What triggered the energy crisis?
Energy markets have never seen anything quite like this. In a matter of days, an intensifying cold blast gripping the central U.S. froze natural gas pipelines, sent electricity prices skyrocketing to record levels and ultimately forced Texas’ grid operator to plunge more than 4 million homes into darkness in the first winter weather-related rolling blackouts since 2011. As electricity outages began spreading through a 14state grid across the southwest, plenty of blame for the crisis was already being assigned.
1. What started this?
On the most basic level, the weather. A polar vortex — a girdle of winds that keep cold bottled in the Arctic — buckled and released record-breaking cold across much of the U.S. at the end of the first week of February. By Feb. 9, temperatures had plummeted from Denver to Chicago, and hundreds of places across the central U.S. set daily temperature records. Prices for different types of heating fuels began to surge higher, including oil and natural gas. Demand for propane climbed to a 17-year high. Gas and electricity use similarly rose.
2. What turned the cold into an energy crisis?
As temperatures continued to fall, gas pipelines began to seize up, wind turbines started to freeze and oil wells shut in — just as homes and businesses raised demand for heating to record levels. The strength of gas demand across the central U.S., especially in Oklahoma, caught some traders by surprise. Physical delivery of the fuel at one hub in Oklahoma traded at an astonishing $600 per million British thermal units. By Friday, traders were panicking and trying to line up additional supplies for the long holiday
weekend. That evening, Texas’ chief energy regulators called an emergency meeting to prepare to ration gas supplies across the state. They adopted a measure that put residential customers, medical facilities, schools and churches at the front of the line for gas ahead of industrial users.
3. Why couldn’t the grid keep up with demand?
Texas’ grid operator says widespread shortages of natural gas supplies to power plants and a decline in wind generation helped create the shortfall. Several other plants tripped offline amid the cold for reasons that aren’t yet known. In all, the agency estimated that more than 34 gigawatts of generating capacity was wiped out. That’s as much as 40 percent of the capacity that the region was expected to have online by the summer. Wholesale electricity prices in Texas skyrocketed to $9,000 a megawatt-hour, the maximum allowed in the market.
4. What put the lights out?
Texas’ grid operator and the Southwest Power Pool have both implemented rolling electricity outages. These are controlled blackouts — designed to last anywhere from 15 minutes to an hour but in reality proving much longer — that force electricity demand
offline to protect the grids from total collapse. In the past three decades, Texas has resorted to such a drastic measure only four times. The U.S. Energy Department issued an order that allows power plants to keep running despite possibly violating certain environmental limits. President Joe Biden approved Texas’ emergency declaration, making more resources available.
5. Is the shift toward renewable energy to blame?
Wind turbine blades icing over has become a real problem, but the cold is wreaking havoc on the region’s entire energy complex, crippling fossil fuel and renewable resources alike. Half of the wind power capacity on Texas’ grid was knocked offline, and wind accounts for nearly a quarter of the state’s supplies. But the region’s grid operator made clear that power plants across all resources had tripped offline, and data from the grid operator shows generation from wind farms has actually been exceeding the agency’s forecasts in recent days. Some are pointing fingers at more systemic, long-standing issues with how Texas manages its power system.
6. What’s different about the Texas system?
The state doesn’t run so-called capacity markets like other parts of the country. These markets act like insurance policies, whereby electricity generators are paid to guarantee that their supplies will be available when consumers need them on the most extreme hot and cold days. If they don’t show up, they face stiff penalties. The grid spanning much of the eastern U.S. runs a market like this, for example. Texas is also home to the most competitive electricity market in the country, a cutthroat business in which power providers offer incredibly low rates and incentives to new customers. This can set them up for failure during extreme events such as this if they aren’t properly hedged for a surge in wholesale energy prices.
7. How might this crisis change the energy landscape?
The crisis reinforces the need for policymakers and regulators to think carefully about what a world wholly dependent on electricity for lighting, cooling, heating, cooking and transportation would look like under extreme circumstances. The same risks were on full display last year when California, the largest electric car market in America and one of the biggest in the world, went through rolling blackouts of its own caused by intense heat waves and wildfires. Proposed solutions include large-scale batteries that back up power plants, along with broader, more regionalized power grids. Some policymakers in Washington have argued that this dependency means it’s critical to preserve coal and nuclear power plants as so-called baseload resources that are available to run around the clock. The issue is gaining urgency as climate change only stands to bring about more extreme weather. That doesn’t just mean extreme heat, but extreme cold too.