What Is Wrong With the Texas Grid?
On Monday, the states grid operator, the Electric Reliability Council of Texas (ERCOT), issued a plea for help. The grid was once again running short on power and to avoid blackouts, the states least understood, most hated entity needed Texans to once again curtail their electricity usage. As ERCOT explained, some 11,000 megawattsenough to power more than two million homeshad inexplicably tripped off-line just as the heat of summer started to set in across the state. ERCOT vice president Woody Rickerson said in a statement that it wasnt immediately clear why so many generating plants had forced outages, meaning they needed unplanned repairs, and then noted that this is unusual for this early in the summer season. Whats not unusual is the number of high-profile flops by the Texas power grid this year. The prospect of running low on electricity comes just four months after the grid failed during Februarys winter storm, cutting off power to more than 4.8 million homes and leading to the deaths of at least two hundred people (and by some counts as many as seven hundred). And it comes just after Governor Greg Abbott signed into law several bills that will supposedly address that crisis. But the reforms, while important, seem to be based on the assumption that the February freeze-out was a onetime event. Major aspects of the legislation, such as protecting power plants against extreme cold, do not address summer shortages. So here we are, just a few months later, struggling once again to keep the lights and the A/C on, with the hottest part of the summer still two months away. Put simply, our electric system cant deliver the power we need when we need it most. Fixing that fatal flaw is going to be extremely difficult, and our politicians dont do difficult. They prefer to rush to safe havens like Fox News to scapegoat renewable energy sources, or distract us with calls for a GoFundMe border wall. What bills they actually pass are little more than Band-Aids to address their past mistakes. Meanwhile, other states that endured freezing temperatures managed to keep electricity flowing, in part because their systems, in one form or another, put an emphasis on reliability. They may have higher prices, but they dont have to burn the furniture to stay alive when temperatures plunge. Make no mistake, the state of the power grid is a political failure of major proportions. The danger that extreme cold posed to the grid was first presented to lawmakers in 2011, in a 357-page report by federal regulators. Yet lawmakers didnt mandate any of the changes because they didnt want to interfere in the markets or discomfit any campaign contributors. Similarly, state leaders have refused to require generating reserves in case of emergency, choosing to let private actors alone set the demands for generating capacity. Our state leaders devotion to purported free-market solutions borders on religious fervor. Except when it doesnt. In February, as the cold set in and power plants started going off-line, wholesale power prices were supposed to spike to their maximum of $9,000 per megawatt-hour. (On a typical day, they are usually less than $30.) But the system didnt work the way it was designed to. Prices plateaued at about $2,000 per megawatt-hour. So the Texas Public Utility Commission, which oversees ERCOT and the power sector in general, stepped in and essentially reset the price at $9,000. Then it kept it there for some 32 hours after the crisis had subsided and generation had returned to normal. The PUCs action was deliberate. We knew at the time we were making a bit of a financial mess, Arthur DAndrea, then-chairman of the PUC, told Bank of America investors in a private call just weeks after the crisis. (Several hours after Texas Monthly revealed the call, Abbott forced out DAndrea.) That bit of a financial mess was actually a $16 billion liability that floated around for months as our elected officials at the Legislature argued over what to do about it. The independent market monitor, a Washington, D.C.based firm called Potomac Energy, which is supposed to settle these sorts of issues, recommended that the overcharges be clawed backed from generators and traders. But lawmakers decided that rather than following their own market rules, they would stick us, the ratepayers, with most of the bill. The state will issue bonds that will be used to reimburse retail electric providers, co-ops, and municipal utilities, and they in turn will add a surcharge on consumers bills. Lawmakers were quick to point out that the charge to each of us will be minimala few dollars a month for as long as thirty years. Upon reaching adulthood, my unborn granddaughter will pay for the bad decisions someone made long before she took her first breath. Nothing our lawmakers are billing us for, however, will prevent more blackouts. They have once again left us at the mercy of a failed system, as they have every legislative session since 2011, when they were warned that a crisis like Februarys could happen. And weve experienced close calls during several winters and summers since then. In fact, 2011 was much like 2021a winter freeze that crippled generation followed by a blistering summer of surging demand. But that summer, the need to curtail power usage didnt appear until August. We have whats called an energy-only market, which basically means power producers get paid only for energy they put into the grid. No one gets paid for having power on standby just in case. Theres no backup. Market participantsthe power plant owners, energy traders, and electric retailersshrug at the lack of a safety net. In an energy-only market, blackouts happen, they argue. But Texans dont see it that way. A University of Houston survey of Texas residents in May found that 52 percent believe our current laws are insufficient to address grid failures. Other deregulated states at least have some reserve generation, often known as a capacity market, which keeps some plants online for emergencies. Texas has some of the slimmest margins for excess generation in the country, which is why we had another near-crisis this week. We have several options for fixing the problem. We could create a capacity market, which would maintain additional generation when needed. Its expensive, but imagine if we were paying for future reliability rather than past mistakes from failed leadership. We could also restructure the market to create more direct incentives for consumers and businesses to use less electricity in times when generation is in short supply. Many large manufacturers already engage in this process, known as demand response. We could expand and create better incentives. Or we could come up with some combination of these ideas. Unfortunately, our history shows us that we wont. Our lawmakers were in session for 140 days and couldnt bother to address many of the structural issues that plague the reliability of the grid. This week, Governor Abbott was asked about the threat of blackouts during a press conference on his plan to build a crowdfunded wall near the Texas-Mexico border. He tried to deflect the question, saying that his critics were the same people who called me a Neanderthal when I opened Texas one hundred percent. The grid, he said, was in better today than its ever been.  The consequences of this persistent foot-dragging and denial could be severe. For the second time in four months, Texas is making national headlines about its unreliable power supply. Businesses thinking of coming here may reconsider. By once again failing to address the obvious flaws in our power grid, our lawmakers didnt just turn their backs on the people of Texas. They may have left the Texas Miracle in the dark.