In West Texas, an oil and gas drilling rush has overwhelmed local roadways, housing supplies and a limited pipeline network.
Now, the shale boom is straining the region’s electric grid, which was designed to handle a fraction of the power needed by oil and gas producers that dominate the West Texas economy.
Driving the booming power demand is a transformation in oil and gas operations as companies forgo expensive diesel and natural gas generators to power compressors and pipelines in favor of the cheaper option of hooking up to the grid.
The unprecedented spike in electricity consumption coupled with inadequate transmission have slowed the development of new projects, such as sand mines, that support the energy industry. Excessive demand on a limited system also threatens the grid’s reliability in West Texas, and could lead to blackouts caused by the voltage overload.
“To say that this is load growth like we have not experienced before is kind of an understatement,” said Jeff Billo, senior manager of transmission planning with the Electric Reliability Council of Texas, which oversees 90 percent of the state’s grid. “There is not an area in ERCOT that has seen that kind of load growth before. That is unheard of.”
Fixing the bottlenecks has implications not only for the oil and gas industry, but also for the Texas economy, the environment and electric customers across the state. New and expanded transmission would allow energy companies to lower costs, improve profit margins, increase production and continue to hire and expand, not only in West Texas, but in Houston and other parts of the state — including burgeoning Gulf Coast ports where abundant supplies of crude and natural gas are sent, stored and exported.
New transmission that accelerates the shift to electricity would also lower emissions from diesel generator and natural gas engines, while supporting the development of large-scale solar farms in the region, particularly in Pecos County, which is fast becoming a hub for solar energy. And electricity customers across the state could end up paying for it.
Under state regulations, the costs of transmission projects are shared by all users of the power grid, regardless of whether they are served directly by the transmission or the utility building it.
Dallas utility Oncor, which serves the Permian Basin, is asking regulators to expedite two transmission projects, costing an estimated $223.6 million, to meet the skyrocketing demand in the oil patch.
“Is the rest of the state subsidizing these capital investments to handle peak loads?” said David Tuttle, a research fellow at the University of Texas Energy Institute.
It’s too soon to tell how much Oncor’s and other transmission projects in West Texas might add to electricity bills. Three utilities, Oncor, AEP Texas and Texas-New Mexico Power, serve a majority of the region around the Permian Basin that covers 24,000 miles, with an average of just 16 people per square mile.
By 2022, the power demand in the area is projected to climb to 1,000 megawatts, up from just 22 megawatts in 2010.
The year 2010 marked the beginning of the shale oil boom, which combined hydraulic fracturing, or fracking, with horizontal drilling to extract crude from previously inaccessible shale rock. Oil and gas operators flocked to West Texas and the Permian Basin, retreating after prices began their plunge in 2014, but recently returning in strength. Much of the new activity is concentrated in the Delaware Basin, a remote subsection of the larger Permian where transmission, pipelines and other infrastructure are limited.
Texas-New Mexico Power, which has around 20,000 customers in West Texas, has seen power demand spike from about 96 megawatts in 2014 to nearly 250 megawatts last year. In response, the company has begun to upgrade its transmission lines and substations, company spokesman Eric Paul said.
Oncor’s service territory is in the heart of the West Texas energy boom. Its eastern boundary is near Sweetwater, a mecca for wind power, and it stretches west to Midland and Odessa, the biggest cities in the region and hubs for drilling. The utility expects the Permian’s power demand to triple in the next five years, and it plans to spend most of its annual $1.7 billion for transmission upgrades on West Texas, said spokesman Geoff Bailey.
Demand for power is only liked to grow. Houston-based Apache Corp. plans to use electricity to run its gas compressors instead of natural gas or diesel as it develops its shale play, Alpine High, which holds 15 million barrels of oil and gas under 350,000 acres of southern Reeves County. Navneet Behl, Apache’s vice president of operations for North American Unconventional Resource, said the company is working with the region’s utilities to bring power to the remote area in the Delaware Basin.
Apache’s five massive compressors, which take gas from wells and separate it from other liquids, run on natural gas engines. The company plans to electrify the compressors and eventually hook up smaller equipment, like tank batteries, to the electric grid.
“We have submitted load requests with each of the three utilities serving the region,” Behl said, “and we are working hand-in-hand with them to develop the infrastructure where it’s needed, including the installation of new substations and transmission and distribution lines.”
Before opening the region’s first sand mine last summer, Hi-Crush Partners of Houston asked Oncor to build a line to bring electricity to the plant, which produces 3 million tons of sand a year to be used in the fracking process. When construction finished months early at the end of July 2017, operations were run on generators until Oncor finished connecting the plant, said Deke Williamson, vice president of operations for the company. The plant uses an average of 1.4 million kilowatt-hours a month. (The average home uses around 1,100.)
Williamson said competitors that have followed his company have a longer and more difficult time getting hooked up to the grid. Capacity on transmission lines has been taken by early arrivals to the areas such as Hi-Crush.
“From our standpoint the capacity was there, and once we got that contracted, we have all the power we need,” Williamson said. “As for somebody later in the game, they are not going to find the same.”