This is a lengthy article but worth reading. The Texas energy system was unregulated, yes, but its members could have planned for the foreseeable — but didn’t because the costs seemed too great. Unfortunately for Texas, the bottom line is that this disaster proved that total lack of oversight can produce utter disaster. A shame that people died and many suffered huge economic loss simply so that a lesson could be learned.
Texas Failed Because It Did Not Plan
What went wrong? The Lone Star State made three fundamental errors.ROBINSON MEYERFEBRUARY 21, 2021
How could this have happened? For four days, millions of people in Texas—the so-called energy capital of the world—shivered in the dark, unable to turn the lights on or run their heaters during some of the coldest days in decades. At least 30 Texans have died so far, including a 75-year-old man whose oxygen machine lost power and an 11-year-old boy who may have perished of hypothermia. Desperate families have tried to stay warm by running generators and grills indoors, leading to more than 450 carbon-monoxide poisonings, many of them in children.
Severed from electricity and bare to the frigid weather, Texas’s infrastructure suffered a kind of multisystem failure. Pipes began to burst inside homes. Cell networks went down, preventing people from calling 911. In Austin and elsewhere, so many people ran their pipes at a drip (in order to prevent them from freezing) that the water system depressurized, contaminating the supply and forcing residents to boil their water before using it.
America’s second-largest state was brought to its knees by winter weather. How could this have happened?
Here are three explanations. I won’t give away the ending, but they are many of the same issues that hampered the United States in its response to the COVID-19 pandemic. Too many crucial systems in this country are run on an ad hoc basis. A lack of planning, a reliance on just-in-time logistics, and a self-defeating trust in the profit motive are withering the American economy and way of life.
1. It’s simple: Nobody planned for this. “We are not known for our winters here,” Joshua Rhodes, a researcher at the University of Texas at Austin Energy Institute, told me. “We vastly underestimated how cold [it]—and how widespread that cold—could get in Texas.”
The power grid is a titanic machine made of copper and steel, but it has to be played like a Stradivarius. At any moment, power plants must generate about the same amount of electricity that customers demand. An out-of-balance grid can burst into flame or break down. This week, some of Texas’s biggest cities saw overnight wind chills around zero degrees Fahrenheit; temperatures across the state did not pass the freezing mark for days. Three in five Texans warm their homes with electric heaters. Those heaters suddenly needed a lot of power: The system didn’t have that power, so it failed.
This failure cascaded down the power lines. When the managers of Texas’s grid realized that they had too little power to meet demand, they told local transmission organizations—smaller grids that cover specific cities or regions—to begin rolling blackouts, Rhodes said. This is a standard move when electricity becomes scarce, but the outages are supposed to, as the name says, roll. In a normal rolling blackout, managers will cut electricity to a neighborhood, wait 45 minutes or so, then rotate it to the next neighborhood and restore power to the first. Nobody likes it, but at least everyone gets some power.
But the “outages are not rotating” in Texas, Rhodes said. This is because the state was—again—unprepared. In an emergency, every local grid must keep the power running to certain key facilities, such as hospitals and 911 call centers. This week, when the local grids directed power to the circuits that serve those facilities, they used up all of the electricity they could distribute. In many cities, that critical infrastructure wasn’t entirely on the same grid circuit. So the blackouts never rolled: Some houses lost power for three days, and others, those lucky enough to be on the same grid circuits as hospitals, kept their heaters running the whole time.
2. But this explanation begs the question: Why couldn’t Texas generate enough electricity?
The Texas grid is named after the Electric Reliability Council of Texas, or ERCOT, the agency in charge of managing it. (Yes, reliability is in the name—making ERCOT perhaps the sole instance of oxymoronic metonymy in English.) ERCOT can keep the lights on during sweltering summer days, when Texans demand more than 70,000 megawatts of power. During this week’s coldest days, Texans demanded about that much power again, Rhodes said. Yet this time, the grid could deliver only about 40,000 megawatts. What happened?
Texas politicians had an early explanation. “Our wind and our solar got shut down, and they were collectively more than 10 percent of our power grid,” Governor Greg Abbott told Fox News’s Sean Hannity this week. “It just shows that fossil fuel is necessary.”
In fact, a senior director at ERCOT now says that renewable-energy outages were the least important factor in the blackouts. And although wind energy underperformed ERCOT’s estimates on Monday, solar power actually overshot them. More important, the Texas grid collapsed because some 28,000 megawatts of coal, nuclear, and gas power went offline—about a third of ERCOT’s total capacity. ERCOT failed, because fossil fuels failed. And one fuel failed in particular: natural gas.
“It reminds me of watching The Big Short,”Daniel Cohan, an engineering professor at Rice University, told me, of Texas’s natural-gas crisis. “You had the best and the brightest, the financial wizards of Wall Street, that knew how to put together a portfolio that was diversified.” But they didn’t foresee that a single massive crisis could tank the value of mortgages across the country simultaneously, taking their portfolios with it.
Likewise, Texas “had a system that depended on one fuel alone, natural gas, to provide two-thirds of our supply when we needed it most in the winter,” Cohan said. Then “an Arctic blast hit all of our components at once,” and the energy system cracked apart like Lehman Brothers.
Texas generates about half of its electricity by burning natural gas. Over the past few decades, companies have constructed a labyrinth of pipelines and fracking wells, smokestacks and export terminals; the tendrils of natural-gas infrastructure now span the length of the state, and reach thousands of feet underground. In a feat of just-in-time logistics, gas is delivered to power plants nearly at the moment that it’s combusted. Most gas plants do not buy fuel in advance, Rhodes said, and few keep on-site backup fuel, such as diesel, to run in case their pipelines break. In fact, the Lone Star State as a whole doesn’t maintain much natural-gas storage, because it treats the ground as its reserve: If it needs more gas, it can always drill.
Nor is the power system the sole consumer of natural gas in Texas. During the winter, homes, hospitals, and offices pipe in the fuel to burn in heaters and boilers.
This remarkable system was totally unequipped for a polar vortex. As temperatures plunged, the pipelines delivering gas to power plants froze and depressurized. At the same time, those homes, offices, and hospitals all claimed whatever meager gas was still available. A system built for summer was outmatched by winter—and Texas, sitting on one of the world’s largest natural-gas reserves, suffered a statewide run on gas.
For energy experts who have sometimes looked past natural gas’s considerable downsides, the failure is striking. “The reliability of natural gas is supposed to be its selling point,” Cohan said. “We put up with minor earthquakes, fracking fluid, air pollution, methane leaks, and climate change because we need this ‘firm and reliable’ source.”
What happened wasn’t so different from what struck FedEx, Charmin, and New York’s health-care system when the pandemic hit last year. There was enough toilet paper in America for everyone to buy it every few months, but not for everyone to buy it the same week. Just-in-time logistics, whether by pipeline or cargo ship, makes good economic sense; it’s cheaper than running a system with a little built-in slack. But it depends on tomorrow looking roughly like yesterday, and when something unusual happens—such as Texas freezing over—the system fails.
When a shortage like this hits Lululemon, it means you can’t buy spandex bike shorts. When it hits the power grid, it means children freeze to death in their beds.
3. Yet why didn’t someone plan for a natural-gas shortage? A wintertime run on supply was entirely foreseeable. Pipelines could have been ordered to winterize; power plants could have maintained on-site backup. The natural aspect of this disaster had precedent: Although Texas saw brutal temperatures this week, they were within the historical norm.
Some researchers, including Cohan at Rice, have started to call Texas’s failure an “energy-governance problem.” This is a shorthand way of saying that society’s plans didn’t make sense, because they assumed that natural gas could do an impossible number of things at the same time. And nobody noticed this beforehand, because it was nobody’s job to notice.
In 1999, Texas restructured its power sector, dumping its old utilities and adopting in their place a new and totalizing market system. But this market looks little like the markets we know from everyday life. Consumers cannot buy electricity like it’s breakfast cereal or sell it like a used car. Instead, Texas has a market only a lawyer could love: a legalistic, mechanistic auction between power plants and distribution companies, funded with consumers’ utility bills.
In this market, ERCOT is less an administrator than an auctioneer. Governor Abbott vowed this week that Texas would “investigate what lapse of judgment ERCOT had with regards to preparing for this situation”—but as he likely knows, ERCOT judges in the same way that eBay judges who will take home this Walker, Texas Ranger varsity jacket. When Texas needs more power, the price of electricity on ERCOT’s market increases. For days this week, it approached $9,000 per megawatt-hour. (A megawatt-hour is enough to power several hundred homes. In Washington, D.C., where I’m writing this, electricity currently costs about $34 a megawatt-hour.)
Those high prices are supposed to drive power-generation capacity online. They didn’t—because of the ice-locked equipment and natural-gas crunch. “The price could’ve been a million dollars a kilowatt-hour, but you can’t supply with gas you don’t have,” Cohan told me.
Yet as the market foundered, those generators that survived made a killing. By one measure, ERCOT power plants have made more already this year than they made in the past three years combined. Meanwhile, customers are suffering. In four days, the city of Denton paid $207 million for electricity—which is more than it paysin a typical year, the Wall Street Journal reporter Tim Puko has found. When Texas’s power market does allow consumers to join as market participants, it does so through start-ups, such as Griddy, that give consumers unfettered access to wholesale ERCOT power prices. Most of the time, Griddy consumers pay alluringly low prices—except, this week, some found themselves owing $2,500 a day.
At the core of ERCOT’s structure is a total trust in markets, says Leah Stokes, a political-science professor at UC Santa Barbara. To design a system such as ERCOT, “you have to believe that markets are better at coordinating than centralized planning,” she told me.
Whatever the virtues of that hope, they were not borne out this week. The city of El Paso has its own utility, separate from ERCOT’s market system. That utility maintained power while ERCOT drowned. Why? After a winter storm swept through Texas in 2011, El Paso planned for future cold-weather disruption by winterizing its natural-gas infrastructure. ERCOT did not. Nor did the Public Utility Commission of Texas, which regulates power generation statewide, mandate such preparedness.
In short, the Texas government assumed that high prices alone could guarantee grid reliability and incentivize power plants to prepare for the worst. This didn’t happen. The market failed.
This failure reminds me of what I observed while reporting on America’s COVID-19 testing failure. For months last year, the federal government failed to adequately plan and pay for the industrial-scale production of COVID-19 tests. It assumed that high demand for tests would lure companies to join the market. But no individual private firm had an incentive to risk short-term stability for potential medium-term profit. So the country went months without sufficient tests.
Texas’s crisis reveals, too, how independence, a praiseworthy trait in postcolonial states and precocious children, is less laudable in the power sector. Rick Perry, the former secretary of energy and Texas governor, implied this week that his old constituents should prefer the blackouts over federal control. “Texans would be without electricity for longer than three days to keep the federal government out of their business,” he said. He is more correct than he may have realized. After that 2011 winter storm, the federal government actually did require Texas power plants to draw up plans for how they would avert a worse disaster, Rhodes, the UT researcher, said. But it had no ability to enforce those plans, and power plants seemingly put them aside.
The power grid is modern society’s life-support system. Everything on which daily survival now depends—clean water, refrigeration, medical care, reliable communication, access to cash and banking—requires, to some degree, electricity. Every day, in a marvel of engineering and statecraft, a national network of wire delivers 10 billion kilowatt-hours of electricity to Americans. Rome once united its territory by paving the Via Appia down Italy’s spine; the U.S. raises power lines.
This week, a Vietnam veteran died in his truck with his last tank of oxygen because he had no power. He deserved better. The power grid is a very large and important machine, but it is also an ennobling tool, a guarantor of solidarity and dignity. The grid grants a certain kind of freedom—freedom from darkness, freedom from cold or heat, even freedom from boredom. There is a freedom in knowing that anything you plug into the wall will turn on; there is a freedom, too, in knowing that your house will stay inhabitable and your pipes will not burst. Texas’s system is built on the idea that the liberty of companies to buy and sell electrons—and the freedom of consumers to pay a $2,500 power bill—is greater and more dear than any freedom wrought by consistent power service.
Perhaps ERCOT’s strangest and most un-American trait is that it strips citizens of their democratic authority; instead of being able to hold someone accountable when the power goes out, Texans are told that the market, like a rain god, has failed again. You might say that ERCOT, in its majestic equality, allows rich and poor alike to think like an economist. Frankly, Texans have better things to do. Moreover, if the freedom to survive a snowstorm is worth protecting, if it is a freedom we owe to one another, it is a freedom worth planning for. Markets are good tools; they aren’t our only tools. Government by auction is no way to live. Indeed, Texans are dying of it.