New Study by Leading Renewables Consultant ArcVera Shows Texas Icing Event Led to Over $4 Billion Financial Loss for Wind Farms

Study points to shortcomings in the hedged financial structures, with asymmetric price risk leading to significant losses for wind farm operators and gains for counterparties. Significant implications for future wind farms and ERCOT planning are described in the study.

ArcVera Renewables, a leading international provider of consulting and technical services for wind, solar, and storage projects, today publishes its report “ERCOT Market Cold Weather Failure 10-19 February 2021: Wind Energy Financial Losses and Corrective Actions”.

The study set out to quantify the lost energy production and calculate the financial impact of the rare Texas winter weather event. It is focused on wind farm outages reported by the Electric Reliability Council of Texas (ERCOT) grid operator for the period 14-19 February 2021, when the grid experienced extensive wind farm downtime, lost energy production, and high hub-settled electricity prices. Three repricing scenarios are evaluated using market pricing before the imposition of $9000/MWh prices by ERCOT.

“Given that the market demand was decreased by ERCOT with blackouts so that production balanced that reduced demand with market prices high but not near the $9000/MWh imposed value, we consider that the $9000/MWh ERCOT mandate could have imposed large, and quite possibly artificial, financial impacts (windfalls and losses) on wind energy power plant operators and investors”, said Dr. Gregory S. Poulos, ArcVera Renewables CEO, Principal Atmospheric Scientist, and author of the report. 

“With more installed wind capacity than any other state in the United States and its projections for renewable energy capacity to dominate ERCOT generating capacity within a decade, we believe that ERCOT must now more stringently apply atmospheric science-based risk assessment, particularly concerning extreme weather operational scenarios. Renewable energy production is governed by the weather. Peak electricity demand scenarios are also governed by weather, such as high and low-temperature events. As such, there is a clear need for restructuring electricity system resilience to account for weather-driven production and demand, concomitant with the pace of the transition to renewable energy-dominated production,” explained Dr. Poulos.   

The icy weather conditions and an unprecedented period of below-freezing temperatures caused extensive wind farm downtime. The study analyzes the outage periods documented by ERCOT for 191 wind farm units, with a nominal capacity of 21,888 MW, of which 57% (12,495 MW) is subject to a hedged financial structure. 

The findings of the study show the lost energy production from wind farms, aggregating individual wind farm results, was 629,700 MWh with a financial impact of this lost production, whether the financial loss to the owner or gain by others, estimated at $4.18B. This represents an average financial impact on any project of $44.4M. For hedged projects, the financial impact of this lost proxy production is even greater, with an average financial impact of $45.4M.

The study makes three assessments:

Hedged financial structures in ERCOT need to properly reflect realistic meteorological conditions, extreme weather stress tests, and, therefore, more realistic production assurances.
Hedged products need to recalibrate their strike prices to reflect the asymmetric risks presented by the availability of different resources during extreme electricity demand, ERCOT minimum and maximum prices, and market interventions by regulators.

Wind farm owners and their hedge counterparties need to partner with turbine OEMs to develop reliable, cost-effective weatherization technologies to reduce the asymmetric risks from future icing events.

“Our observations, taken together, clearly describe a condition where, with greater attention to the atmospheric science details when assessing the risks of weather-driven electricity production and demand, an adequately resilient and interconnected ERCOT electricity system can be created. ERCOT planning should consider that cold-weather events worse than the recent February 10-19, 2021 event are possible.” Dr. Poulos concluded.

Having worked on ERCOT measurements and detailed wind energy resource assessment for more than 20 years, ArcVera has evaluated hundreds of wind farms in ERCOT development and amassed in-depth knowledge of wind behavior across ERCOT’s vast expanse of wind farms. Combined with decades of atmospheric science and engineering experience, ArcVera has devised a method to determine materially accurate estimates of net energy production at the wind farms that experienced outages during the event. 

 

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Waga Energy to deploy its break-through landfill renewable natural gas technology in Quebec

Waga Energy, the European leader in landfill gas-to- renewable natural gas (RNG) technology, has been enlisted by The Mauricie Residual Materials Management Board (RGMRM) to deploy its innovative gas upgrading solution at the Saint-Étienne-des-Grès landfill, in Quebec. The green gas produced will be purchased by Énergir, the largest gas distribution company in the province, and injected into its gas grid onsite. This landfill gas-to-RNG project will be the first in Canada to use the WAGABOX® technology, developed by Waga Energy to recover landfill gas in the form of RNG, also known as biomethane.

Under the agreement signed in March, Waga Energy will buy the landfill gas from RGMRM for a period of at least 20 years. It will then be transformed into grid-compliant RNG by a WAGABOX® gas treatment unit built onsite. Waga Energy will generate income by selling its RNG production to Énergir. Until now, the landfill gas at Saint-Étienne-des-Grès was captured and burned in a flare.

Designed to process 3,400 cubic meters of biogas per hour (2,000 scfm), the WAGABOX® unit in Saint-Étienne-des-Grès will produce 468,000 GJ* of renewable gas per year, corresponding to the annual consumption of 8,000 local households. The WAGABOX® unit will be built in Shawinigan by a local company under the supervision of Waga Energy’s Canadian subsidiary, except for the cryogenic distillation module which will be imported from France. The project is scheduled to be completed by 2022.

Mathieu Lefebvre, president and co-founder of Waga Energy, declared: “Thanks to the WAGABOX® solution, hundreds of landfill sites across the United States and Canada will be able to produce renewable natural gas, contribute to the energy transition, and generate a new revenue stream, without the need for investment, and free from additional operating constraints.”

The project carried out jointly by RGMRM and Waga Energy will improve the environmental record of Mauricie and will contribute to Quebec's energy transition. It will prevent the release of 23,000 tons of CO2 per year into the atmosphere by substituting renewable gas for fossil natural gas.

Michel Angers, President of RGMRM, said: "This contract is the result of an initiative undertaken several months ago to identify the best technology to enable us to use our landfill gas to its full potential. Thanks to the WAGABOX® technology, treating our gas is no longer an expense, it is a new income stream, and more importantly, it is yet another step towards a more sustainable approach to landfill management. The project fits perfectly with the government's greenhouse gas reduction objectives and we are proud to contribute to Quebec's energy transition."

Renault Lortie, Vice-President, Customers and Gas Supply, at Énergir, concluded: "The development of the green gas industry in Quebec is one of the cornerstones of our efforts to decarbonize our economy. Énergir aims to inject an ever-increasing amount of renewable gas into its network, corresponding to a volume of at least 10% that of the annual volume it distributes by 2030. This fantastic project brings us a step closer to this objective, demonstrates the value of smart circular economy, and allows more and more of our customers to benefit from clean and local energy”.

* 468,000 GJ = 130 GWh (Europe) or 444,000 mmBtus (USA)

 

 

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