winds of change

New report finds coal and wind energy usage tied in Texas for the first time

Wind energy usage in Texas has been slowly creeping up on coal — and now the two are neck-and-neck. Getty Images

In an electrifying sign for the renewables sector of Houston's energy industry, wind for the first time has essentially tied with coal as a power source for Texas homes and businesses.

In 2019, wind (19.97 percent) and coal (20.27 percent) were locked in a statistical dead heat to be the No. 2 energy source for customers of the Electric Reliability Council of Texas, or ERCOT. Natural gas ranked first (40.2 percent). The Austin-based nonprofit manages about 90 percent of the state's electrical grid.

Houston stands to benefit greatly from these winds of change.

Long dominant in the oil and gas industry as the Energy Capital of the World, Houston is adapting to the shifting tide from traditional energy sources to renewable energy sources like wind and solar. Over 30 companies involved in wind energy are based in the Houston area. Major local players in wind energy include BP Wind Energy North America Inc., EDP Renewables North America LLC, and Pattern Energy Group Inc. In addition, many of the state's more than 130 wind-generation projects are operated from Houston.

Bob Harvey, president and CEO of the Greater Houston Partnership, says the region's "unparalleled experience" with massive energy initiatives supplies an edge in the burgeoning renewable energy sector.

"Houston's talent base knows energy, from development to commercial operations, and the region offers a competitive advantage to renewable energy companies looking to develop projects both domestically and around the world," Harvey says. "Houston and Texas are well positioned as leaders who are developing large-scale renewable energy projects in both wind and solar."

Harvey says ERCOT's aggressive pursuit of wind and solar power also bodes well for Houston and the entire state.

"When combined with our natural advantages of great sites for wind and solar, our market structure has made Texas a global leader in the transition to low-carbon power generation," he says. "We expect Houston will continue to play a major role as wind, solar, and other renewable energy sources continue to rise on a global scale."

Susan Sloan, vice president of state affairs at the American Wind Energy Association, notes that Texas leads all states for wind energy, with 25 gigawatts of capacity generated by nearly 14,000 wind turbines. The Lone Star State produces about one-fourth of the country's wind power, and the wind energy industry employs more than 25,000 Texans.

With another 9 gigawatts of capacity coming online, "Texas continues to champion investment in wind energy as the state's electric load continues to increase," says Sloan, who's based in Austin. "Wind is an established and growing part of the Texas energy economy, and will be for years to come."

Texas has made great strides in wind energy in the past decade. In 2010, wind represented only 7.8 percent of ERCOT's power generation and ranked as the grid's No. 4 energy source, while coal stood at 39.5 percent and ranked first.

In September 2019, Norwegian energy research firm Rystad Energy predicted wind will bypass coal as a Texas energy source in 2020. Rystad Energy, which has an office in Houston, expects wind to generate 87 terawatt-hours of electricity in Texas this year compared with 84.4 terawatt-hours from coal. One terawatt-hour equals the output of 1 trillion watts over a one-hour period.

"Texas is just one of many red states that have recently 'gone green' by harnessing their great wind-generation potential," Carlos Torres-Diaz, head of gas market research at Rystad Energy, said in a release. Renewable energy sources like wind "are reaching a level where new installations are not driven solely by policies or subsidies, but by economics," he added.

The oil and gas industry has been hit by a trifecta of challenges. This local expert has some of his observations. Getty Images

In the matter of a few weeks, COVID-19 disrupted life across the globe, but the oil and gas industry was hit especially hard with the triple impact.

First, there was the direct impact of COVID-19 on the workforce. Next, there was a dramatic drop in global demand as countries and cities around the world issues travel restrictions. Finally, there was a global increase in oil supply as OPEC cooperation disintegrated.

As energy companies raced to set up response teams to address all three concurrent issues, something that no one was quite prepared for was the speed at which all direct lines of communication for the industry were shutoff. Seemingly overnight, industry conferences and events ground to a halt, corporate offices were reduced to ghost towns, and handshakes were replaced with virtual high fives.

To fill this inability to interact, connect, and collaborate as we used to, my company, Darcy Partners, stood up a series of executive roundtables for the exploration and production community to come together and share ideas on how to approach this unprecedented series of events.

Each week, over 25 executives from various oil and gas operators (and growing) gather virtually to share best practices around COVID-19 response plans, discuss the broader impacts of the turmoil on the industry and learn about innovative technology and process solutions others are implementing to help mitigate the impact of the virus and associated commodity price volatility.

We've seen the priorities of these executives shift and evolve with each phase of COVID-19 and the market impact. In early discussions, the main focus was on taking care of their workforce and what plans were being instituted to help minimize the disruption to operations while also ensuring that no one was exposed to any unnecessary risks. Participants shared best practices and policies they had in place for communication both internally and externally as well as their transition to work-from-home.

At later roundtables, the discussion turned to commodity prices and market response. Although this industry is quite accustomed to the inevitable ups and downs, this time is notably different. The market dynamics during this cycle are far more pronounced than in past downturns – largely due to the concurrent supply and demand imbalances coupled with the broader economic uncertainty. Most operators are taking action by making cuts, and some have already decided to shut-in production. Additionally, the importance of technology and innovation came to the forefront, whether discussing tools to facilitate working from home or remote operations to ensure the continued safe operations in the field.

The future is largely unknown; all of the information and analytics and millions of outcomes being modeled do not create the full picture needed for leaders to make the difficult decisions that are necessary. But there are a few things we know for sure. First, there will be an oil and gas industry on the other side of the current turmoil. Secondly, technology will play an increasingly important role going forward. And, finally, the complex issues the industry is dealing with today can be more effectively understood and managed by coming together to share ideas and best practices.

Nearly 5 years ago, Darcy Partners was founded on the premise that there was a missing link in the oil and gas Industry for the adoption of new technologies. Today, there is a missing link for an entirely different reason. Darcy Partners has rapidly mobilized our vast network of operators, technology innovators, investors, and thought leaders to come together and create a shared level of certainty, in an entirely uncertain world. To help leaders make the decisions that must be made and prepare for a new future, one that might not have been expected, but one that the industry will evolve to succeed in.

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David Wishnow is the head of energy technology identification and relationship management at Houston-based Darcy Partners.