Analysts say Warren Buffett’s $ 8.3 billion proposal to build more power plants in Texas fails to address the root cause of February’s deadly power crisis, and guarantees a huge profit for his energy business that would be paid for by consumers.

The proposal for Berkshire Hathaway Energy to buy from Texas executives and lawmakers would add natural gas-fired generation capacity for emergency use and provide the billionaire Omaha’s company with a return on investment of 9.3 %, paid by electricity customers.

But Texas had enough gas-fired power plants, said Jim Krane, an energy researcher at Rice’s Baker Institute for Public Policy. Half of them, however, were not functioning due to the unprecedented cold that swept through the state.

“It’s like trying to fix a broken window by installing a bigger oven,” Krane said. “Let’s fix the broken window. The oven is fine. This is the wrong solution to the problem. “

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According to Chris Brown, CEO of Berkshire Hathaway Energy, Berkshire’s Texas Emergency Power Reserve would include 10 new natural gas-fired power plants that would add 10,000 megwatts of generating capacity – enough to power some 2 million Texas homes – in the United States. state network. The factories would be operational by November 2023.

The gas-fired plants, which could withstand freezing temperatures and have up to seven days of natural gas storage on-site, would operate in an emergency and under instructions from the Electric Reliability Council of Texas, the grid operator of the State, Brown said.

The plan comes a month later more than 100 people died during the electricity crisis in which half of the state’s power generation capacity has been taken offline for days of below freezing temperatures.

Representatives from Berkshire Hathaway Energy have pitched the idea to lawmakers and state leaders, including Gov. Greg Abbott, Lt. Gov. Dan Patrick, at meetings in Austin in recent weeks, the company said. He also hired eight lobbyists in Austin at a cost of more than $ 300,000, according to files filed with the Texas Ethics Commission.

The additional capacity of the proposed plants would create a more robust grid which, in the event of a crisis, would provide enough electricity to ensure that no customer is without power for more than three hours, according to Berkshire plans.

State power producers oppose the plan.

“The $ 8.3 billion in consumer costs absolutely increases costs for Texas consumers, but it doesn’t increase reliability for them,” said Michele Richmond, executive director of Texas Competitive Power Advocates, an association professional representative of electricity producers and wholesale electricity distributors. .

During the freeze, the state’s supply of natural gas to power plants was hampered by frozen lines that were not built to withstand the near historic low temperatures and the failure of electric pumps that were not. powered.

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“People couldn’t get natural gas to their factories and the factories had been idle,” said Chris Moser, executive vice president of operations at NRG Energy, which owns retail electricity brands such as Reliant Energy, Direct Energy and Cirro Energy.

Even when ERCOT raised wholesale electricity prices to the state maximum of $ 9,000 per megawatt hour to attract electricity suppliers to the market, the additional energy could not be provided.

Deregulation rules

Unlike other deregulated electricity markets across the country that pay generators to keep plants ready to meet peak demand – whether they’re running or not – Texas relies on prices to encourage business. to invest in the construction, maintenance and modernization of power plants.

The factories in Berkshire Hathaway would only offer backup power, Mr Brown said, and would not interfere with the Texas market. “It’s actually blackout insurance for all consumers,” he said.

The move would create a reserve of power for a single company paid to produce power in the future when needed, experts said.

“Why would someone invest their own investment and development money in our existing factories or in building new factories when the state of Texas just paid someone to build?” Richmond said. “This will reduce investor confidence in the market. And that’s not the signal we want to send. “

Pressed by low electricity prices, tight margins and competition from cheap wind power, merchant power companies such as NRG Energy, Calpine and Vistra Energy have been reluctant to invest in new power plants or modernize existing ones.

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Lenders and investors agreed. A major new power plant – excluding wind and solar installations – has not been built in Texas since 2017, when Chicago-based Exelon completed two 1,100 megawatt gas generators, according to ERCOT.

If Texas power companies were guaranteed a 9.3% return, many more would be willing to build new plants, NRG’s Moser said.

“I don’t think this is the right way for Texas. But there are certainly other companies that would be very interested if they distributed guaranteed contracts, ”Moser said.

Environmental blowback

Further opposition to the Berkshire plan could come from those who support President Joe Biden’s efforts to curb climate change by putting the United States on track for net greenhouse gas emissions by 2050.

Biden’s energy plan calls for increasing renewable energy sources such as solar and wind power, and reducing the use of fossil fuels such as natural gas. Over the past 13 years, the generation mix on the Texas power grid has shifted to natural gas and renewables, with wind making the biggest gains. Wind power produces about 20 percent of the state’s electricity, down from just 2 percent in 2008, while natural gas has remained almost stable at 47 percent, according to ERCOT.

“Adding more fossil fuel capacity to the grid will not solve the problem we faced in February,” said Ms. Rice, Krane. “It will make the elevator even heavier when Texas finally manages to tackle climate change.”