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More Thoughts about the Texas Power Grid Failure

More Thoughts about the Texas Power Grid Failure

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One week after the power grid failure in Texas, I decided to search Google for some outside perspectives to go along with the Texas perspectives. It was not surprising that 92,000,000 results surfaced in my search, nor was it surprising that some of the top stories were stories that I had read.

The Wall Street Journal’s Katherine Blunt and Russell Gold reported that the core problem with the Texas electricity market is those power providers are not required to provide power during a lengthy emergency even though they can reap the rewards by supplying power during the peak times of usage. They also face no penalties for failing to provide power during emergencies.

Ironically, Texas’ less-regulated power market that allows plant owners to charge high prices during peak demand periods was supposed to provide the money for them to winterize their plants in order to continue operating in severe cold situations like last week.

According to Ms. Blunt and Mr. Gold, the current electrical grid system has its roots in the 1990s when fossil fuels supplied the majority of electricity. The increased utilization of renewable-energy power sources (like wind and solar) makes it more difficult to ensure sufficient supply because they cannot be turned off and on like a traditional fossil fuel power plant. Predicting extreme weather events that drive up demand is difficult as well.

In addition, the Texas wholesale power market was designed to keep power inexpensive when demand is steady. When demand increases, so do prices. If a power producer agrees to supply power into the market and fails to do so, the producer has to pay for the cost of replacing that power. However, if a plant trips offline and stays out of the market due to extreme weather (similar to last week), there is no penalty other than lost revenue.

The Texas Tribune and ProPublica reporters Jeremy Schwartz, Kiah Collier, and Vianna Davila wrote that regulators and lawmakers knew about the grid’s vulnerabilities for years, but protected the interests of large power providers instead.

North Texas-based Luminant failed to deliver power to the grid during winter storms in 2011 and 2014, and each time, its equipment malfunctions nearly brought the power grid to a collapse. In May 2014, the Texas Public Utility Commission (PUC)  concluded that power-generating companies like Luminant failed to understand the critical failure points that could cause equipment to stop working in weather colder than normal.

The Commission asked for weather design changes at all power plants. Luminant argued against such changes. At the end of the review process, the PUC softened the recommended improvements and only asked for power companies to identify failure points that were previously known.

According to the Tribune and ProPublica reporters, lawmakers and regulators have repeatedly ignored, dismissed, or watered-down efforts to address weaknesses in the electric grid.

Houston Mayor Sylvester Turner, a former state legislator, held a press conference last Friday and asked that his former colleagues in the legislature dust off a bill that he filed in 2011 that would have required the PUC to ensure ERCOT (the grid) maintain adequate reserve power to prevent blackouts.

Mr. Turner also warned about the high utility bills that some residents are likely to receive in a few weeks, thanks to the system that rewards power providers who provide electricity whenever demand is high. The normal charge of $35 per megawatt-hour may increase to $9,000 per megawatt-hour for some customers.

There are a few politicians that have doubled down. Former Governor Rick Perry suggested that last week’s disaster was worth it if the system continues to keep electricity rates low and federal energy regulators from requiring changes to the system. His statement may not be that coincidental given that he recently returned to his job on the board of pipeline giant, Energy Transfer LP.

It’s also notable that ERCOT, the Texas power grid regulator, only has one board seat reserved for a representative of residential consumers. The remaining seats are held by energy retailers, power generators, and utility companies.

New York Times reporters Clifford Krauss, Manny Fernandez, Ivan Penn, and Rick Rojas wrote that it seemed unlikely that Texas, the nation’s leading energy-producing state, could run out of energy…until it did.

Again, the reporters cited Texas’ independent energy grid that became a liability when power plants shut down due to the cold given their lack of preparation or incentives to prepare for extreme weather conditions. When the grid was deregulated in 1999, the possibility of more frequent cold weather events was never considered. In Texas, the two agencies responsible for regulating energy, ERCOT and the PUC, are “nearly unaccountable and toothless compared to regulators in other regions where utilities have stronger consumer protections and submit an annual planning report to ensure adequate electricity supply.”

After the outages, the Times reporters write that Democrat and Republican residents, lawmakers, and business executives have called for ERCOT reform. Nearly 10 years after a heavy snowstorm in February 2011 caused statewide rolling blackouts, pipelines remain inadequately insulated and heaters that may have kept power generators, turbines, and other instruments from freezing were never installed.

In another New York Times article entitled “The Future of Texas,” Dave Leonhardt writes that Texas may be the U.S. state with the brightest long-term economic future. More affordable costs of living than the Northeast or West Coast combined with a thriving cultural scene, a diverse population, and top research universities to make it one of the most attractive places for companies to relocate or expand their businesses. Over the past decade, Texas’ population has expanded by more than 15 percent.

At the same time, Texas has a “fossil fuel problem” according to Mr. Leonhardt. The economy is dependent on oil and gas despite major growth in tech and healthcare. Climate change has increased the number of 95-degree days as well as increased the frequency of severe hurricanes.

Climate change has also shifted the jet stream making extreme cold weather shifts more common. Texas politicians have failed to support slowing climate change on a national level and locally, failed to prepare the electricity grid for extreme cold spells.

According to Mr. Leonhardt, Texas Governor Gregg Abbott initially blamed the power blackout on wind and solar energy instead of the failure of natural gas plants to stock gas reserves or heaters to keep their pipes from freezing. Texas’ political and business leaders should make their power grid more resistant to extreme weather and take advantage of cheaper wind and solar energy options.

In a summary titled “What Went Wrong in Texas,” The Atlantic’s senior associate editor Caroline Nyce wrote that the collapse of the Texas power grid has come to symbolize something much darker. Ms. Nyce cites an Atlantic article written by Adam Serwer who writes that the collapse of the power grid happened because Republican politicians spent their time inflaming grievances instead of governing.

Mr. Serwer quotes a report from the Federal Energy Regulatory Commission (FERC) explaining the Texas power grid failure was due to a cold-weather event “unusually severe in terms of temperature, wind, and duration.” Then, he writes that the report is from 2011, not from 2021.

If Texas utilities had followed FERC’s recommendations to winterize their system, it would have been expensive. The companies didn’t want to spend money they did not have to spend, and Texas politicians whose campaigns were financed by the energy companies didn’t want to make them do it either.

Mr. Serwer also points to the initial attempts of Texas Governor Abbott to blame the power outage on wind turbines and not acknowledge the more substantial failure caused by inadequate natural gas reserves, frozen gas pipelines, and frozen gas turbines at some power plants.

Mr. Serwer writes that, to his credit, Governor Abbott is meeting with Democrats in the Texas state legislature to help Texans hit with thousands of dollars in energy bills as well as calling for the grid to be winterized. As a postscript, he adds that “if politicians don’t fear being punished for not doing their jobs, they won’t do them.”

In another Atlantic article cited by Ms. Nyce, Robinson Meyer writes that Texas’ grid failed because of poor planning for winter temperatures that did not get above freezing for days. Three in five Texans heat their homes with electric heaters. When the temperature dipped below freezing across the state, the heaters ratcheted up the energy needs from the grid.

The increased power demands caused ERCOT to ask utilities to put their customers on rolling power blackouts except for the districts with key facilities like hospitals and 911 call centers. When this order was enacted, the utilities found that the vital districts were drawing far more power than expected and that made enacting rolling blackouts impossible.

A wintertime run on natural gas should have been foreseeable argues Mr. Meyer. Pipelines could have been ordered to winterize and power plants could have maintained an on-site backup of gas reserves. Although the temperatures in Texas were brutally cold, they were within the historical norm.

According to Mr. Meyer, the city of El Paso operates its own utility, separate from ERCOT’s system. El Paso’s utility provided power for all its customers last week. Why? After the now-infamous 2011 winter storm, El Paso winterized its natural-gas infrastructure unlike the rest of the utilities in the state.

Back in Texas, Austonia writer Claire Partain reported that the five non-Texan board members of ERCOT resigned Wednesday. An out-of-state candidate for an ERCOT position withdrew their candidacy, and ERCOT’s Market Segment Director resigned as well. As previously reported, Texas’ governor, Greg Abbott has called for the resignation of ERCOT’s board and for an investigation into the reasons for the grid’s failure.

One day later, Claire Partain wrote an article titled “Is the ‘Texodus’ over for storm-damaged Austin?” She argues that Austin and all of Texas could face a backlash if the most energy-rich state in the country doesn’t fix its electricity infrastructure. Where the funds will come from is unsure, but it is certain that the state will not add state income taxes in order to pay for improvements. While companies like Tesla, Oracle, and Samsung that have recently announced moves to Austin will be unlikely to change their mind, Partain writes that they can’t be happy with last week’s events.

Meanwhile, the power returned in Austin, but many residents are still impacted by water issues. In an article written by Emma Freer, it was reported on Saturday that hundreds of apartment complexes and other properties still lack water because of unresolved pipe breaks.

While Austin Water has restored service city-wide, many complexes cannot without risk of flooding or other damage. Its director, Greg Meszaros, reported to the City Council that between two to four hundred apartment complexes and condos are out of water due to interior piping system problems.

Ms. Freer reports that property owners and management companies are competing for repair services. The state of Texas has temporarily suspended its requirements that plumbers be licensed in Texas, and out-of-state plumbers have been requested to assist with the extensive repair work. Austin Water Director Meszaros estimates that it will be many days before all of the pipe issues are resolved.

The Texas legislature and Governor Abbott are scheduled to meet this week to assess the situation caused by the power outages. It’s clear that the same items cited from the 2011 outage (lack of winterization, fuel reserves, and a requirement that utilities provide power during shortages or high need) contributed to this year’s outages. It’s also clear that there are some politicians who continue to support the system that has failed the state several times.

Whether or not the Governor and the Legislature will collaborate and agree to mandate the changes that are necessary is up in the air. Hopefully, they’ll do what’s best for residents and the economy and ignore the lobbyists representing utilities and energy companies. Texas doesn’t have to merge its grid with the East and West national grids, but it clearly needs to fortify its grid so that something like this winter’s outage doesn’t happen again.

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Wally Boston Dr. Wallace E. Boston was appointed President and Chief Executive Officer of American Public University System (APUS) and its parent company, American Public Education, Inc. (APEI) in July 2004. He joined APUS as its Executive Vice President and Chief Financial Officer in 2002. In September 2019, Dr. Boston retired as CEO of APEI and retired as APUS President in August 2020. Dr. Boston guided APUS through its successful initial accreditation with the Higher Learning Commission of the North Central Association in 2006 and ten-year reaccreditation in 2011. In November 2007, he led APEI to an initial public offering on the NASDAQ Exchange. For four years from 2009 through 2012, APEI was ranked in Forbes' Top 10 list of America's Best Small Public Companies. During his tenure as president, APUS grew to over 85,000 students, 200 degree and certificate programs, and approximately 100,000 alumni. While serving as APEI CEO and APUS President, Dr. Boston was a board member of APEI, APUS, Hondros College of Nursing, and Fidelis, Inc. Dr. Boston continues to serve as a member of the Board of Advisors of the National Institute for Learning Outcomes Assessment (NILOA), a member of the Board of Overseers of the University of Pennsylvania’s Graduate School of Education, and as a member of the board of New Horizons Worldwide. He has authored and co-authored papers on the topic of online post-secondary student retention, and is a frequent speaker on the impact of technology on higher education. Dr. Boston is a past Treasurer of the Board of Trustees of the McDonogh School, a private K-12 school in Baltimore. In his career prior to APEI and APUS, Dr. Boston served as either CFO, COO, or CEO of Meridian Healthcare, Manor Healthcare, Neighborcare Pharmacies, and Sun Healthcare Group. Dr. Boston is a Certified Public Accountant, Certified Management Accountant, and Chartered Global Management Accountant. He earned an A.B. degree in History from Duke University, an MBA in Marketing and Accounting from Tulane University’s Freeman School of Business Administration, and a Doctorate in Higher Education Management from the University of Pennsylvania’s Graduate School of Education. In 2008, the Board of Trustees of APUS awarded him a Doctorate in Business Administration, honoris causa, and, in April 2017, also bestowed him with the title President Emeritus. In August 2020, the Board of Trustees of APUS appointed him Trustee Emeritus. In November 2020, the Board of Trustees announced that the APUS School of Business would be renamed the Dr. Wallace E Boston School of Business in recognition of Dr. Boston's service to the university. Dr. Boston lives with his family in Austin, Texas.

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