Buffett’s Plan To Fix Texas Energy Grid Includes 10 New Peaker Plants Owned By Buffett
Warren Buffett, the Sage of Omaha, is generally acknowledged to be the world’s smartest investor. Maybe so, although it can be argued that his warm embrace of fossil fuels indicates he may be good at making money but not so good at keeping his customers healthy. For the past few weeks, his minions have been scurrying around touting a plan to keep the lights on in the Lone Star State even during extreme weather events such as the one that severely disrupted the state’s electricity grid in February.
Here’s the essence of the plan: Buffett’s Berkshire Hathaway would spend more than $8 billion to construct 10 1-gigawatt natural gas-powered peaker plants in Texas in exchange for a guaranteed rate of return. According to a report by the Texas Tribune, the new generating facilities would be in place and ready to provide electricity to the grid no later than November, 2023. A peaker plant sits idle most of the time until it is pressed into service to meet high demand for electricity. In theory, it can be brought online to provide electricity in as little as 10 minutes. “When you flip that switch and say, look, demand has exceeded supply, it has to come on in 10 minutes,” Chris Brown, CEO of Berkshire Hathaway Energy, told the Texas Tribune in an interview. “That’s the Texas Emergency Power Reserve promise — that’s the promise that we’re making to the citizens of Texas.”
The new power plants would be paid for by a surcharge on the utility bills of Texas consumers — $1.42 per month for residential customers, $9.61 for commercial customers, and $58.94 for industrial customers. ERCOT, the Texas grid administrator, would determine when to activate the new facilities, not Berkshire Hathaway.
Electricity On The Cheap
For decades, the Texas utility grid has been designed to provide electricity at the lowest possible cost. As a result, spending money to protect the infrastructure from extreme weather was taboo. When sub-freezing weather gripped the state in February, lots of Texans turned on electric space heaters, which sent the demand for electricity soaring. ERCOT tried to respond but many pieces of the grid infrastructure were knocked out by the cold. Valves in the natural gas pipelines froze. Diesel engines that power those pipelines refused to start.
“We didn’t have a shortage of power plants, we had a shortage of power plants that could work in the cold, and the gas to run them,” says Dan Cohan, an associate professor of civil and environmental engineering at Rice University. “Texas has an enormous amount of natural gas plants already. It’s not at all clear that there’s a need to have more power plants built.” J.P. Urban, senior vice president and acting CEO of the Association of Electric Companies of Texas, a trade association of electric companies in the state, warned lawmakers earlier this week against subsidizing new power plants in their response to last month’s outages. The money would be better spent on the winterizing of existing facilities — precisely the sorts of investments that were not made over the past 20 years in order to keep the cost of electricity low.
The Texas Tribune explains the dilemma Texas has created for itself this way. When demand for power is high, the price for power increases and companies that can supply electricity to the grid make more money….