With weak grid, Texas puts electricity profit ahead of reliability
Two cold nights without electricity is all Texans need to jump to the wrong conclusions about the state’s electricity grid.
Internet trolls shared photos of helicopters spraying wind turbine blades and blamed renewable energy for the state’s failure to provide light and warmth to 4 million households during a cold snap forecast more than a week in advance.
That is not what happened. Angry CenterPoint and CPS Energy customers in Houston and San Antonio railed against the local utilities responsible for delivering energy to their homes.
They are not to blame either.
While we may not know the details for months, the fault lies ultimately with the Electric Reliability Council of Texas, which operates the grid that supplies power to most Texans, and with the Texas Legislature, which has failed to regulate a wholesale electricity market that prioritizes profit over resilience.
ERCOT operates one of the most innovative wholesale electricity markets in the world, but it’s far from perfect. There are three different segments, each playing a pivotal role and prone to failing if not carefully regulated.
Electricity generators compete to meet the state’s power needs with the cheapest sources, whether coal, nuclear, wind, natural gas or solar. ERCOT forecasts the expected demand weeks in advance, companies bid to provide the cheapest power, and ERCOT contracts for what it needs the day before.
No prediction is perfect, though, so ERCOT builds in a reserve. The price paid to generators is based on the actual consumption, though, which means Texans do not pay for power they do not use. Other states pay generators to stand by if needed, but not ERCOT.
The typical price for ERCOT electricity is about $25 for a megawatt hour. But ERCOT can pay as much as $9,000 to get power providers to generate enough electricity to meet the state’s needs.
The state grants monopolies to companies to maintain the transmission lines. CenterPoint has the contract for the Houston area. CenterPoint is forbidden from owning generating assets or even batteries to store power along their wires.
Electricity retailers manage customers and then buy, sell or trade electricity contracts. Some generators own retail operations, such as NRG Energy, which owns Reliant and other retail brands.
The exceptions are rural cooperatives and municipally owned utilities such as San Antonio’s CPS. They can do it all: power plants, transmission and retail sales.
Ten days ago, ERCOT meteorologists warned power plant operators the polar vortex could strike. But West Texas winds are weak in winter, and they make up a small proportion of ERCOT’s generation compared with fossil fuels. In winter, ERCOT relies on coal and natural gas peaker plants, because we do not have enough renewables in the right places, such as offshore.
ERCOT publicly reports what generators are offering and how much they actually provide to the grid. These numbers are available both a day ahead and as it happens. You can also track which source of power — renewable or fossil fuel — is meeting its obligation.
Wind generators did not bid a lot of power due to the ice storm. Plenty of natural gas and coal plants made bids, so it looked like ERCOT was adequately supplied to meet recordhigh winter demand. Heroics like de-icing blades with helicopters seemed unnecessary.
ERCOT needed a little more than 70,000 megawatts of juice early Monday morning when the fossil fuel plants failed and took 30,000 megawatts off the grid. Wind came within 1 gigawatt of meeting its obligation, and then wind and solar outperformed expectations during the day.
The fossil fuel plants failed because they were not prepared for the cold. Texas could have relied on wind, but operators opted out of buying cold-weather add-ons used in the Arctic. Texas electricity generators did not want to spend the money to build resilient equipment because it
would cut into their profits.
“Power outages in Texas have nothing to do with power generation technology,” said Jim Krane, an energy fellow at Rice University’s Baker Institute. “Texas’ unwillingness to regulate turns out to be an unwillingness to buy insurance. Sure, it makes power cheap most of the time. But we wound up with a system designed for making a quick buck under optimal conditions. When something unusual happens, it’s a crisis.”
The Texas Legislature and the Public Utilities Commission could require Texas power providers to better prepare. But even after a similarly catastrophic failure in 2011, Texas regulators have failed to mandate a more resilient power grid.
Extreme weather events such as the polar vortexes of 2011 and 2021 will become more common due to climate change, just as heat waves have worsened. If Texans do not insist on a stronger grid, we will spend a lot more time at the mercy of the elements.