It is never fun to see our fellow Americans suffer, whether it’s from pandemic diseases or weather disasters. Our hearts go out to the residents of Texas who suffered without electricity and heat for days, some of them also without safe drinking water, and a few of them even dying from exposure, fires or carbon monoxide poisoning as they tried to keep warm.
On the other hand, picking apart the preposterous excuses from Texas leaders seeking to avoid responsibility for the fully preventable power outages and the misery that accompanied them — well, that’s another matter. And it’s made so much easier by those leaders’ insistence on trying to score political points instead of admitting that at least some of the blame rests on their shoulders.
Take Republican Gov. Greg Abbott, who went on Fox News to blame liberals for the debacle. Ignoring the failure of his state, which hasn’t elected a Democrat to statewide office since 1994, to plan for climate change and invest in power grid winterization, he told talk show host Sean Hannity the problem was actually the portion of the state’s electricity supply that comes from wind and solar. “This shows how the Green New Deal would be a deadly deal for the United States of America. Our wind and our solar got shut down, and they were collectively more than 10 percent of our power grid, and that thrust Texas into a situation where it was lacking power on a statewide basis.”
No one in Abbott’s echo chamber pointed out that a) solar actually did just fine, b) states like Iowa and South Dakota, with much worse winter weather, rely much more heavily on wind power than Texas does, yet there are no stories about their turbines seizing up and their grids collapsing, and c) if a shortage of 10 percent shuts your grid down, you have way more problems than you can blame on the Green New Deal. Also, Abbott’s claim elides the inconvenient fact that the biggest factor in the grid failure was some 28,000 megawatts of coal, nuclear and gas power that went offline, as the Electric Reliability Council of Texas reported.
For his part, former Gov. Rick Perry preferred swaggering to problem-solving, saying in a blog post, “Texans would be without electricity for longer than three days to keep the federal government out of their business.” This seems to have been written at about the same time Governor Abbott was asking the federal government for disaster relief.
And then there was Ted Cruz. I’m not referring to the farce of his skipping out on the post-storm misery to fly to Cancun, then pinning it on his daughters before high-tailing it home to make a show of handing out relief supplies. That incident just reminds us that no matter how deep our divisions, Americans can always find unity in our collective loathing of Ted Cruz.
No, in this case I want to point to a pair of tweets from Cruz, almost exactly two years apart. Feb. 13, 2019: “Success of TX energy is no accident: it was built over many years on principles of free enterprise & low regulation w more jobs & opportunities as the constant goal. We work to export this recipe for success t more & more states so that all Americans enjoy the same prosperity.”
And here he is on Feb. 22 of this year, reacting to news that free enterprise and low regulation had produced $5,000 electric bills for some customers in the aftermath of the storm: “This is WRONG. No power company should get a windfall because of a natural disaster, and Texans shouldn’t get hammered by ridiculous rate increases for last week’s energy debacle. State and local regulators should act swiftly to prevent this injustice.”
Luckily for us, lots of other people have been more interested in understanding what happened and preventing it from happening again than in trying to duck blame and score political points. The real story, it turns out, is simple at its core: “Low regulation” meant the Texas grid and power providers did not adequately prepare for winter storms that climate change might be making worse than they used to be. And because the Texas grid is cut off from the rest of the country, (a feature, not a bug, to cowboy politicians) when the crisis hit there was no way to import power from other states that were better prepared.
Let’s take a closer look at what went wrong, how it could have been avoided and what lessons it offers for the rest of us.
The setup: an isolated grid with ‘free enterprise and low regulation’
The grid that serves Texas is uniquely isolated, which also gives it a unique vulnerability. The Electric Reliability Council of Texas serves most of the state, and no other states. Texans are proud of that (or were before this month), because it means there is no role for federal regulators like FERC. It also means that when power ran out, ERCOT couldn’t just import it from parts of the country with a surplus. Of course, states near Texas also suffered in the storm, so there may not have been a lot of surplus power to be had. It is worth noting, though, that the border city of El Paso fared better than the rest of Texas because it is not part of ERCOT but part of a larger regional transmission organization serving several southwestern states.
Another feature of ERCOT is the low regulation that Ted Cruz celebrated. ERCOT keeps it simple for power generators. They get paid for the power they produce. Other RTOs have what is called a “capacity market” to reward generating plants just for being available to run when called on; ERCOT does not. As a result, generators have no incentive to guarantee their facilities will be capable of generating when most needed. Nor are they otherwise required to winterize their infrastructure to keep it operating in the case of very cold weather. That would be a normal cost of doing business for a power provider in a northern state, but Texas winters are usually warm enough not to require it. If you won’t be penalized for not winterizing, you have little incentive to do it when you’re competing on cost with other power sellers.
The lack of a capacity market means ERCOT doesn’t have a lot of surplus generation to call on when demand spikes, as it did this month. A power provider that is only paid for power actually produced has no incentive to build or maintain a less competitive generating plant that can only make money when prices go high enough. As a result, ERCOT has the lowest amount of reserve capacity of any RTO, at about 10 percent. (The RTO that serves Virginia and parts of a dozen other states, PJM Interconnection, has a much-higher-than-average reserve margin of 30 percent.)
Ordinarily, a small reserve wouldn’t be a problem for Texas in winter, because demand for power in ERCOT is higher in summer, with air conditioners running, than it is in Texas’ typically mild winters. But in cold weather, gas-fired power plants face competition for fuel, when some of the gas supply goes for heating buildings. This month, when gas wells and pipelines also froze up, there simply wasn’t enough fuel to go around.
The last important feature of the Texas system is retail competition. Electricity customers in ERCOT can choose among dozens of power providers. Some providers keep rates constant; others offer a variable rate that just passes through the wholesale cost of power, with only a small monthly fee added. When wholesale rates are low, the consumer saves money on a plan like that. But regulators didn’t insist on any safeguard to protect customers against the possibility of wholesale prices spiking to astronomical levels due to a power shortage. That’s exactly what happened in the aftermath of this month’s storm.
That $5,000 power bill Cruz criticized? That’s unfettered free-market supply-and-demand at work. It’s a feature, not a bug. If you don’t like that feature, Senator Cruz, maybe low regulation isn’t for you. Helping consumers avoid power bills in the thousands of dollars would have been easy, but it would have required a little bit of regulation.
The storm: Nature takes no interest in political posturing
Well before this storm hit, ERCOT was fully aware of the vulnerabilities of its particular brand of laissez-faire operations. Ten years ago, in the wake of another winter storm, Texas operators were warned of the dire consequences that could ensue if they did not require generators to winterize operations.
But, they didn’t, and this chart from the U.S. Energy Information Agency shows what happened to generation as a result.
Before the storm, you can see natural gas and coal plants running less when high winds produce plenty of cheaper wind power, then cranking up when wind speeds drop. As the week goes on, power supply from natural gas plants increases to meet higher demand from colder weather, while other generation holds steady. Then suddenly you see every category of energy resource except solar drop in output, as critical components of some generating units freeze up and the units fall offline, while fuel supplies also dwindle. Some wind generation falls off, but so does coal, nuclear and (especially) natural gas, just as they are all needed most.
The storm was, to be sure, one of the worst winter storms ERCOT had ever faced. And the situation could have been worse. If operators had not proactively cut power to customers, demand in excess of supply would have damaged grid infrastructure so severely that large swaths of the population would have been without power for weeks or months. (Let us now praise faceless bureaucrats, for they just saved Texas.)
So it was bad, and could have been worse. Why didn’t Texas prepare for it, even after being warned? I have one theory. People who cling to simplistic notions that global warming “should” produce only warmer winters have a tiresome habit of pointing to cold weather as evidence that climate change isn’t real, but I think they also take secret comfort in the idea that if the planet is warming, extreme cold weather events will become less common, with less need to prepare for them. If your political philosophy requires you to see regulation as an evil, your own willful misunderstanding of climate science might provide all the excuse you’re looking for not to act.
Could it happen here?
Bad weather can happen anywhere, and it’s always safer not to gloat. That said, several features distinguish ERCOT from PJM, and Texas from Virginia. As noted before, PJM has a capacity market that rewards even otherwise-uneconomic generators for hanging around being ready to produce at short notice. Indeed, PJM is so oversupplied that consumers are paying higher prices for the inefficiency, but it does protect us from the kind of power shortage and price spikes that Texans experienced.
Virginia, though not other states in PJM, also features monopoly power companies rather than retail choice. There is plenty of disagreement as to whether that is good or bad for consumers. The monopoly model requires strong regulation to ensure captive consumers aren’t being overcharged, and are being offered the products they want. Critics (and I’m among them) have argued that Virginia isn’t doing enough on this front.
On the other hand, the retail choice model depends on consumers being well informed, and also requires regulators to scrutinize the tactics of power providers and punish the ones who take advantage of unwary consumers. So, ironically, a deregulated electricity market requires strong regulation to protect participants. Strong regulation could have prevented Texas providers from offering residential customers a tariff based on wholesale prices, with risks that residents couldn’t easily understand or mitigate against.
Texas was also more vulnerable to disruption because power generators were neither required nor incentivized to winterize their plants. Sure, a winterized plant would have turned a hefty profit in this storm, but in a more average winter, the extra cost would not have paid off. The option not to winterize isn’t a good one in PJM. As a result, when the power does go out in PJM, the problem is inevitably in the delivery infrastructure, not the generation.
Virginia’s system of vertically-integrated utilities means our utilities own their electric generation as well as the power lines. They can charge customers for building and maintaining those generating facilities, so they have less incentive to skimp on weatherization. That increases the reliability of those facilities. But even if several power plants in Virginia were to fail all at once, we could still draw power from more than 1,200 facilities across PJM, or even from the larger Eastern Interconnection. By design, Texas does not have that option.
One distinction between ERCOT and PJM that doesn’t make a difference, in spite of Gov. Abbott’s claims, is the greater percentage of wind in ERCOT than in PJM. Wind actually makes up 23 percent of generation in ERCOT, more than perhaps Abbott wanted to admit, given that most of it came online under his watch. In PJM, wind makes up only about 3 percent. If Abbott were correct that wind turbines can’t handle winter weather, that would be a reason for more northern grids like PJM to avoid wind. But of course, Abbott’s claim is political wishful thinking divorced from reality. Wind turbines operate just fine in the much colder winters of Iowa, the Dakotas, Canada—heck, even in the frigid and stormy North Sea, where offshore wind ramps up production in winter.
As for solar, you could see from the chart that it was not affected by the cold weather. Texas residents who were lucky enough to have both rooftop solar and batteries spent the aftermath of the storm bragging about never losing power.
In the wake of this month’s storm, the independent Electric Power Research Institute (EPRI) analyzed what went wrong and issued recommendations for Texas grid operators. Among the unsurprising recommendations: ERCOT should do better planning for resource adequacy and increase its interconnections to other power systems so it does not have to go it alone.
I would add one more recommendation: Keep politics out of it. You can’t deliver reliable power that is also reasonably priced without robust regulation. If leaders refuse to learn from this winter, they’ll simply set up Mother Nature for another opportunity to mess with Texas.
