Rolling Blackouts in Texas? One Easy Cure

Will the lights stay on in Texas this summer? With record energy demand and even higher energy demand this week, there are some doubts. What may be a solution? Greater focus should be placed on energy efficiency to reduce near and long-term risk.

Soaring Demand for Power

The Texas electricity market continues to hit record power demand highs. The most recent record high was 73,259 MW on Thursday. Demand is expected to go as high as 75,596 MW some time in the next few days as record temperatures hit the area. This will be close to 6,000 MW higher than average over the last few years, about an 8% increase from the previous year.

More importantly, this is almost 3,000 MW higher than was anticipated April 2018 when ERCOT made its last summer peak demand prediction for the summer of 2018.  With a generation capacity of 78,000+ MW ERCOT had planned for a reserve capacity of 5,428 MW during the 2018 summer peak. If the new prediction for this week of a peak demand of 75,529 MW happens, that reserve capacity goes down to 2,588 MW.

The Razor’s Edge

2,500 MW of reserve capacity is not a lot to play with when you start looking at the possible generation outage scenarios, such as natural gas plants have mechanical difficulties or the wind slows down in west Texas. ERCOT looked at a bunch of different scenarios to determine the potential risks that could eat into the reserve margin. When the reserve was north of 5,000 MW ERCOT saw that there were three scenarios where the reserve margin would be used. With the new possible reserve margin, all risk scenarios show inadequate capacity.

When there is inadequate capacity, we may begin to see brown outs and rolling black outs. Some of this threat is limited by demand response and load management programs that allows for voluntary reduction of loads by large energy users. This does not provide a lot of comfort because the demand response and emergency response service only gives us about 2,300 MW of spare capacity.

To sum up, Texas is running on a razor thin amount of reserve power this summer and there is not much that can be done in the short term to increase generation capacity. Due to such low electricity prices in Texas there is no appetite to build new merchant generation plants in Texas. Operators cannot make money in the current market due to such low prices throughout the year. Operators only get paid when they run. ERCOT is not a capacity market where generators get paid to have additional capacity onsite and standing by. After this summer, if peak prices get high enough for long enough period of times, and these higher summer prices appear as if they are here to stay, we may see some entering the market. But don’t hold your breath.

What to do? What to do?

There is one relatively easy solution. It doesn’t get the attention of a lot of people because it is not a shiny solar panel or a big turbine. Typically, most people never see it or know it is there. It is energy efficiency. Unfortunately, the state of Texas is a laggard at energy efficiency.

How Texas Compares to Other States in Regards to Energy Efficiency

I am not saying utilities responsible for energy efficiency programs run bad programs. They are very efficient operators of their efficiency programs. They do good work. The problem is that they don’t have to try to hard. The energy efficiency requirements for utilities is very low in Texas. We have the lowest energy efficiency goals by far across the entire United States. These goals are set by the energy efficiency resource standard (EERS). The state of Texas was the first state to adopt an EERS in 1999. We then quickly became laggards and fell of the pace. The image below, although a couple of years old, shows how far Texas lags behind other states in energy efficiency savings goals by utilities.

Everyone in the ERCOT market pays for energy efficiency. You may see it on your bill as the energy efficiency cost recovery factor (EECRF). You may not have noticed it because it is either bundled with other costs on your bill. Even if it was listed it is such an inconsequential piece of your bill you wouldn’t notice it anyway.

Saving Energy is Cheaper than Making Energy

Energy efficiency continues to be on of the cheapest ways to increase the amount of generation capacity in Texas. Solar and wind have come down in price significantly, that is for certain. However, energy efficiency should not be set aside. The United States wastes a lot of energy. If we waste less through energy efficiency programs, we put less stress on the grid and we will not have to be as concerned as to whether we have enough electricity to keep the lights on.

Energy Efficiency Simply Done

It doesn’t take a lot of time and requires minimal disruption to a business or household. It can be as simple as some behavioral change, such as not having every TV on in the house that no one is watching because they are on their IPad or Nintendo Switch.  Other simple things to do would be to buy new high efficiency LED light bulbs ( the light quality is excellent, they last forever and are really not that expensive anymore); adding insulation to your attic and walls; adding weather stripping and caulking to windows and doors; installing ceiling fans and finally, upgrading to a new high efficiency air conditioning system. A lot of options and there are ways to find out what you can do.

A very well kept secret is that utilities provide free residential energy audits. In Texas, call up your utility, not your retail electricity provider (although some are now offering these services) and see who their providers are. We had our house done a few years ago. They came in, did and audit, and on the same day, installed new light builds, added weather stripping, sealed leaks in the A/C duct work and added insulation. You are paying for it with your EECRF so why not take advantage of it. Businesses should do the same thing. There are a large number of energy efficiency programs to take advantage of, but act fast the dollars go very quickly. Which gets me back to one of my pain points, Texas as a state sucks at energy efficiency. Not because of the work of the programs, the utilities do good work, but because of the lack of funding provided to these programs.

Regulators and Legislators Lack Sense of Urgency

Our legislators and regulators have not been convinced that energy efficiency is a priority for the state. The PUCT has actually put a pretty restrictive cap on what utilities can spend on energy efficiency.  If the state, marginally increased its energy efficiency goals under the EERS, and just brought Texas up to the state that is second to last, the amount of dollars would be significantly higher. SPEER, a state-wide energy efficiency organization finds that with modest tweaks to our energy efficiency goals, we should expect about a 10% decrease in energy consumption. That is a significant reduction and impact when we are playing so close to the margins.

There is a pretty clear path to reducing the likelihood of blackouts. The 2019 legislative session is coming up. Let your representative know that you don’t want black outs, you see energy efficiency as a simple fix and you want more funds to support it.

More funds would mean more energy efficiency, which means improved reserve margins which means a much lower likelihood of the lights going out in Texas. Plus your house or business will see lower power costs and probably be a lot more comfortable.

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Three years, three floods

Over the last three years, the Houston region has experienced three 500 year plus rain events.  Will we see another three storms in the next three years? No one can really say. What we can say is that there will be more large flooding events and they are likely to be

1024px-Support_during_Hurricane_Harvey_(TX)_(50)
Port Arthur, TX – US National Guard

more commonly occurring and more intense. According to the National Climate Assessment, communities that are already vulnerable to weather extremes will be stressed further by even more extreme weather events.

The recent major flooding events and the likelihood of future flooding events, does not look good for Houston’s economic viability. People are watching what the City and region will do to start mitigating the impact of these flooding events.

Could Houston or any other City for that matter, have prevented flooding from 51 inches of rain or rain events with a 95% Probable Maximum Precipitation (PMP)? No, they couldn’t.

The 95% PMP was mentioned at a recent event at Baker Institute where Jeff Lindner, Harris County Meteorologist, discussed the rain total amount from Tropical Storm Harvey in Houston. Check out what 95% PMP means, it is mind blowing  to think of that amount of rain falling at one time.

It is not helpful, however, when we have project developers and construction companies, many of them who helped get us into this mess, saying that everything is fine and we don’t need to do anything different. We don’t want to ruin the Texas Miracle with California land-use regulations and other heavy handed government regulation.

Harvey dog
Hurricane Harvey Dog – DOD

Unfortunately, this line of reasoning and belief is not correct, helpful or productive. Things aren’t fine with business as usual. The Texas Miracle, in Houston is under siege, Low cost of doing business and low cost of living does not last if there is regular disruptions to business and our community. Ongoing and regular recovery has a cost and it will be felt across the entire economy, not just in higher taxes, or loss of productivity but a decreasing desire by new companies to locate their business here. Houston is already under a double climate risk. Double in that we are facing increasing intensity of storms and that we have an economic threat as more companies, cities and nations make pledges to be carbon free. We need new industry and companies moving to Houston to diversify the economy. Still 70% of the Houston economy is tied to the oil and gas sector.

I am by no means arguing for heavy handed regulations or the mandating of requirements for land development and stormwater management. These are fightin’ words in Texas and will just end up getting everyone in an uproar. What I am suggesting is that we start looking at development and deployment of voluntary resilience standards; described in a previous post.  These standards are demonstrated techniques that will improve the ability of our storm water management systems, both grey and green infrastructure, to limit the impact of major rain events. By simply building capacity in the market through education and demonstration projects these ideas can be introduced into the market, tested by the market and the ones that make the most sense will get implemented.

Former Houston Mayor Bill White set a great model of how to introduce potentially controversial ideas in the Houston market through the 2004 Green Building Resolution. This resolution mandated that all City building be built to LEED certification standards. What this mandate did to some degree was allow local engineering firms, architects and builders to have the incentive to learn how to build to LEED in a cost effective manner so they can win City projects. The outcome was a better educated building and owner community that understood LEED and how to cost effectively meet these standards. Houston is now one of the national leaders for LEED building and Energy Star. We also must keep in mind, that progress in green building was aided by several of the large oil and gas companies began demanding LEED for their buildings and continue to do so.

The point that is important to keep in mind is there are ways to introduce new standards, hurricane harvey DODmethods and tools in the market without heavy handed regulations. There are ways to incrementally move away from business as usual without significantly impacting economic growth and productivity. There is no reason to continue with business as usual. The evidence is becoming increasingly clear that storm events like Harvey are going to be more common. The world is watching, it’s in our best interest to make the right decision to decrease our flooding risk, otherwise it will be made for us.

Book Review: Drawdown – The Most Comprehensive Plan Ever Proposed to Reverse Global Warming

Title: Drawdown: The Most Comprehensive Plan Ever Proposed to Reverse Global Warming

Editor: Paul Hawken

Publisher: Penguin Books

Year Published: 2017

Price: $17.31

When this book arrived in the mail I was shocked. I was not expecting a book with coffee table dimensions. It is a wonderfully designed book. The solutions are well organized, the writing is accessible to all readers and the pictures are eye-catching.

The genesis of this book came from Hawken’s realization that there is not a comprehensive checklist of technologies and solutions for climate mitigation and climate adaptation. After several years of looking for this list and not finding one, he decided he would need to bring together and work with the top climate experts in the world to come up with a list of solutions that have the greatest potential of reducing emissions and sequestering carbon from the atmosphere. The outcome is the Drawdown organization and this book. The book is just the beginning. It is anticipated that this will be a living plan with regular analysis and updates from Drawdown and found at www.drawdown.org 

The Foreword is provided by Tom Steyer, Founder of NextGen Climate. Here he discusses the importance of identifying innovative solutions to climate change, and particularly not just technological solutions but solutions that work in tandem with natural systems. Steyer sees Drawdown as a roadmap with a moral compass that finally provides a vision that allows all of us to work together to build a cleaner and better world.

In the book over 80 solutions are identified and ranked based on the greenhouse gas reduction potential out to the year 2050. Of the top 20, reductions in the food, energy and the land-use sector are the most commonly seen. The number one solution identified is refrigeration. The problem is the proliferation of refrigeration using hydrofluorocarbons (HFC). HFCs were adopted to replace the ozone depleting chlorofluorocarbons (CFC), hydrochlorofluorocarbons (HCFC). In October 2016, in Kigali, Rwanda, the Montreal Protocol was amended to start the phase-out of HFC. However, with an anticipated 700 million air conditions being in circulation by 2030, many using HFC, this will be quite a monumental task to reign in the use of HFC.

The book provides a concise review of each of the 80 options taking into account reductions in GHG potential, net costs and the net savings of taking action. The authors do a nice job of bringing in real world examples of struggles, as well as success stories of communities and governments implementing these solutions. The solutions are broken into categories of energy, food, women and girls, buildings and cities, land-use transportation and materials. There is also a wish list presented at the end of the book of high value, but not yet fully scaled solutions such as smart highways, the hyperloop, marine permaculture and the artificial leaf.

Solutions are plentiful, both those that are already being implemented, as well as those that have some near-term potential of scaling. The book does a nice job by bringing together high impact solutions to one place for easy access and evaluation. That being said, I would not call the book a comprehensive plan. At the most a comprehensive list, but not a comprehensive plan. It is definitely a call to action. It is inspirational and provides hope and optimism that there is a way to salvage our planet through cost effective emission reducing solutions. But at the end of the book, I was still asking myself what is the plan? Maybe that is asking too much. This book takes a global approach to identify a list of solutions. We probably should not expect it to provide an actual plan to implement these measures at a national or sub-national level.

I believe the book does provide local planners and officials a better idea as to what solutions may be viable, but there still needs to be considerable work at the federal, state and local level to turn the list of solutions into a workable plan. Stakeholders must be engaged and priorities must be identified and set. Communities need to conduct cost benefit analysis to see what is economically practical. Regulations and policies must be changed that would allow for proper valuation and inclusion of these solutions and remove the barriers to their adoption. Finally, for any solution to work or plan to implemented, there needs to be funding. I was hoping this book would begin to present these funding solutions but none are identified. Fortunately, there is growing interest by institutional investors and the market in general to push more funds to climate solutions. 

To sum, it is a great list of solutions. It is well researched and well laid-out. It should be a must-read for any planner, government official or policy maker. For anything to happen in reducing greenhouse gases, it is vital that these solutions are known, quantified and ranked and the book does just that. Learn more at the image below.

Hurricane Harvey: Loss Recovery is not Sustainable

With Hurricane Harvey’s arrival, I felt it was important to continue the discussion on the

hurricane-harvey-nasa-master675
NASA

increasing vulnerability of coastal cities to flooding. Particularly, what cities should be doing to shift from the business as usual reactive strategy of loss recovery and hunkering down, to a more proactive move toward land-use strategy and green infrastructure investment that will reduce climate risk vulnerability.

The science is pretty clear that with the warming of the climate, storm intensity and flooding are likely to increase, particularly along the Gulf Coast. This was well documented in a recent study by NOAA that covered the 2016 1,000 year flash floods in Louisiana. With Harvey, there are estimates of 20 to 25 inches of rain. This is significantly above what our storm water infrastructure can manage. If projections remain as they are as of the writing of this post, the Gulf Coast is going experience flooding levels that it has rarely seen. This will result in significant property damage and a very large number of flood claims being made to the insurance industry, at least by those who have flood insurance. Unfortunately a good portion of residential and commercial properties are under insured or not insured at all.

The insurance industry can cover only so many claims and participate in so many loss recovery events before it stops insuring areas or the premiums become so high properties are not able to purchase adequate coverage. This concern was recently discussed in the Yale Climate Connections podcast titled “Waters Rise, and so does the Cost of Coastal Insurance.” In this podcast, Larry Filer with the Commonwealth Center for Recurrent Flooding Resiliency at Old Dominion University, discussed the rising costs of insuring properties along coastal areas and how with current infrastructure that cannot adequately manage stormwater, insuring these properties is not sustainable. One of the more harrowing remarks made by Filer was “The biggest fear and the biggest concern is that you wake up one day and you realize in your city that you have a large swath of properties that are uninsurable.”

To add to the decreasing ability of insurance companies and programs being unable to adequately insure properties along the Gulf Coast, the federal government, beyond the Federal Flood Insurance program, is also pushing back a bit. According to new FEMA Director Brock Long, local communities need to take more responsibility in reducing natural disaster risk and be less dependent on the federal government to bail them out due to poor land use and infrastructure planning. The Trump appointed Director is actually pushing an idea that was started with the Obama Administration. The thought is to have state and local governments take greater responsibility and pay more for natural disasters, particularly when floods and hurricanes hit. In a recent Bloomberg News report, Long stated ““I don’t think the taxpayer should reward risk going forward…We have to find ways to comprehensively become more resilient.” Here he means the federal taxpayers should not subsidize the risky behavior of local communities. Environmental groups have been pushing for this approach for years. By reducing FEMA’s role in loss recovery, cities and counties will be pushed to take more risk mitigating action, such as adopting and enforcing resilience standards, retreating from flood prone areas, implementing more effective and robust storm water infrastructure and low impact development.

There is little excuse for Cities not to take a greater role in reducing their climate risk. The writing’s on the wall. First, the insurance industry and federal government are saying that can’t sustain the current level of loss recovery payouts and rebuilds. Second, the climate models are not painting a pretty picture of what the future holds.

The time has come for cities to take a more serious look at mitigating climate risk, i.e. floods, droughts, extreme heat, etc. I have discussed in previous blogs about ways that Cities can pay for resilient infrastructure. (here and here) There are also resilience standards that Cities can start putting in place. (here and here) But a first step is to determine risk and start developing a plan. A great free resource is the US Resilience Toolkit. It is a very helpful tool that presents a climate planning framework, tools to identify risk and opportunities and case studies of what other communities are doing. There are organizations around the country that are trying to get communities to become more resilient and should be engaged by local coastal communities to determine options. Also, you can check out Boswell et al’s book on Local Climate Action Planning. It has been out a few years, but is a good primer to get things started.

As I sit here in Houston, just witnessing 2 inches of rain in a 40 minute period, watching water coming over the curb, and with a forecast of another 20 inches by Wednesday, I look to our community leaders and ask when they will move from business as usual reactive strategy of hunkering down and loss recovery, to a more  proactive approach of investing in the appropriate infrastructure. The storms will continue to come, but the possible damage and loss these storms bring is not inevitable, if the right steps are taken.

Uncertainty in Climate Regulations Detrimental to the Environment and the Economy

A variety of climate risks are starting to have a noticeable impact on how we do business. These risks can be physical climate risk, both chronic and acute, which directly Inhofe_holding_snowballimpact operations; financial risks, such as divestment; regulatory/policy risks, such as carbon pricing or risk disclosure requirements; and reputational risks. In the next series of blog posts we are going to take a deeper look at each of these risks. The first will be with regulatory risk.

According to the Global Adaptation and Resilience Investment (GARI) Working Group 2016 survey, 78% of respondents see physical climate risk as being a very important concern and 53% ranked climate regulation risk as a very important issue that must be considered. Within the same survey, 68% of respondents are currently working on strategies to deal with anticipated changes in climate-related regulations.

Organizations must we willing to address the transitional risks associated with new policies and regulations that are likely to be adopted to mitigate climate change. New climate related regulations at the local, state and federal level have been and will continue to be considered. Some of the potential regulatory risks are related to pricing or taxing carbon emissions; change in land use zoning and subsequent loss of property value; new building and construction standards; new business continuity or insurance requirements; more requirements attached to state and federal funding for infrastructure development; and more stringent disclosure requirements. To add complexity to these regulatory changes, there is a distinct possibility that a lot of this action will be happening at the state and local level which will result in a patchwork of regulations and policy across the United States. For example, many state and local governments have vowed to move forward in battling climate change. California is one of the more vocal and active states in regard to climate policy; see the “Preserve California” legislative package.

A key area of interest for me is to what extent these companies are actually acting on these potential regulatory risks. The private sector gets very uncomfortable when there is uncertainty in the regulatory environment. In fact, although regulations are typically not highly desired, many corporations prefer regulatory certainty over a regulatory environment that is in flux. Organizations can at least plan when there is greater certainty. This is why we see some large corporations that have not traditionally been overly excited about climate regulation pushing for a carbon tax. A carbon tax is not too complex and it can be planned for and actively managed by corporations.

Unfortunately, the current Administration is creating a significant amount of uncertainty in the regulatory space. There is a definite desire by the current administration to roll back as many climate related regulations as possible. It appears the Clean Power Plan has largely been put on the back burner and there are a variety of efforts to roll back methane emissions and other Obama-era regulations. However, today July 29th, the US Court of Appeals for the DC Circuit just ruled that the EPA cannot suspend these rules.  This follows an earlier loss by the Administration when the Senate voted to reject the suspension of these rules.

This frenetic policy making process of the current administration to roll back regulations just because the word climate is associated with it is not good policy making. This is particularly a problem when the Administration does not understand the policies they are rolling back and how policy making works, particularly in regards to the dynamic we have in place with the checks and balances from the Courts and the representatives we have on the Hill. Further, for an Administration that is focused on economic growth, this yo-yoing back and forth between rules and regulations is not good for business. It leads to very uncertain business environment that reduces investment R&D, and economic growth.  To track policy uncertainty, Moody’s has published their Policy Uncertainty Index and currently it is at its highest point to date this year.

I am a fan of many of these climate regulations. I would like to see many of them stay in place. That being said, none of them are perfect and there is room for improvement. However, a wholesale rollback without any thought as to the impact on the environment, and particularly here, the impact it has on the ability to conduct business is highly problematic. There are common areas of concern and interest that both sides of the aisle can work on together. We have great examples of bipartisan work from Shaheen and Portman and Murkowski and Cantwell. So if we really want to make “America Great Again” it is important that the current Administration take a deep breath on their regulatory agenda, learn how the federal policy making process works and conduct policy making in a way that actually helps business and our communities.

 

Resilience Design Standards – Another Option for Climate Adaptation

In the last few years, real estate property owners have started taking a closer look climate vulnerability of their properties and the cities where they conduct business. Grosvenor, one of the largest privately owned property business was curious enough to conduct their own study, titled “Grosvenor Report: Resilient Cities.” This study assesses the climate vulnerability and adaptability of the world’s 50 most important cities. Houston, in Grosvenor’s opinion, is one of those cities. For this study, an  adaptive capacity score and a vulnerability score was constructed. Cities were ranked based on how they score in each area. Unfortunately the City of Houston was not a top-performer. Overall it came in the top half, #22. Of the 11 US cities in the ranking, Houston came in last place, at #11.

most and least resilient city graph
Resilient Cities – Grosvenor Report

Further, the City and the State’s adaptive capacity is being tested on a more regular basis. NOAA’s Billion Dollar Weather and Climate Disaster study tells a rather alarming picture of how the state is being tested.

First, is the graphic that shows 6 very large weather events hitting the state in 2016.

Billion-Dollar Weather and Climate Disasters
NOAA – Billion-Dollar Weather and Climate Disasters

Second, we have a graph that shows the number of storms over several years. Most important to pay attention to is the black trend line.

TX Disasters
NOAA – Billion Dollar Climate Disasters

Finally, Texas is the reddest state and I am not talking politics. This map displays in a red gradient the number of billion dollar plus storm events over the time period 1980 to April 2017.

1980 2017 storm events NOAA
NOAA – Billion Dollar Climate Disasters

This is a problem. The cost of doing business in Houston and Texas in general are likely to see significant gains in the near term if trends continue. As mentioned in earlier posts, there is plenty evidence that it will. According to a 2014 ULI report, direct monetary losses as reported by reinsurance companies was over $150 billion in the last decade. It is anticipated that in some places monetary losses for buildings are likely to double which will increase insurance premiums and overall property operating costs. In many cases, real estate owners are looking to absorb these increasing premiums and allocate them out to tenants. This approach is not sustainable for the viability of the business or the community.

A potential solution, not a silver bullet, but part of the silver buckshot needed to deal with climate adaptation, is the adoption by cities of voluntary resilience standards. There are a lot of them and you can check them out in this 2017 Meister Consulting Report titled Voluntary Resilience Standards. The expectation of these standards is that by increasing the resilience of the built environment, the entire community’s resilience is improved. There are a very wide assortment of these standards dealing with new construction and remodels, different building sectors and resilience against certain natural disaster and man-made disaster events. Similar to what the City of Houston did with the LEED process in Houston during the Mayor White administration, it should consider leading by example with resilience standards, particularly since we are dealing largely with critical infrastructure.

Climate Adaptation Planning Frameworks

Cliff_Palace
Cliff Palace in Mesa Verde National Park (Credit: Varien 2006)

Cities have come and gone due to significant changes in weather patterns. Ancient tribes such as the Ancestral Puebloans in Mesa Verde are rumored to have abandoned their Cliff Palace due to significant changes in weather, particularly drought, making life there unsustainable.

The Ancestral Puebloans were forced to migrate away from their lands due to the normal climate cycle and weather patterns. Overtime, humans have become more resilient and adaptable to normal climate cycles and weather patterns. However, more recent human industrial activity is now directly impacting the climate, resulting in more rapid climate change and more severe weather events. This increase in intensity and severity of events are forcing us to think more closely about how we sustain our communities.

As we see an increasing amount significant weather events, the reality of a rapidly changing climate is becoming more apparent. To help prepare for climate change and its impacts, cities are actively working on developing adaptation plans. Some cities are receiving significant support from the Rockefeller Foundation with its 100 Resilient Cities program. Since 2013 the 100 Resilient Cities program has been adding cities. It added its last cohort in 2016. Participating in this program provides resources to the city to bring in a Chief Resilience Officer (CRO). The CRO leads the resilience strategy development and deployment effort. If you are not part of the program but want to build your city’s resilience, don’t fret, the 100 Resilient Cities program provides some resources to get started. Also, if you want some good examples of UScities taking action, check out the activity of Seattle, Nashville and Pittsburgh  in 2017. Pittsburgh is making the biggest splash with the actual release of its resilience strategy in March called ONEPGH.

Some other resources to consider are: