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Lights out

17 February 2021 By Robert Cyran

Nearly 3 million Texans are without power three days after a cold snap crippled energy sources serving the second largest U.S. state by population. The Lone Star state’s free market policies and desire to avoid oversight bear blame. But California hasn’t fared much better in recent years. Reliable grids are expensive. Forcing voters to pay up for a non-obvious benefit is unpopular for all politicians.

Supply and demand must match on a grid, though gauging that is difficult when weather anomalies occur. Demand rose and supply contracted sharply this week, with 34 gigawatts of power generation forced off the system according to grid operator Electric Reliability Council of Texas. A nuclear reactor shut after its water supply stopped, wind turbines froze, and natural gas plants couldn’t get fuel.

Most grids purchase committed spare capacity as a buffer, but Texas uses the carrot of high prices when supplies are low. ERCOT sets a target for excess potential power supply of about 14% of peak demand, but the grid serving most Mid-Atlantic states has about a 25% buffer.

Less slack lowers consumers’ bills. Texans paid 12.2 cents per kilowatt-hour in November, while those on the Mid-Atlantic grid paid 16 cents according to the U.S. Energy Information Administration. Prices in Texas are helped, too, by the competitive market, which allows for customers to choose which provider brings electricity into the home.

Texas’ grid has limited connections with neighboring grids, which allows it to minimize oversight. Together, this makes it tempting to blame regulators. Only California isn’t much better. PG&E, the nation’s largest utility, went bankrupt in 2019 because of wildfire claims. To avoid a repeat, it has pre-emptively shut down power on several occasions since. But regulators won’t force rural customers to pay higher prices to reflect the risk that comes from serving them.

The value of electricity to consumers is perhaps 100 times its retail price, according to some economic assessments cited by the Institute of Electrical and Electronics Engineers. So it makes sense for Texas and other states to consider reforms such as forcing intermittent green power suppliers and consumers to pay for backup capacity, retrofitting southern fossil fuel plants to ensure cold weather reliability, and building more transmission. That costs money, though, which comes from ratepayers, companies, the government, or a combination. It’s a test of whether Americans support a reliable grid in theory, or with their pocketbook.

 

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