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(Bloomberg) – The Arctic frost in the central United States has triggered power outages in Texas and is putting pressure on energy prices which are already trading at all time highs.
The state’s electricity grid operator has ordered transportation companies to reduce pressure on the system when people turn up heaters. Outages will be implemented for residential areas and small businesses for up to 45 minutes at a time. Large industrial customers have previously had a power outage as part of previously agreed emergency plans. In Houston, the city’s main utility said most customers would be affected, with outages lasting more than an hour.
“Energy conservation is essential,” grid operator the Electric Reliability Council of Texas said Monday in a message posted to its Twitter account. “We urge Texans to prioritize safety during this time. Traffic lights and other infrastructure may be temporarily without power. “
About 800 daily records for cold temperatures were set last week as arctic air spreads to the Gulf of Mexico, sending gyrations in energy markets. Winter storm warnings, advisories and watches stretch 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 loaded watch and warning map,” said Bob Oravec, senior forecaster at the US Weather Prediction Center branch.
Previously, spot electricity prices at the West Texas hub exceeded the grid cap of $ 9,000 per megawatt hour, a 3,466% increase from Friday, according to data compiled by Bloomberg. LNG exports from the United States also plummeted after ports and wells were shut down by the freeze, and oil production was also affected, with traders estimating a few hundred thousand barrels a day of production in Texas had probably been affected. West Texas Intermediate futures rose 2.5%.
Storms will largely miss major cities on the east coast, Oravec said. While there may be snow showers and ice in New York and Boston, most of the build-up will occur in upstate New York and the New York interior. England, Monday to Tuesday.
Frigid temperatures and a parade of storms in the United States follow other cases of extreme winter conditions this year that have boomed ports and disrupted energy markets in Asia and Europe. Texas, which is not used to the winter fury, is getting a big taste. President Joe Biden declared a state of emergency, mobilizing federal aid to help local response efforts.
In Houston, there are long lines to fill up propane cans and firewood is sold. The city can pick up up to 2 inches of snow overnight, as well as ice and sleet, the National Weather Service said. It will be hit by another storm bringing ice and freezing rain on Wednesday.
The Dallas-Fort Worth area could receive 4 to 6 inches (10 to 15 centimeters) of snow overnight. More snow could follow on Wednesday. “It will be a cold week,” said David Roth, a senior forecaster at the US Weather Prediction Center branch. “The southern plains are in a cold pattern and it will take a while for them to come out of it.
The additional consumer demand in response to the cold seems to have surprised many in the regional energy market in the United States, and chaos has reigned in recent days.
Ercot expects electricity demand to hit an all-time high on Monday and Tuesday, breaking a record set during a summer heatwave in 2019. “We expect to be in emergency operation tomorrow at least. Tuesday morning, ”said Dan Woodfin, a senior manager at Ercot.
In the natural gas market, spot prices in some regions have also reached extreme levels. Prices in Oklahoma have jumped more than 4,000% since Wednesday. A hub in Cheyenne, Wyoming, has seen prices as high as $ 350 per million UK thermal unit, according to traders who have asked not to be identified because the information is not public. For comparison, a week earlier fuel was hitting single digits in both places.
Frozen turbines
A mixture of freezing temperatures and precipitation threatens to cripple Texas wind farms. It would be devastating for power plants with contracts to supply a certain amount of electricity at specific times if they instead had to buy it on the spot market to meet their obligations. At the moment, this energy is extremely expensive.
“When wind turbine blades are covered in ice, they have to be closed,” said Joshua Rhodes, a research associate who focuses on energy at the University of Texas at Austin.
About half of Texas wind turbines were unusable Sunday morning due to ice and cold. Still, those that are working are consuming more power than expected for this time of year, Ercot’s Woodfin said in a briefing.
Power plants that are only partially functioning could also be pinched by high prices. Projects that commit to delivering 50 megawatts of power in a given hour but only produce 20 megawatts may need to buy the difference at market price, said Lee Taylor, managing director of the analytics firm. clean energy RESurety.
Among the other markets operating in the cold:
Gas in Chicago hit $ 220 per million British thermal units, traders said, physical gas cost as much as $ 300 at a Texas hub, Oklahoma gas prices hovered between $ 50 and the top of 600 dollars. moderate amid milder temperatures, valued between $ 4 and $ 12 on Friday, price data compiled by Bloomberg shows.
(Updates impacting Texas energy markets throughout.)
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