TEXAS

Harvey and the future of energy

HOUSTON — The flooding that overwhelmed much of this city last week didn't spare the energy industry. Instead, it provided an argument for a more electrified and decentralized future.

The famed oil refineries in and around Houston shut down, halting gasoline production and pouring pollutants into the air.

The main electric utility here drew praise for keeping power on for scores of customers but had to tackle hundreds of thousands of outages.

Down the Texas coast, high winds caused extensive damage to the power grid. Some areas of the state saw water slow the process of restoring power.

Ultimately, Hurricane Harvey and its remnants cemented both the vulnerability of Texas' energy infrastructure and the crucial role electricity plays in keeping the economy and everyday life running. Houston and the Texas Gulf Coast now face countless questions.

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What could and should be done to lessen the impact of the next big one? Was this a once-in-a-lifetime flooding event or evidence of a new normal? Will the disaster quicken the U.S. shift toward low-carbon electricity, distributed power and less reliance on fossil fuels?

"We need to keep moving the economy as quickly as we can away from these fossil fuel products and towards wind and solar and electrified vehicles," said Daniel Cohan, an associate professor of environmental engineering at Rice University. "In doing so, that reduces our need for the fossil fuel products, and it's what we need to slow down the global warming that's intensifying these storms."

Such a transition will take decades, so Cohan laid out two other central suggestions. One is striving for some kind of protection to keep catastrophic flooding from hampering a large chunk of the nation's refining and chemical capacity. That could help avert "an unfathomable environmental disaster and disaster to our country's energy economy," he said.

The other idea is having better management plans at facilities and more regulatory and financial incentives to help minimize emissions that have been apparent in Texas since Harvey (Greenwire, Aug. 30).

"It's the fuel that's vulnerable, right?" said Adrian Shelley, director of the Texas office of Public Citizen, which tracks consumer and environmental issues. "And it's the fact that we have such a deep concentration of fuel production in this one area that's so intensely vulnerable."

But, in Shelley's view, the idea of investing billions of dollars to shore up the resiliency of the fossil fuel industry would be a misapplication of resources. He sees a need for more electrification.

To Cohan, expanded use of electricity could apply to transportation and home and water heating. Smart chargers and thermostats could help steer energy use toward times with the cheapest and cleanest power.

"You need to get more efficient first and foremost," Cohan said. "You need to green the grid. And then you need to electrify as much as possible."

Electricity offers the potential for customers to pair home solar with storage and perhaps have reserves when the grid is down. It remains to be seen how advances in batteries might be able to reduce worries that relying so much on electricity could actually increase vulnerability.

Meanwhile, the shift toward decarbonization and increased electrification continues, including in the transportation sector.

"The trend is really going to be shaped by the rate of the technology development and the rate of the economic viability of it," said Fred Beach with the University of Texas, Austin.

Electric 'nervous system'

Beach, an assistant director for policy studies at UT's Energy Institute, was impressed by the electric resilience in Houston during Harvey, even if it reinforced the difference between a flooding event and one more centered on high winds that can knock over power lines. Harvey made landfall in Texas on Aug. 25.

When Hurricane Ike struck in 2008, CenterPoint Energy Inc. saw some 2.1 million customers — or homes and businesses — lose power as heavy winds hit Houston. It took about 18 days for the company, the main electric wires utility in the Houston metropolitan area, to consider its restoration complete for people who could take power.

This time around, workers from CenterPoint and other utilities turned lights back on at a steady pace (Greenwire, Aug. 29). The company said it has restored about 885,000 customers since Harvey began affecting its service territory. As of yesterday evening, more than 11,000 customers were without power in CenterPoint's region, though fluctuations continued. Some homes have been unable to take power due to damage.

"The restoration times, particularly in the Houston area, have been pretty remarkable particularly when you compare it against Ike," Ken Anderson, a member of the Public Utility Commission of Texas, said during a meeting Thursday.

Many Houstonians stayed dry inside their homes last week and rode out the storm with air conditioning and lights and the internet. Meanwhile, an Arkema Inc. chemical plant northeast of Houston suffered explosions after it lost electricity and lacked needed refrigeration (Greenwire, Sept. 1).

"It's a pretty big dichotomy, isn't it?" Brandy Marty Marquez, another PUC member, said in a recent interview. She also reflected on electricity and modern life.

"It is truly the nervous system of our society, and without it, people are sometimes in mortal danger and certainly are at a loss with communication and all of those other things," she said.

Marquez said it will take time to examine the response to Harvey, but she thinks smart meters played an important role in getting the lights back on. She also praised utility workers.

"I just feel like everybody needs to go hug a lineman," Marquez said.

The Electric Reliability Council of Texas, the state's main grid operator, reported a stable power system despite the disruption and damaged transmission lines. Fortunately, power demand also was lower in the days after Harvey.

The South Texas Project, which has two nuclear units, was among the facilities that remained on during and after the storm. Beyond Nuclear issued a news release last week urging that STP be shut given worries about flooding risks, but the facility kept operating as about 250 people were sequestered at the site.

Wind installations in the state survived even if some had to cope with nearby infrastructure damage. "Texas wind power seems to have weathered the storm, and virtually all of the wind farms there are back online producing electricity," Peter Kelley, a vice president at the American Wind Energy Association, said in an email last week.

The total Texas and Louisiana outage count topped 300,000 at times after Harvey hit, according to the Edison Electric Institute. But snapshots don't capture the full total as customers came back online and others fell off.

AEP Texas said it may be days before it can restore power to some customers southwest of Houston. And Entergy Texas, which serves parts of East Texas, said Sunday that it might take 10 days to fully restore power to thousands of customers given damage to the system, if they can take electricity.

"Unlike distribution lines and poles, substations are much more complex parts of the power grid that includes electronics and computers to protect the electric system," Sallie Rainer, CEO of Entergy Texas, said in a statement.

Oil's vulnerabilities

For Greater Houston's oil and natural gas, refining, and petrochemical industries, the question of vulnerability to severe storms is no longer an academic one. Harvey exposed new vulnerabilities that previously hadn't been fully considered.

By some estimates, Harvey knocked out 25 percent of the nation's crude oil refining capacity, shuttering refineries across the Texas coast. Some infrastructure has been offline for about a week, causing temporary spikes in pump prices.

Rough estimates suggested Harvey forced some 900,000 barrels of oil per day to stop production during the storm's multiday run. That figure included both the Gulf of Mexico and onshore with the Eagle Ford Shale. The latter was affected largely because producers lost avenues for refining and exporting crude.

S&P Global Platts also reported a big hit to petrochemical manufacturing, with Harvey forcing the closure of roughly 50 percent of U.S. ethylene production capacity.

With Houston cut off, fuel distributors on the East Coast could tap imported gasoline and diesel from Europe, even though that can push up prices. Meanwhile, refineries not hit by Harvey have ramped up output to fill the gap, particularly from the Midwest. And the U.S. Energy Information Administration reported the nation had some 230 million barrels of gasoline alone in storage before Harvey hit.

"Given the scope of the capacity offline, the greatest disruption in U.S. refining history, given that scope it's almost surprising it wasn't worse, and I think a big reason is the gasoline stockpiles," said Rob Smith, a research director at IHS Markit.

But Basil Karampelas, managing director at BDO, said Hurricane Harvey also exposed a new aspect of storm vulnerability: the oil, natural gas and refining workforce.

According to one rough federal estimate, Harvey's floodwaters may have damaged or destroyed at least 100,000 homes. It was inevitable that many of those who lost property or were forced to evacuate were oil and gas workers.

"For many of the refiners and chemical companies a large percentage of their employees are going to be displaced from their homes for potentially months," Karampelas noted in an email. "This could have significant impacts on their ability to staff their facilities."

Paul Lux, also at BDO, sees Houston facing lingering problems from Harvey's aftermath in terms of workforce recruitment and retention.

"One of the biggest risks is the possibility that Harvey could trigger a mass exodus from Houston, similar to what we saw with Katrina," he said, referring to the hurricane that struck New Orleans in 2005. "That scenario could put a serious strain on the labor market essential to operations and production."

Still, Smith argued that many of the impacts were predicted, and that refineries were proactive in shutting in their operations ahead of the storm. He said the industry's ability to rebound from an event as momentous as Hurricane Harvey could surprise many.

Some petrochemical and refining capacity is expected to be back up and running as early as this week as companies appear determined to keep the disruptions as short as possible. Refining giant Valero Energy Corp. said yesterday that its Texas City and Corpus Christi plants have already returned to pre-storm conditions. Production also has been returning in the Gulf and the Eagle Ford, and partial reopenings are happening at ports along the Texas coast.

The future

Regardless of how quickly the energy sector recovers, Harvey will be one for the record books.

Some eastern parts of the Houston region — where much of the oil, gas, refining and petrochemical activity is centered — recorded around 50 inches of rain, according to the National Weather Service. Roofs of storage tanks literally caved in from the weight of the water.

Parts of Houston returned to normal over the Labor Day weekend, though some homes and businesses still lay underwater and certain roads had closures as waterways remained swollen.

Households throughout Houston were beginning the arduous process of cleaning up after the storm. Piles of ruined carpet, furniture and plasterboard formed on residential streets. Thousands of residents will be looking for new cars.

Jigar Shah, a clean energy advocate and co-founder of Generate Capital, tweeted Friday to automakers about the opportunity for electric vehicles, saying, "This would be a great time to bring all of your extra EV inventory to Houston on monthly rentals."

UT's Beach said he thinks plug-in hybrids may play an important role in a transition in the coming years because of the flexibility they provide compared with pure electric vehicles. They could combine the trend toward electrification with America's trust of cars that run on fossil fuels.

"I have zero range anxiety in my electric vehicle because there is an engine in there and there is a [gasoline] tank," Beach said. "So I don't have to worry if the battery goes dead."

Beach stressed the outlying nature of Harvey and said refineries will have to consider risks, and it's not clear the region can fully prepare for the sort of event it just experienced. This was essentially a rain event, not a storm surge event, for Houston-area refineries.

"I can almost guarantee that there are going to be people calling for those refineries to be built up to where they can withstand" such events, Beach said. "Does that mean we build higher dikes and walls and dams and stuff around the refineries? I don't know."

In an opinion piece, Eric Berger, editor of the popular Space City Weather site, said Houston faces an important question as it considers its future after major flooding.

"We risk Houston becoming a place shunned by new people and new businesses as not worth the trouble," he wrote in a piece published on the Houston Chronicle's website. "Heat and humidity, people can live with. But not this."

Public Citizen's Shelley said Houston needs to look at major questions around drainage and upgrades. He thinks the energy side of the equation can be addressed in part by reducing the petrochemical footprint that's focused here.

"Are we going to be immune to hurricanes when we're electrified? No," Shelley said. But that doesn't mean petrochemical problems can't be addressed, he said.

Rice's Cohan is hopeful that Harvey acts as a wake-up call to rebuild the city the right way. Looking to change could apply to Houston's approach to energy as well.

"The city in the long run will be better off if we move away from the boom-and-bust cycles of the oil and gas industry and we're on more diversified footing, with clean energy being a part of that," he said.

One past proposal, known as the Ike Dike, would try to protect the region from storm surge and could cost billions of dollars. To Cohan, it calls for too much in terms of a barrier, though he said a case could be made for more targeted protection for the Houston Ship Channel.

"No matter how quickly we move towards electric cars, it takes a long time to replace the existing fleet," he said, adding, "We're going to need refining capacity."

Twitter: @edward_klump Email: eklump@eenews.net

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