Lessons from the Texas Grid Failure

February 2021

Everything is big in Texas – even the crises.

Over the past weekend, a blast of winter cold and snow spread from Canada, bringing sub-freezing temperatures and heavy snow to the center of the continent as far south as Mexico.  Northern states managed; Texas did not.  As Texans huddled inside and turned up thermostats, the grid failed.  Over four million Texans lost heat and power, more than forty have died, and tens of millions are under boil water advisory.  Long lines of people assembled in the cold, seeking propane, firewood, or help.  Five days later, many still have no power.

What happened, and what can we learn?

Stripping out the political rhetoric (to which we’ll return), there were four interlocking causes to Texas’ grid failure: high demand, supply failures, Texas’ peculiar regulatory environment, and lack of preparation.  The last of these is arguably least the fault of Texas’ utilities, yet also arguably the most important factor from which to draw lessons.  Cutting across all four of these causes is something larger – climate change.  Let’s take each of these in their turn.

High demand.  When the unexpected cold arrived over the weekend of February 13-14, demand for power and heating surged.  It’s not that Texans turned up the thermostats, but it was taking a lot more electricity – or natural gas, depending on the household – to keep the inside temperature warm.  Texans consume an average of roughly 50 gigawatts (GW) of electricity at a time, and the state has a generating capacity of about 85GW.  By February 15, demand had hit 71 GW.  In the best of cases, this would have caused generators and grid operator to scramble to meet demand, without much room to maneuver.  It was not the best of cases. 

Supply failures.  This is where most of the headlines have landed.  The state’s grid operator said that on February 15 about 34 gigawatts of power were offline.  That’s almost half of the peak power demand which hit the grid.  Wind turbines were the focus of the blame from Texas’ fossil-fuel fraternity, including Governor Greg Abbott.  In practice, inoperative wind turbines accounted for… 4 GW of lost supply.  30 GW, the vast bulk of lost supply, came from natural gas, and to a lesser extent coal and nuclear.  Frozen gauges and instruments at natural gas, coal and nuclear plants cut into operations.  Natural gas-fired plants also had to deal with low gas pressure in their supply lines, as demand for gas from pipelines feeding home heating also surged while gas producers dealt with frozen pipes and difficulties at cold well-heads.  Freezing also forced one of the state’s nuclear power plants offline. The Texas grid, with demand exceeding 70 GW, could only muster 51 GW of supply.  Grid operators, faced with the choice between a “managed” failure of rolling and hopefully temporary blackouts and an unmanaged grid meltdown, went with the blackouts. 

Texas’ peculiar regulatory environment.  Every grid has its own distinct regulatory environment, whether across the different parts of the United States, Europe, or across 200-plus of the rest of the world’s countries.  But some are more distinctive than others, and this is the case of Texas.  The two key characteristics of the Texas system are deregulation and independence – neither unique, but pushed farther in Texas than in most places.  In terms of deregulation, the Texas market encourages constant competition between providers of energy.  This is a good thing in terms of creating incentives for utilities to provide power to customers as cheaply as possible, and a great many other energy markets now do the same thing.  Yet the Texas market is unusual in lacking an accompanying regulatory feature which is common in most other competitive power markets – coupling payments for electricity delivered with capacity payments – payments that create incentives for generators to keep their plants available to deliver power, and not avoid the costs of maintenance (or, say, winterizing).  Most grids have kept this – Texas has not.  It is not just opponents of renewables who are taking the opportunity to politicize the current crisis: proponents of old-styled fully regulated and vertically-integrated monopoly utilities now claim – incorrectly – that any kind of deregulation and competition is bad.  What one should aim for is both cheap (from competition) and reliable (from capacity reserves) electricity.  Texan “independence” has also been a factor.  Texas has far fewer cross-state border electrical connections relative to size than other states, partly because this serves to make the state less subject to federal rules than would otherwise be the case, and partly because Texas is Texas.  This week it has meant that a tool available to many other grid operators – buying surplus power from neighboring grids – was not available to deal with Texas’ crisis. 

Lack of preparation.  This is in some ways the most interesting factor in the crisis.  After all, weekend temperatures were far worse elsewhere than in Texas.  The Southwest Power Pool (SPP), a 14-state system stretching from North Texas to the Canadian border, had limited and rapidly solved problems.  Same with the Midcontinent Independent System Operator (MISO), a 15-state system going from Louisiana to Manitoba.  Yet it was in “relatively warm” Texas that the grid failed from the cold.  ERCOT, the main Texan grid, did to some extent plan for winter troubles. But not enough: ERCOT predicted winter storm-driven demand would peak at about 67 GW (not 71), and that outages from coal and natural gas plants would be limited to about 14 GW (not 39).  Texas had most importantly not asked generators to prepare for cold – insulation and heaters helped keep SPP and MISO electricity coming into the system when Texan turbine blades and gas-fired boilers just froze.  Not exactly rocket science from a technical point of view – though costs that have to be paid for, in a regulatory environment that does not compensate maintaining availability.

Here are four key lessons we can take away from Texas’ tragic week.

  1. Climate change will further stress our power grids
  2. Grids need more investment.
  3. The regulatory environment for electricity transmission needs to catch up with climate change.
  4. Politics is a big part of the infrastructure problem

Lesson # 1.       Climate change will further stress power grids

Texas’ crisis started when it got cold – very cold, and unusually cold.  “Climate change” is often mis-translated into “Global Warming.”  The world is definitely warming – a lot.  But climate change effects include extreme weather events of all sorts, even more cold snaps like the one the southern US is experiencing.  The likely culprit here is warming in the Arctic, which has loosened the mechanism that usually keeps the jet stream far north, locking Arctic air away.  This week the jet stream has bent far south, bringing cold air with it.  The huge winter storms that plunged large parts of the central and southern United States into an energy crisis this week, sounded an alarm for power systems throughout the country.  Electricity systems are designed to handle spikes in demand, but the wild and unpredictable weather linked to global warming is making those spikes much bigger.   As climate change accelerates, many electric grids will face extreme weather events that go far beyond the historical conditions those systems were designed for (see “A Glimpse of America’s Future: Climate Change Means Trouble for Power Grids”). As the NYT also points out, “blackouts in Texas and California have revealed that power plants can be strained and knocked offline by the kind of extreme cold and hot weather that climate scientists have said will become more common as greenhouse gases build up in the atmosphere.”  The common theme in the two states is that many power plants are much more sensitive to temperature changes than the utility industry has acknowledged, said Jay Apt, co-director of the Carnegie Mellon Electricity Industry Center: “coal plants and gas plants have problems in both heat and cold.” Last August, several power plants fired by natural gas stopped generating electricity as Californians were cranking up air-conditioners because equipment at the plants malfunctioned in the hot weather.   Pedro Pizarro, CEO of Edison International, the parent company of California’s second-largest investor-owned utility, said no utility in Texas or California had anticipated the kinds of extreme weather that hit the two states: “both the Texas event and the California event are really good examples that we are all living with climate change.  Electric grid systems need to be able to deal with the new normal.”

In turn, the process of adjustment itself to climate change will create still yet more stress on power grids.  As ever-increasing amounts of intermittent power generation are built, accounting for greater share of generation, and more energy storage is connected both in homes (back of the meter storage) and grids (front of the meter storage) – both good things for emission reduction and for cheap electricity – yet further investments will be needed in grids to adjust to this, too.

Lesson # 2.       Grids need more investment.

Even without the effects of extreme climate events, investment in electricity transmission has lagged behind needs for many years.  Investments in new generating facilities – particularly in renewables – have captured the vast bulk of the sector’s financing in recent decades.  Clean and cheap power is good, but it does require transmission facilities to keep up.  The intermittent nature of wind and solar power can cause grid instability: ten years ago it was thought that intermittent generation of as little as 15-20% could cause major instability; now Denmark, other European countries and grid operators have shown that with sufficient investments in technical resiliency, systems can tolerate having at least 50% of their capacity from intermittent sources.  But a great many middle and lower-income countries have yet to make such investments in technical resiliency.  Wind and solar power, while increasingly the cheapest alternative for new electricity, also changes the geography of generation, requiring new and enlarged transmission lines to take advantage of the cheap power.  More transmission lines would help cheap wind power from the Great Plains, including north Texas, come to markets in the west and east of the US – or, as we saw this week, help an overloaded grid more quickly resolve its problems.  This issue has bedeviled systems across the world, and will only do so more as the energy transition continues.  Unfortunately, growing cyber-security risks to utilities also now require more investment for hardening controls, as Infrastructure Ideas has previously commented.  This week’s crisis was accompanied by at least one faked news story purporting to be from a Texas utility – it could have been much worse if hackers had been targeting the state.  Intelligence agencies warn that the United States’ power grids are increasingly vulnerable to attacks from hackers sponsored by foreign adversaries. Hardening the nation’s electrical supply against cyberwarfare is also needed.

Infrastructure Ideas had predicted that 2020 would be the year that policy-makers woke up to the problem and began catching up – then the pandemic intervened.  2021 may be the year.

Note that if you’re an emerging market, the events in Texas should be even more of a wake-up call.  Antiquated, underinvested electricity transmission grids are a problem that’s going to get a lot worse.  Use available public funding – and World Bank and other external funding where available – to strengthen transmission.  Don’t use those scarce public funds – especially after the COVID pandemic and its fiscal impacts — for Chinese-offered coal-fired generating plants: the debt which may be offered to fund them will have to be paid back before long, their electricity is more expensive than renewables, and their raw material supply will become increasingly problematic.  And don’t use scarce public funds for new wind and solar generating capacity – the world is awash in private capital willing to finance that. 

Lesson # 3.       The regulatory environment for electricity transmission needs to catch up with climate change.

As noted above, generating plants failed in Texas in part because they were not hardened to withstand the sort of severe weather that struck the state this week. This was avoidable. Texas had a similar freeze in 2011, after which the need for system upgrades and better planning was obvious.  Yet none of this happened.  Again as summarized by the NYT, grids can be engineered to handle a wide range of severe conditions.   Wind turbines can be equipped with heaters and other devices so that they can operate in icy conditions — as is often done in the upper Midwest, where cold weather is more common. Gas plants can be built to store oil on-site and switch over to burning the fuel if needed, as is often done in the Northeast, where natural gas shortages are common. Grid regulators can design markets that pay extra to keep a larger fleet of backup power plants in reserve in case of emergencies, as is done in the Mid-Atlantic.  Energy storage can make a big difference, especially as longer-term storage technologies start to emerge.  But these solutions all cost money, and grid operators are often wary of forcing consumers to pay extra for safeguards.  “Building in resilience often comes at a cost, and there’s a risk of both underpaying but also of overpaying,” said Daniel Cohan, an associate professor of civil and environmental engineering at Rice University. “It’s a difficult balancing act.” 

As extreme weather events become more common – without becoming more predictable – a regulatory environment which recognizes these risks, and forces and/or creates incentives for utilities to make these kinds of precautionary investments becomes more important.  Cross-border regulations and cooperation, which encourage investment in transmission lines that can both transfer cheap energy when it is generated and when one system has a failure, also take on a new importance.

Lesson # 4.       Politics is a big part of our infrastructure problem

The Texas crisis shows us that money and change are both needed to improve the infrastructure needed to keep millions from freezing unnecessarily.  Yet infrastructure is easily politicized – and that’s a big problem. 

Building long-term infrastructure is a complex and risky undertaking.  Countries, states and cities that have done so successfully – at least for a time – have benefitted from a good degree of popular consensus as to needs and (at least in general) solutions.  Without that consensus, it is much harder for the public sector to build long-term infrastructure across electoral cycles, much harder to do things differently than before, and much harder to complement public finances with private capital.  This week in Texas illustrates how easy it is to undermine popular consensus.  Under a Republican Governor, Rick Perry – also a former Republican Secretary of Energy, no less – fossil-fueled Texas had achieved a remarkable popular consensus on the value of wind power.  Drive across the north of the state and it seems like a forest of turbines, stretching for dozens of miles: even hotel rooms feature photographs of turbines.  Yet the first thing current Republican Governor Greg Abbott blamed for the crisis was wind energy.  It was surely much easier than blaming one’s own lack of preparedness.  And it illustrates how much harder the next phase of the energy transition will be in Texas.

Modernizing the electrical grid to make it more resilient, more efficient and more secure is the worst kind of challenge: complex, expensive and easy to ignore.  Local companies see overall demand for electricity leveling out, thanks to more efficient homes and businesses, which means a future without growth for their bottom lines.  They lack motivation and capital to build a stronger grid on their own.  Solving the problem will take political will, yet as the past has shown us, once heat and light are restored and the press has stopped covering the crisis in Texas, elected officials and policymakers will tend to quickly move on as well.  

Let’s see how Texas, and the new Biden administration, rise to the challenge.  Communicating clearly to voters what the problem really is and what is needed – and countering false claims about what the problem is not – will be an important part of the challenge.

In closing, this paragraph from today’s Washington Post captures the issue:

The grid is responsible for modern civilization, yet its failure can imperil life itself. It’s a 20th-century antique that, when foiled by 21st-century factors, can send us back to the 19th century, when Thomas Edison’s company built coal-fired dynamos on Pearl Street to illuminate Lower Manhattan.

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