rolling
blackouts were largely effective and timely. However, the massive amount of
generator failures that were experienced raises the question whether it would
have been helpful to increase reserve levels going into the event. This action
would have brought more units online earlier, might have prevented some of the
freezing problems the generators experienced, and could have exposed operational
problems in time to implement corrections before the units were needed to meet
customer demand.”

Essentially, the findings of that report would appear to align with the results
from the 2021 extreme winter storm event. The suggestions of that report
included 26 recommendations to improve reliability performance during an extreme
winter weather event. One specific requirement, highlighted from Recommendation
11, indicated that, “NERC concluded there would be a reliability benefit from
amending Reliability Standards to require Generator Owner/Operators to develop,
maintain, and implement plans to winterize plants and units prior to extreme
cold weather, in order to maximize generator output and availability.”[10]

Follow-Up from Previous Extreme Winter Weather Events

Both the timing (February) and type of extreme weather event in 2011 and 2021
are similar. In 2021, however, there was a significantly greater loss of
generation due to forced outages as well as the total number of units that were
unavailable due to forced outages. Frequency deviations—resulting from demand
exceeding supply—became more critical during the 2021 event. Given that
recommendations were developed following the 2011 event, the question remains as
to why similar events would produce similar results, though it should be noted
that the 2021 event was more “extreme” in terms of low temperatures.

A status review of recommendations from ERCOT’s February 24, 2021 Emergency
Meeting indicates that, even though many actions had been taken, the enforcement
component to verify that generation owners weatherized their facilities appears
to have been insufficient. There are approximately 680 generating units within
ERCOT. According to ERCOT, approximately 80 units per year can be spot checked.
That is slightly more than 10 percent per year of the total number of units. One
possible vulnerability is the need for additional inspection/assessment support
so that more frequent spot checks can be accomplished, with additional follow up
as needed, to assure proper weatherization measures are implemented in
accordance with FERC/NERC 2011 recommendations.

Authority for Enforcement

According to Slide 17 of the ERCOT Emergency Meeting presentation:[11]

“Generation owners and operators are not required to implement any minimum
weatherization standard or perform an exhaustive review of cold weather
vulnerability. No entity, including the PUC or ERCOT, has rules to enforce
compliance with weatherization plans or enforce minimum weatherization
standards.”[12]

As mentioned earlier, ERCOT performs site visits to review compliance with
weatherization plans. However, according to ERCOT, “the only entity that can
confirm that a plant is weatherized to any particular standard is the entity
that owns the plant.”[13]

A review of other Independent System Operator/Regional Transmission Organization
(ISO/RTO) systems such as PJM Interconnection, LLC, shows that formal
requirements for cold weather guidelines exist along with a provided checklist
of requirements. PJM Manual 14D: Generator Operational Requirements, Appendix
N,[14] specifically provides a checklist, safety focus, and annual training
requirements. The list includes personnel preparation, staffing needs, and
equipment preparation.  Appendix N of that manual specifically provides a
checklist, safety focus, and annual training requirements for cold weather
conditions.[15] The list includes personnel preparation, staffing needs, and
equipment preparation. Compliance enforcement includes penalties if certain
measures are not in place within specified schedules.

According to the PJM’s standards for mandatory enforcement, Section 215 of the
Federal Power Act requires the Electric Reliability Organization (ERO) to
develop mandatory and enforceable Reliability Standards, which are subject to
FERC review and approval. Commission-approved Reliability Standards become
mandatory and enforceable in the U.S. according to the NERC Implementation Plan
associated with the Reliability Standard, as approved by the Commission.[16]
Pursuant to the Energy Policy Act of 2005 (EPAct 2005), Congress expanded FERC’s
role and jurisdiction under the Federal Power Act (FPA) by adding a new Section
215 pertaining to electric grid reliability. Section 215(e) of the FPA
authorizes the Commission or an Electric Reliability Organization (subject to
review by FERC) to impose a penalty on a user, owner, or operator of the bulk
power system for a violation of a Reliability Standard.[17]

Because the transmission grid that the ERCOT independent system operator
administers is located solely within the state of Texas and is not synchronously
interconnected to the rest of the United States, the transmission of electric
energy occurring wholly within ERCOT is not subject to the Commission’s
jurisdiction under certain enforcement sections of the Federal Power Act. Bulk
electric system reliability has been delegated through a delegated authority
agreement between NERC and Texas RE that assigns compliance and enforcement
authority to Texas RE for purposes of assuring NERC reliability standards are
maintained for the bulk electric system. Determining whether Texas RE has
compliance and enforcement authority regarding weatherization of generating
facilities would require a more detailed assessment of the representations in
the ERO agreement between NERC and Texas RE.

ERCOT is an “energy only” system with no capacity market. What is the need and
potential benefit of a capacity market? A good analogy is provided by PJM in its
description of a capacity market:

“Capacity represents a commitment of resources to deliver when needed,
particularly in case of a grid emergency. A shopping mall, for example, builds
enough parking spaces to be filled at its busiest time – Black Friday.
The spaces are there when needed, but they may not be used all year round.
Capacity, as it relates to electricity, means there are adequate resources on
the grid to ensure that the demand for electricity can be met at all times.”[18]

A capacity market has been suggested as potentially incentivizing additional
generation assets that could serve as added backup generation during unusual
circumstances such as an extreme weather event. The state of Texas has not
implemented a capacity market within ERCOT; rather, it relies on market rules to
incentivize the availability of additional capacity assets.

It is beyond the scope of this paper to assess the overall planning process for
adding either firm generation or backup generation within the ERCOT service
territory. There are several guides and related documents that are relevant to
system expansion, including expansion of generation within the ERCOT service
area. They are identified in the ERCOT Planning Guide (Planning Guide), dated
January 2021. If there is a conflict between the Planning Guide and Protocols,
any Public Utility Commission of Texas (PUCT) Substantive Rules or the NERC
Reliability Standards, then such PUCT Substantive Rules, NERC Reliability
Standards, and the Protocols shall control.[19] It is not clear at this time
whether Texas RE, on behalf of ERCOT and in accordance with NERC requirements,
can or has implemented compliance enforcement either related to or in
anticipation of generation for this or other extreme weather events.
Weatherization and associated availability of generation could be one component
of resolving grid performance issues that assure compliance with specific NERC
operational guidelines. It appears that issues related to the lack of
weatherization of generation assets contributed to the significant load shedding
associated with the 2021 extreme winter weather event.

The Texas legislature passed a law after the 2011 weather event that required 1)
mandatory reporting of emergency operations and 2) independent review by the
PUCT.[20] As part of the report following the 2011 extreme cold weather event,
FERC Staff recommended that winterization practices for Texas be mandatory and
that the legislature grant the PUCT the authority to impose penalties for
non-compliance as well as hold senior management responsible for a particular
generation asset to review and acknowledge that their winterization plans were
appropriate.[21]

Standard of Care

Standard of care generally refers to the duty of a professional to provide
services as expected to be provided by similar professionals under similar
circumstances.[22] In the case of generation assets within the ERCOT service
area and, more importantly, performance of those assets during the most recent
extreme weather event, there is a standard of care that a reasonable
owner/operator would be expected to take to assure that their facilities were
available. Whether those standards were met is yet to be determined but there
will certainly be substantial review as to whether reasonable care was
appropriately applied to the weatherization of generation assets. From all
current indications, one of the weak links in the overall performance within
ERCOT appears to be related to a lack of sufficient weatherization of generation
assets.

So, what should reasonable standard of care related to weatherization of
electrical grid assets, and, more specifically, generation assets take into
consideration? According to the previous FERC findings, reasonable standard of
care includes, but is not limited to:[23]

 * Consideration during plant design
 * Equipment and material selections
 * Maintenance and inspections of its freeze protection elements
 * Evaluation of specific freeze protection maintenance items
 * Inspection and maintenance of heat tracing equipment
 * Inspection and maintenance of thermal insulation
 * Inspection of valves and piping
 * Use of wind breaks/enclosures
 * Proper training of personnel specific to extreme weather events

In addition, consideration should be given to any changes or modifications
during the lifecycle of the facility as well as to how those changes may impact
current weatherization or require additional weatherization.

ERCOT stated in its initial findings after the 2021 event that generation owners
and operators are not required to implement any minimum weatherization
standard.[24] However, this may not relieve owner/operators from what would be
considered a reasonable standard of care, given the importance of the product
provided and the potential consequence if that product is not delivered.


CONCLUSION

There will be a number of detailed follow-up assessments of this winter storm to
determine root cause of system failures, potential contingent business
interruption, system vulnerabilities, and improvements required to mitigate risk
for future events.

Regarding system improvements, an independent and detailed audit and assessment
of weatherization (i.e., what worked, what needs to be improved, etc.) at all
generating facilities would be an important first step, especially from the
perspective of generation owners and operators. Periodic critical review of
performance is an important indicator to customers, shareholders, and regulators
that reasonable standards of care are being considered and updated as needed. By
self-initiating this type of detailed weatherization audit, owners/operators
will also be in front of the eventual regulatory examinations that will
certainly follow such an event.

Another important consideration is the potential impact this winter storm had on
Environmental, Social, and Governance (ESG) criteria performance—perceived or
actual. ESG is used to measure the sustainability and societal impact of an
investment in a company or business. This is a particularly important
measurement for private equity and other investors and has a growing interest
for customers as well.

Questions that should be considered include those seeking to understand how the
recent performance of a facility or system affected:

 * Public image and public health and safety
 * Reputation
 * License to operate
 * Regulatory scrutiny
 * Attraction of future investment
 * Ability to obtain insurance coverage and cost of that coverage
 * Shareholder value
 * Pricing impacts and effect on customer rates

All these questions and the associated answers ultimately go directly to the
bottom line of a company’s financial performance. A materiality assessment of
ESG programs and attributes following this extreme weather event would provide a
baseline measure of potential impact from the storm event as well as a measure
of improvement going forward.

Both independent weatherization audit assessments and materiality assessments of
ESG programs and attributes would have an immediate and measurable benefit to
energy providers as well as their customers.


ACKNOWLEDGMENTS

We thank our colleagues John Dulude, PE, MBA, Vice President – Energy Transition
& Impact Assessment and Permitting (J.S. Held), Paul Banks, PG, Executive Vice
President – EH&S Practice Lead (J.S. Held) & Chris Norris, PMP for providing
insight and expertise that greatly assisted in this research.


REFERENCES

 1.  Katherine Blunt & Russell Gold. (February 19, 2021). The Texas Freeze: Why
     the Power Grid Failed. Wall Street Journal.
     https://www.wsj.com/articles/texas-freeze-power-grid-failure-electricity-market-incentives-11613777856
 2.  ISO/RTO Council. (Archived 2012-12-27).
     http://www.isorto.org/site/c.jhKQIZPBImE/b.2603295/k.BEAD/Home.htm
 3.   NERC. https://www.nerc.com/Pages/default.aspx
 4.  ERCOT. http://www.ercot.com/about
 5.  ERCOT. Bill Magness. (February 24, 2021). ERCOT Presentation, Urgent Board
     of Directors Meeting. “Review of February 2021 Extreme Cold Weather Event,
     February 24, 2021.”
 6.  Texas RE.
     https://web.archive.org/web/20130328213848/http://www.texasre.org/about/Pages/Default.aspx
 7.  JD Taft, PhD. (November 2017). Electric Grid Resilience and Reliability for
     Grid Architecture.
 8.  FERC Staff. (August 2011). Report on Outages and Curtailments During the
     Southwest Cold Weather Event of February 1-5, 2011, Executive Summary.
 9.  PJM Operations Planning Division, PJM Manual 14D: Generator Operational
     Requirements, Revision: 53. November 23, 2020. Appendix N, P. 145.
 10. NERC Mandatory Standards Subject to Enforcement.
     https://www.nerc.net/standardsreports/standardssummary.aspx
 11. FERC Enforcement Reliability.
     https://www.ferc.gov/enforcement-legal/enforcement/enforcement-reliability
 12. ERCOT Planning Guide. January 1. 2021, P. 1-1.
 13. Insureon. https://www.insureon.com/insurance-glossary/standard-of-care



 * TAGS
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 * ERCOT Region
 * Extreme Cold Weather
 * John Dulude
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 * power
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 * Southwest
 * Texas
 * weather
 * weatherization

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