Arguments
Why is the Texas grid in such bad shape?
Posted on 23 July 2024 by Guest Author
This is a re-post from the Climate Brink by Andrew Dessler
The Texas grid, run by ERCOT, has had a rough few years. In 2021, winter storm Uri blacked out much of the state for several days. About a week ago, Hurricane Beryl knocked out power to millions of Houstonians, and a week later, hundreds of thousands of Houstonians still hadn’t had their power restored.
It might seem that these two events are completely different — one was a winter storm that caused a blackout by knocking out the natural gas supply, while the other one is a hurricane that knocked out the power distribution system.
But the root cause of these two incidents is actually the same. To understand what’s going on, you need to realize that keeping the power on is incredibly valuable to society and, when the power goes out, the damages are enormous. The Uri blackout cost well north of $100 billion. I have yet to see an estimate of the cost of Hurricane Beryl, but I’m guessing it’s also going to be eye popping.
But here’s the key fact: these costs are not paid by energy companies. When the power went out during Uri and pipes froze and burst, the energy companies didn’t pay those costs. Homeowners and insurance companies did. When the power outage caused Texans to freeze to death, the energy company didn’t pay, society did. Energy companies aren’t paying the expenses from Beryl, either.
Thus, power outages actually cost energy corporations very little money — maybe a few days’ revenue. Hardening energy infrastructure, on the other hand, is very expensive and entirely paid for by the energy corporations. This cuts into their profits and stock price.
Put slightly differently: Energy corporations pay the full cost of hardening infrastructure but capture only a small fraction of the benefits. Most of the benefits flow to society in the form of avoided burst pipes, avoided loss of income, avoided health impacts.
So why in the world would a corporation spend money hardening the energy system? The answer is there’s no reason. The net result is that the rational thing for corporations is to underinvest in making the grid resilient to extreme weather.
This is a market failure just like the carbon dioxide problem: There’s no incentive for emitters to reduce emissions because they pay the full costs of the emissions reductions but capture only a small fraction of the benefits of avoiding the impacts of climate change. In such a case, the rational thing for a profit-seeker is to keep emitting carbon dioxide.
Texas is open for business pushing costs onto consumers!
The only solution is for the Texas State government to come in and force companies to invest in hardening the grid. Texas politicians understand that people demand action, which is why we heard Lt. Gov. Dan Patrick say that the government will fix the grid after the Uri blackout:
We’re going to get to the bottom of this and find out what the hell happened, and we’re going to fix it.
And Gov. Greg Abbott sent a letter to the Public Utility Commission of Texas ordering an investigation into CenterPoint and deliver a report on its findings by Dec. 1.
“Maybe they have too large of an area for them to be able to manage adequately,” Abbott said. “It’s time to reevaluate whether or not CenterPoint should have such a large territory.”
But this will promise of action is entirely performative. When the cameras are rolling, they express outrage and promise action. Once the cameras are off, the outrage fades, and nothing changes.
History confirms this. After a big December 1989 blackout caused by lack of winterization of the energy system, fixes were promised. Those were never implemented and another blackout occurred in Winter 2011. A subsequent report laid out steps to make the grid more robust. Those were never implemented, so we had another blackout in 2021.
After the 2021 blackout, a natural gas billionaire made huge campaign contributions to prominent politicians and, lo and behold, nothing was done to make natural gas providers harden their infrastructure. If we had another Uri tomorrow1, we could once again see widespread blackouts.
The same will happen over the next few months with respect to the Beryl blackout: After the outrage theater dies down, nothing will be done.
This is one of the reasons, by the way, why Texas is so popular with corporations. They are never held accountable for pushing their costs onto society, as long as the people who pay the costs are the poor and middle class.
Ultimately, the problem is that Texas politicians legislate on behalf of corporations and not the citizens of Texas. Until that changes, episodes like Uri and Beryl are certain to continue.
Centerpoint which is the houston area electric provider requested funds from the US DOE to upgrade the houston area electric distribution system using funds avaiable due to the inflation reduction act. The DOE said no. The local distribution systems are not part of ERCOT, thus no blame can be placed on ERCOT
www.chron.com/weather/article/houston-beryl-centerpoint-doe-grid-19571835.php
David-acct:
As the OP points out, ERCOT does not require power companies to harden their electrical sydtems. This hardening is required by federal regulations in the test of the country. After the often repeated disasters in Texas, consumers AR required to pay for he immense damages while the electrical generators who failed to take reasonable action to prevent disasters made extra profits. The problem lies entirely with ERCOT, the federal government is not responsible for Texas regulators allowing electrical companies to neglect normal maintenance.
I note that in 2021 Oaklahoma, which endured the same cold as Texas, had no problem during the cold event that crippled Texas. Oklahoma's grid complied with federal regulations while the ERCOT grid did not.
The story David-acct linked to seems to be largely based on a story at E&E News, linked to in the first paragraph of the story David-acct linked to. The E&E story states:
...and got some feedback from CenterPoint. The E&E article says:
It looks to me like CenterPoint is in a bit of a bind. They don't want to pay for the costs of adding resiliency to their grid. They don't want to charge their customers for it, either. ERCOT won't force them to do it. And they're having a hard time convincing others that it should be paid for from taxes collected outside of Texas.
This sounds like what my dad called "freeload enterprise". Privatized profits, and socialized costs.
Michael - I appreciate your comments, though quite curious why blame is being placed on ERCOT unless its an intentional distortion by the article.
Ercot does not own the local electric distribution systems (ie the power lines that provide power to individual businesses and homes. None of the Grids operators in the US own the local distributions systems, whether it is CISO, PJM, CISO, MISO or any of the others. Thus there is no reason to place blame on ERCOT.
Do you blame the CISO grit for the wild fires caused by the power lines in California - of course not since CISO grid does not own those power lines. Likewise you cant blame ERCOT for the houston powerlines since they dont own or control the owner of those power lines.
You mention that Oklahoma survived the Feb 2021 fiasco that felled ERCOT. What you omitted was that Oklahoma is part of the SWPP Grid which along with the MISO grid, both of which came perilously close to failure. Yes, the Texas grid failed due to the overreliance on natural gas and wind with the natural gas lines freezing and the lack of wind. Note that the lack of wind was across the entire north american continent
Both the SWPP and the MISO grid rely much more heavily on coal instead of natural gas and wind and therefore, were not subject to those risks. In spite of that fact, both grids teetered on collapse during the Feb 2021 freeze.
I strongly urge you to review the source data from the EIA website. The EIA website clearly shows how poorly wind performed across the entire United States during those 7-10 days losing 60%+ percent of electric power generation, with the SWPP grid and the ERCOT grid losing 80%-90% power for those 7-10 days. Whereas ERCOT lost 40% of electric generation from gas for 2 1/2 days.
That is a huge difference, the magnitude of losing 60-70% of power generation from wind across the entire continent 7 days is significantly greater than losing 40% electric generation from natural gas in only one state for 2 &1/2 days
There was a similar deficiency with solar during that period which was partly due to being winter months with shorter daylight time.
Again please review the link below which provides the source data
www.eia.gov/electricity/gridmonitor/expanded-view/custom/pending/GenerationByEnergySource-4/edit
Reading of the article, and the related points in the comments, from the perspective of my 1980s Engineering and MBA education and successful career, leads to the following judgment (open to adjustment if good reason is given to update it):
The recent tragic electricity supply consequences that happened in Texas that are the focus of the article were understandably avoidable. The ways to minimize the harm and risk of harm were understood and possible to achieve.
Electricity is clearly a ‘basic need’ in Texas. It is also a marketplace commodity that can be chosen to be paid for to be ‘unnecessarily consumed’. Reliable delivery of the basic need is an ‘essential service’. And it is well understood that ‘essential needs’ should not be expected to be delivered responsibly by marketplace competition. More harmful and riskier actions that others will suffer the consequences of are cheaper and more profitable.
If it was practical the total basic need would be provided by a very robust and reliable electricity system and a less reliable cost-profit driven system would exist for the unnecessary over-consumption (but unnecessary system would not have freedom to be harmful to others, only the freedom to risk the loss of access to unnecessary electricity).
That ‘dual system’ is not practical for electricity. So the total system needs to be hardened to the level of an essential service (which can even be done in a system that only uses the least harmful renewable energy generation). If the cost is prohibitive then making the unnecessary consumption more expensive could be a solution. A practical responsible government action would be to have the cost for the electricity consumed be high enough that excess revenue can be used to provide financial assistance to those who are unable to afford their ‘basic needs’.
The harms and risks were the result of the failure of the government of Texas to govern/limit the harm and risk of harm related to activity governed by the government of Texas. And the government of Texas can also be blamed for using its influence to interfere with, fight against, federal and global leadership actions that would have reduced the harm and risk of harm.
The failure of leaders to act based on learning about the potential harmful consequences of the fundamental guaranteed ‘failure of the marketplace competition for perceptions of superiority to limit harm or risk of harm’ is understandable.
The easily impressed among the population of Texas voting for that type of failing leadership is the root of the problem producing understandable consequences that others need to try to ensure do not become 'their problem'.
The citizens of Houston are victims if they are unable to isolate themselves from the harmful consequences of the failures of their Municipal or State governments to responsibly govern to limit harm done and risk of harm. And a municipal government can be the victim of being unable to isolate itself from irresponsible State leadership. Of course, a State government can also be a victim of the inability to isolate itself from irresponsible harmful federal leadership. But in this case the Texas State government has clearly fought to isolate itself from, and fought against, helpful harm limiting federal leadership actions.
David-acct:
ERCOT or another regulator is responsisble for making the rules governing how the grid is built. The electrical industry in Texas has captured the regulators and the rules for maintaining the grid are much inferior to the rest of the country. ERCOT allowing the electrical industry to maintain their machinery at lower than industry standards has cost the state of Texas consumers bilions of dollars. As documented in the OP, it would have cost much less to properly maintain the grid and generating sources than has been lost because the electricity providers in Texas only care about their profits this week and do not care that they are not prepared for even a category 1 hurricane.
Your proposing that we reduce regulations on industry would only result in even more unnessary damage to the economy. Critical industries like electrical generation and distribution have to be maintained to a high standard. As proven repeatedly by Texas, left to themselves the electircal industry does not do its job, they have to be closely watched by the regulators.
The situation in the California fires is different. Climate change has made forrest fires much worse in just the last decade. The regulators in California are reviewing their rules and making changes to prevent more fires in the future. As documented in the OP, Texas continues to have the same type of disasters year after year because the regulators do not requre routine maintenance of equipment in Texas. The ERCOT grid was specifically set up to avoid federal regulations. The customers in Texas have paid billions and billions of dollars extra because the industry is slack in maintenance.