The grid is shorthand for a collection of technologies owned and operated by thousands of entities — from government agencies to homeowners with rooftop solar panels. There are, in the contiguous United States, three major interconnected power systems: one covering everything east of the Rocky Mountains, one for everything west of the Rocky Mountains, one for Texas. The Eastern Interconnection and the Western Interconnection are made up of multiple grid operators and dozens of smaller networks that serve power needs through continuous coordination, across state lines when necessary. In Texas, we have one grid operator, the Electric Reliability Council of Texas (ERCOT), one control area, hundreds of infrastructure owners and lots of coordination to make it work. The casual use of the term “the grid” results in the common misconception that everything is under the control of, say, an electricity czar. But in the United States, even the federal government doesn’t have that role. When something goes wrong, as happened here this week, it’s a mistake to look in one direction for one culpable party.
In Texas, there are three things to remember: The power system that serves 90 percent of the state is intentionally isolated from the rest of the country, with the exception of very small ties that are used for limited power trades; our competitive wholesale power market offers scant incentives for investment in backup power; and Texas generally does not have winter storms like this one.
During World War II, America needed lots of power to build planes, tanks, bombs and other war materiel. Power companies and the federal government focused on expanding interconnections among power systems as the fastest and cheapest way to meet defense needs. In 1941, Texas investor-owned utilities did their part by connecting into two networks serving the northern and southern parts of the state. Congress had already given the Federal Power Commission (now the Federal Energy Regulatory Commission) authority to regulate interstate power sales. Texas didn’t have any state-level regulation of power companies, and the utilities liked it that way. They also didn’t want federal regulation. So they were careful to avoid selling or buying power across state lines. With two time zones, every type of generating resource and lots of different kinds of customers, Texas utilities were able to achieve economies of scale and power-sharing efficiencies — all within the state’s borders.
In 1970, the Texas utilities formed ERCOT to comply with new rules established after the nation’s first devastating power failure — the 1965 Northeast blackout, which left more than 30 million people from Ontario to New Jersey without electricity for up to 12 hours. In 1981, ERCOT took over as the grid operator. Between 1996 and 2005, the legislature passed laws to create a competitive power market, increase renewables with hard targets and invest in new transmission infrastructure. These decisions created a very friendly environment for renewables, and as a result, Texas leads the nation in wind power and in renewables of all kinds. But the success of these initiatives hinged somewhat on the autonomy of the Texas grid: The state could set goals, foster investment and expand transmission without input from other state or federal agencies. In a sense, this is the beauty of ERCOT’s isolation.
Other factors also contribute to the uniqueness of Texas’s power system. First, the state’s fleet of generators has been shifting gradually but steadily from coal-fired to natural-gas-fired and wind-powered plants. This winter, Texans are depending far more on wind turbines and gas-fired power plants than on coal. When temperatures dropped to all-time lows across the state, wind turbines that had not been winterized froze. So did gas-fired and coal-fired plants, taking out far more of the state’s generation capacity than we lost from wind.
Second, because of the way the state’s wholesale power market works, utilities have very few incentives to invest in backup power. The state does not say to a generator, “Please build us some extra backup power plants, and utilities will charge that cost to their customers.” Instead, the market allows a generator to charge excessively high prices when supply falls short — which, for an investor, could be a long shot. Under a 1996 state law, Texas generators bid prices for their power, and the lowest price wins. That means they rarely have extra money to set aside for investment in backup capacity or new generation. Texas could have included additional mechanisms to incentivize more investment in backup power, but the market hasn’t done that up to now. As a result, ERCOT’s backup power is lower than in most other areas in the United States. This week, demand for power far exceeded the available supply, leaving millions of us stuck in the dark and the cold.
Now where shall we point our frigid fingers?
The highly centralized, isolated power grid has served Texas really well for many decades. It has allowed us to accelerate renewables development and, notably, to avoid cascading blackouts of the sort that plagued the Northeast in 1965, 1977 and 2003. But this week, it means we were unable to import large amounts of power from the gigantic Eastern and Western interconnections when we needed it.
We don’t have a large enough backup system for when power demand shoots way up or when generators go offline. It is a problem that plagues ERCOT every year as the hottest part of the summer approaches. This is the fault of our wholesale market structure. Of course, additional reserve power may not have been sufficient this week, but surely it would have helped. The cost of extra capacity that would sit idle most of the time wouldn’t be so bad if shared by everyone connected to ERCOT. Instead, based on how the Texas wholesale market works, backup plants charged an eye-popping $9,000/megawatt hour rate this week (the price was $30/mwh just six days ago, a more typical rate). For customers who chose a rate plan tied to wholesale prices and ordinarily pay less than average for electricity, that could easily translate to thousands and thousands of dollars in bills.
Ultimately, this outage, like many of the biggest blackouts before it, reflects the challenges of unanticipated events and consequences. In 1965, experts felt sure they had built in enough redundancy to prevent any cascading power failure from ever happening. But they did not envision the way dozens of different operators would respond when one relay setting caused unexpected power movement across the networks. In Texas, we know that our summers will be exceedingly hot, pushing our grid to the limit, but the last time it was this cold was in 1989, and this year’s winter storms have lasted longer. Our wind turbines do not have the cold protection that turbines do in the North. Neither do our gas power plants. Our overall system is not winterized.
From my chilly living room, I can reflect on our state’s unique approach to power systems, both the benefits and the shortfalls, and simply hope we will learn quickly from the catastrophe. No doubt there will be accusations, investigations, pontifications and extrapolations in the weeks and months to come. Surely we can plan for our weather extremes more effectively, winterize our system more thoroughly, back up our renewables more completely and (dare I say it?) ask customers to pay more for resiliency. I imagine there are a few million Texans ready to chip in right now.