Texas winterization has economic basis: Fed

Solutions to prevent future winter storm blackouts in Texas are "economically justified" based on analysis, the Federal Reserve Bank of Dallas said in a report issued today.

"Our analysis indicates winterizing for extreme winter weather events appears financially reasonable," the group said, suggesting the possibility of insulating power plants to addressing the "efficacy of intermittent renewable generation".

The Federal Reserve Bank of Dallas noted that no single source of power generation was to blame for the outages in Texas during the middle of February this year mirroring analysis by the Electric Reliability Council of Texas.

"While industry sources report gas production difficulties occurred because of wells and other such installations freezing, the bigger disruption began when power was cut to the wells, processing plants and compressor stations that move the gas into and along major pipelines serving power plants," the group said.

Approximately 38 of 176 gas processing plants shut down because of weather conditions and power disruptions, with gas production falling by 45pc from 13-17 February, according to the analysis.

The Fed's Dallas branch estimated that the freeze and outages cost Texas' economy $80bn-$130bn in losses both directly and indirectly.

Winterizing standards on new oil and gas wells could offer a targeted long-term solution, while a faster, larger and affordable solution would be prioritize electricity delivery to gas infrastructure, the bank said. Winterizing the 162 gas-powered plants in Texas could cost up to $95mn, the group said, using adjusted data from a joint study by the Federal Energy Regulatory Commission and North American Electric Reliability Corporation on winter power outages in Texas and New Mexico in 2011.

The Fed estimated costs for totally winterizing Texas' power infrastructure at approximately $430mn/yr.

By David Haydon