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WORST CASE CAPACITY

Were the Texas blackouts inevitable?

Ricardo B. Brazziell/American-Statesman/USA Today Network via REUTERS
The byzantine electricity market in Texas may have left it more vulnerable to winter outages.
  • Tim McDonnell
By Tim McDonnell

Climate reporter

Published Last updated on

Rolling blackouts that left millions in Texas without power this week were the result of a perfect storm—and not just the one that sent temperatures into the single digits.

It started on Feb. 15, when an icy winter storm drove up demand for electricity for heating, while simultaneously freezing the state’s power system. The most important failure was in natural gas-fired power plants and gas distribution pipelines, state regulators said on Feb. 16. (Wind turbines also froze, although they were not a main cause of outages, and have been some of the first systems to come back online.) The gap between supply and demand was huge, reaching 30 gigawatts at some points, more than 10 times the gap California experienced during its mid-2020 heat wave. Meanwhile, Texas’s uniquely byzantine electricity market may have left it especially vulnerable to disruption.

As climate change increases the frequency of extreme weather events, including cold snaps, it’s clear that the grid isn’t prepared. But are the Texas blackouts a symptom of systems in need of repair, or an inevitable byproduct of a more volatile weather world? The answer is a bit of both.

Why is Texas power deregulated?

In 1999, Texas lawmakers voted to deregulate the electricity market in most of the state, in the hope that competition would drive down consumer prices.

The decision changed two key facets of how electricity was produced and marketed in the state. First, utility companies that operated transmission lines could no longer operate their own power plants; those would be built and maintained by other companies. Second, utilities could now compete for customers, rather than everyone signing up with a designated local monopoly.

Deregulation helped make Texas a powerhouse for wind energy by opening the wholesale market to new entrants. But it failed to bring down customer costs as lawmakers envisioned, because there was no way for one power provider to offer a substantively different product than its competitors. Although more than a dozen other states have also deregulated some of their territory over the years, Texas remains the state with the highest proportion of energy users in deregulated zones (85%).

The state’s power plants operate on slim margins, and without the guaranteed customers that come with a regulated market, investment in the sector has stagnated; since deregulation, the state’s overall power-generating capacity has not kept pace with growing demand (pdf). Texas usually manages to avoid blackouts in the summer because plant operators are standing by to seize the high prices that result from air-conditioning use. But in the winter, when demand is typically at its lowest, many plants go offline for maintenance. Texas is also unique in that it’s the only state in the continental US where the grid is almost entirely independent from neighboring states, making it more difficult to import power in case of an emergency.

The end result is a state highly vulnerable to a surprise freeze, says University of Houston energy economist Ed Hirs, both because not enough plants are online and those that are haven’t invested in insulation and other cold-weather protections. Meanwhile, state regulators rely on natural gas to pick up the slack when wind power, which they know is unpredictable, falls off—but in this case, as Arizona State University energy systems expert Clark Miller noted, “they didn’t have a backstop for the backstop.”

“There’s no compensation or incentive for generators to stay ready when they’re not needed,” Hirs says. “So there’s been a lack of reinvestment, a lack of maintenance, and this was exactly the outcome you would expect.”

Reliability vs. cost

Not everyone blames deregulation. The skyrocketing wholesale power prices that emerged in Texas during the cold spell are a feature of the market, not a bug, says Melissa Lott, a senior power sector research scholar at Columbia University’s Center for Global Energy Policy. They should provide an incentive for some power plant operators to plan better and invest in cold-weather protection systems, Lott says, now that such events are becoming more common. (Texans also suffered serious cold-related outages in 2011.) They also create an incentive for people to use less power, relieving demand pressure on the system.

Alternatively, the Electric Reliability Council of Texas (ERCOT), the state agency that oversees the flow of electrons between dozens of market participants, could take a more active role in mandating reliability protections. That’s what happened after a 2014 winter storm in the Midwest, when the interstate grid operator PJM, a peer agency to ERCOT, instituted new cold-weather performance rules and penalties for plants that couldn’t produce when called upon. For Texas, other changes could include raising the wholesale power price cap to incentivize more plant construction, and requiring gas plants to keep more gas supply on hand rather than buying it as needed.

But all of these steps are certain to cost households and businesses money, in order to mitigate the risk of outages that, while clearly dangerous and disruptive, remain rare. The jury is still out on how much and which kinds of regulation yield the maximum reliability at minimal cost, Lott says, and the blackouts will ultimately offer a new point of comparison between regulated and deregulated markets. “We need to look at this and ask whether, net over the year, the average household paid more or less for a more or less reliable system,” she says.

The next weather event

Most scientists and economists do agree on one thing: The Texas situation underscores that electricity markets need to do a better job of planning for climate change. Beefing up the grid will be even more important in the future, as electricity increasingly replaces fossil fuels in our vehicles and buildings.

“Our existing processes are not really designed to consider the extreme climate scenarios we expect to see,” says Daniel Brooks, vice president of integrated grid and energy services at the Electric Power Research Institute.

Grid and power plant operators need to study the vulnerability of their systems to extreme storms, heat, and cold, Brooks says, and incorporate more climate-savvy expectations about future weather patterns into their planning. Last year’s California blackouts, like the ones in Texas, happened in part because officials simply didn’t anticipate the weather would be as bad as it was. And it may be time for Texas to consider adding new connections to the outside grid, which will help fill in gaps as more intermittent wind and solar come online. Lawmakers can also boost tax incentives for rooftop solar and household and utility-scale battery systems, to take some pressure off the grid itself.

Still, it’s not clear that any kind of grid or electricity market reform can forestall all future outages. It would likely be cost-prohibitive to design a system that could stay online through an unprecedented, statewide winter storm like this.

“We need to recognize that there will be some types of events that are too expensive to design around,” says Emily Grubert, an environmental engineer at Georgia Tech who studies electric grids. “I agree that different market designs might have led to different outcomes here—possibly! But it’s not clear to me that this is the kind of situation that we should expect there to be market-based solutions for.”

In other words, if the ultimate goal is to protect people from the dangers of extreme weather—at least 21 people have died in Texas—emergency planners need to think beyond the grid. That means planning for public heating or cooling centers with their own power supply or at least privileged grid access, especially in minority neighborhoods that are often the first to go dark, plus generators or batteries for places like hospitals or elder-care facilities that can’t afford to lose power.

“Grids cannot weather anything that comes at them,” Grubert says. “We need to think about this from a justice perspective, and make sure people aren’t dying because they don’t have access to energy.”

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