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The hyper-partisans have already been using the power grid failure as grist for the renewable energy versus fossil fuel debate. However, while the mix of power sources played a role in the current crisis, it was not the main culprit. Its origins relate to more fundamental issues about markets versus regulation and that all too common human trait – procrastination.
To unwind what is happening this week, we have to begin with the State’s decision to largely deregulate electricity generation in 1999. The legislation, Senate Bill 7, was bipartisan with an equal number of Republican and Democratic co-sponsors. That legislation separated the generation of electricity from the distribution of it. The distribution companies, like Centerpoint in most of the Houston region, were forced to give equal access to their distribution systems to all generation companies. Electricity was deregulated to keep prices down. While there is some debate about how effective it has been at that, it is unquestionably true that Texas has some of the lowest electricity rates in the country.
The bill set up the Energy Reliability Council of Texas (ERCOT) to manage the flow of the generation into the distribution systems. ERCOT is basically a co-op. Its members are various commercial enterprises engaged in the business of generating or distributing electricity. Its board is controlled by those entities; however, state law gives the Public Utility Commission (PUC) considerable oversight authority, and the PUC Chair is an ex officio member of its board.
A retired electricity executive told me a rough way to think about the relationships is to think of ERCOT as Amazon. The generators are the suppliers of “products” to ERCOT and the distribution companies, like Centerpoint, are the UPS/FedExs.
According to ERCOT almost all of Texas’ power generation comes from natural gas (46%), wind (23%), coal (18%) and nuclear (11%). The other common sources – hydro, solar and geothermal are de minimis.
As nearly as I have been able to sort out, the problems of the last few days boil down to two issues.
The first is the cold shutdown of many of the power generation facilities. ERCOT in a press release said at the height of the crisis that about 28,000 MW of fossil fuel power was offline and 18,000 MW of wind power. That was nearly half of the state’s generation capacity.
This is where the fossil fuel versus renewables debate has some relevance. While every source was affected, wind unquestionably failed at a much higher rate than did the fossil fuel plants.1 The great thing about wind is that it is very cheap power; the problem is that it is more affected by weather conditions than are fossil fuels, and therefore relatively less reliable. As fossil fuel plants (primarily older coal plants) have been replaced by wind, the system has become less resilient to extreme weather events.
The relative reliability of generation sources affects the calculation of something the industry refers to as “reserve margin.” The reserve margin is a calculation of how much extra power is available above what might be demanded. It is obviously affected by both the demand for electricity and the amount available from all generators at any particular time. The more unreliable the sources providing generation are, the greater the reserve margin needed to deal with potential shortages from either a spike in demand or a drop in production or a combination of the two. So, the greater the amount that renewables contribute to our system the larger the reserve margin will need to be.
The critical issue to me, however, is that Texas is alone in the country in not having an enforced reserve margin. Instead, Texas relies on the operation of the market to insure there is an adequate reserve. Ironically, just last month consultants engaged by ERCOT did an extensive study on the reserve margin in Texas. This was the most telling statement in the entire study:
“ . . . unlike all other electricity systems in North America, ERCOT does not have a resource adequacy reliability standard or reserve margin requirement.” Estimation of the Market Equilibrium and Economically Optimal Reserve Margins for the ERCOT Region for 2024, p. 5.
In other words, Texas does not enforce reliability and a minimum reserve requirement through regulation, as does every other state. According to ERCOT, generators must file winterization plans with it, but ERCOT exercises minimal oversight of generators’ compliance with the plans.
This study clearly shows the risk of losing power in a severe weather event is possible, although not probable. This Houston Chronicle story documents how previous winter storms had prompted federal regulators to warn that generators should beef up their winterization precautions.
This is a place where the market fails to meet the public’s expectation. In an unregulated market, it makes no sense for an investor to spend money to take precautions might be needed only once a decade. If they do, another generator will not and will thus be able to undercut the more cautious generator’s price. This is akin to the concept in economics known as the tragedy of the commons where a cost (in this case of making generation more reliable) is not fully reflected in the production of a good or service but ultimately will be borne by society generally – in this case in form of plumbing bills to fix broken pipes, of example.
If every generator is required to meet certain reliability standards, that will be reflected in the cost of all generators and thus no one generator can obtain a competitive advantage from supplying electricity from a less reliable source. Of course, that enhanced reliability will come at a cost, one that I suspect will favor fossil fuels while being more challenging for wind and solar. It is possible that some sources will just be inherently less reliable. In that case perhaps they should pay a surcharge to create extra standby capacity.
But whatever mechanism is used to make generation more reliable, it will be reflected in higher costs that will be ultimately paid by consumers. Determining the proper balance between risk and the costs will not be easy. One of the problems with turning it over to a regulatory scheme is that regulators tend to err on the side of caution, driving up costs. But it appears to me that we, at a minimum, are going to have to have a serious conversation about this trade-off.
The second issue that has baffled me in this crisis was the failure of the rolling blackout system to function properly. The idea of rolling blackouts is that if demand exceeds supply, enough users will be taken offline to equalize the two. But those who are offline are supposed to be rotated so that everyone gets some level of power during the day. For example, if 40% of the generation was offline, everyone should be getting about 60% of their normal power. So, everyone should have been getting power about 14 hours per day and shut off 10 hours.
There are some limitations to rolling the blackouts. Critical infrastructure like hospitals and water treatments plants are supposed to be prioritized and never taken offline, which reduces the percentage available to households and other non-critical users. But in this event, there are many reports of homes going without power for days and some critical infrastructure facilities, especially water treatment plants, also offline. That is not how the system is supposed to work and that is on the distributors, not ERCOT. I have heard informally that the supply got so low that there was only enough to power circuits with critical uses. But we need to hear from distributors, CenterPoint in particular, definitively why the system did not work as planned and what can be done to avoid that problem in the future.
I fear that in the toxic, hyper-partisan world in which we live today there will be little serious discussion of the issues that caused this crisis. Instead, we will have a lot of finger-pointing and partisans screaming their tired talking points at the top of their lungs. Solutions are almost always found in exploring the nuance of problems and issues. Unfortunately, nuance does not make good headlines or sound bites in campaign ads.
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Note 1 – The exact rate at which each source failed is still a little murky. Doug Sheridan at EnergyPoint Research estimates that only about a 33% of gas plants and 25% of coal plants went offline, but over 80% of wind generation did. These are links to a Lium discussion and a Wall Street Journal article which have some data on this issue.
This is a level-headed concise explanation and it it very refreshing. If the TX Lege will let an independent authority provide such a study and make necessary recommendations and ultimately, changes for the better instead of arguing in Austin. Nice work.
I believe the real issues reside with equipment in every area. Not only in homes to use less energy and creating more energy efficiency through delivery to each home but also with generators and windmills. Advancing in technology to reduce freezing
Look at https://www.eia.gov/beta/electricity/gridmonitor/dashboard/electric_overview/balancing_authority/ERCO
you can see that Nat Gas lost 4 times as much capacity as Wind, but generally lost the same percentage. Both have recovered at about the same rate also.
Top (2/14) Bottom (2/16) Loss % loss Today (2/19) % recovered
Nat Gas 43,798 25,964 17,834 41% 33,058 75%
Coal 10,829 6,896 3,933 36% 9,834 91%
Nuclear 5,140 3,785 1,355 26% 5,122 100%
Wind 8,087 4,433 3,654 45% 5,997 74%
Solar 0 2,007 -2,007 n/a 0 n/a
Hydro 142 100 42 30% 96 68%
Natural gas lost capacity, because gas plants had to reduce load drastically to remain online, because there was not enough natural gas to meet demand. I work at a gas plant, and we were being dispatched from 325 MW down to 35 MW because there was not enough natural gas. We’re on the regulated SPP side, but had there been enough natural gas supply, ERCOT would have bought generation in an attempt to meet demand. The costs would have been passed to the consumer for sure, but the reality is, coal and natural gas are significantly more reliable than green energy. I’m all for green, but it’s being shoved down Americans throats before it is dependable enough to support the grid in large quantities. We’re going to have to wait on technology to catch up, or everyone needs to put a coat on in the winter. Additionally, this was an unprecedented cold snap we went through. There were all time cold records broken daily. I’ll add that when it’s 105 in the summer in Texas, the wind isn’t blowing enough to meet demand either. We’ll get there, but it takes time and we need to keep politics out of it.
Today’s wind turbines don’t need much breeze to operate. The gears inside are actually more important than the slowness of the rotating blades. Basic mechanics like knowing what kind of oil lubricant to use in winter or summer is helpfull. Wind turbines in northern states operated just fine during the same time Texas failed. The link is just one of many, many examples. https://bit.ly/37zgl8y
Sounds to me that the contract between ERCOT and Texas needs to be amended to provide for a detailed maintenance schedule for all methods of generation ( wind ,nuclear , gas and coal ). Also a contract with alternate electricity suplier and a penalty for failure to provide power in an emergency.
Not sure why the subsidy of wind power would be removed from its total cost. The might change the picture of cost for wind power.
Solid comments in my opinion. Reliability seems to be the question. Snow covered solar is not reliable and wind without ice and snow protection are also not reliable.
Gas suppliers must be pulled into the analysis as well. Frozen transmission lines?
Coal might be an issue if the fuel is frozen into inaccessible blobs. I wonder how the BNSF coal unit trains worked in this weather for North Texas.
“The original plan was to put end users on a rolling blackout schedule, said Kenneth Mercado, CenterPoint’s executive vice president of electric utility. But outages exceeded expectations to such an extent that Mercado said CenterPoint had to cut power to virtually all circuits that didn’t have critical demand, which meant there was no more room to rotate the blackouts. The users who weren’t affected were those who shared a circuit with critical infrastructure like a hospital, police station or water purification facility.”
From https://www.bizjournals.com/houston/news/2021/02/18/centerpoint-nears-end-of-blackouts.html
There are ways to “winterize” wind turbines. How about a discussion of whether it’s worth paying for that in a place like Texas?
In short, a once in a lifetime cold snap causes the state’s electrical system to fail, this in contrast to California where every summer has the same effect?
From 3 1/2 years ago – “California invested heavily in solar power. Now there’s so much that other states are sometimes paid to take it” https://lat.ms/3shuuPI
In an unregulated market, it makes no sense for an investor to spend money to take precautions might be needed only once a decade. If they do, another generator will not and will thus be able to undercut the more cautious generator’s price.
No.
It makes perfect sense, in an unregulated market, for an investor to take precautions (eg build expensive spare capacity) that might be needed only once in a decade, so long as the investor reasonably expects to earn a good profit from the investment – by charging sky high prices for that spare capacity when that once in a decade need arises.
Ditto the local store that keeps excess stocks and quadruples prices when there’s a hurricane.
This is called “price gouging” by the foolish virgins, and legislators rush to make it illegal. Thereby eliminating the predicate “unregulated market.”
Exactly!
Mr. King, thank you for the excellent and informative article.
I would also like to pay you my highest compliment.
After reading your article, I have no idea if you are a Democrat or a Republican!
On most science articles, it takes about three sentences for the author to reveal their partisan leanings. That has no place in ACTUAL SCIENCE.
You know, you don’t to be either one.
Very good article, but there is not enough discussion of how this happened on the back end of a four day trading weekend. Because of the shortages in the midwest due to the extreme cold already there, South Texas gas hubs last Friday were trading for up to 100x higher price than usual. Ercot underestimated demand on Monday and most gas generators chose to turn their plants off than pay that much for fuel for the whole weekend. Then, on Monday when the gas plants were needed, they were cold and and frozen and there wasn’t enough gas available to start them up because Texas wells had frozen up and what gas that was produced was being shipped north. A lot of the problems this week just came from bad timing. Had this happened on a normal trading weekday, more gas generation would have been available.
An adult conversation would be good about risk-management would be amazing. It would be an interesting study/survey to put out the cost to see what people would really -pay- to solve this black-swan, once a generation event (2 snows storms && all-time low temps @ the same time). right now, people are living the event, so I’m sure they’d say whatever it costs. Until they get their electric bills. Perhaps give the people a menu of cost options and the resiliency levels that’d be provided.
An increase 0.03$ per Kwh increase for 20% overhead generation capacity.
0.05$ per Kwh for winterizing everything for 0F conditions.
0.05$ per Kwh for summer condition (115+ temps).
Then show them what an annualized average increase to the bills that’d cost. A lot of people talk a good talk until its -their- money.
then we’d need to ensure the system works so we’d need quarterly/bi-annual test of the rolling blackout system to ensure the system functions as expected. If you don’t test periodically, it’s not really an emergency and back-up system. its a prayer. As we saw, bringing some systems back-online post test … isn’t good. Motor and electronics generally don’t like hard shutdowns. can you picture the whining and gnashing of teeth when your block/neighborhood is scheduled for an outage? make it a green day celebration instead!
as for the article stating wind is cheaper. Reads like a highly partisan piece
1) Author states it REQUIRES a 2ndary reliable system due to fluctuations. What is that cost of that system?
2) Author completely glossed over the 7$Billion subsidized cost of power lines saying everyone paid for it so it wasn’t that bad of a cost. Was that just a capex expense or is that a lifetime capex/opex combo. i’d speculate it was capex only.
3) saying it depends on the cost of integration while providing detailed information regarding wind capture, motor and blades should make anyone highly skeptical. You can provide that level of detail here, but when the authors preferred solution is going to incur a cost hit, he essentially ignores it.
Texas has several excellent universities whose brain power and super computers could and should be put to work on the problem of distributing power, prioritizing hospitals, and managing the system with greater use of AI. Texas A&M, UT, Rice, SMU, TCU, UH should all be put to work on this problem.
To ensure reliability, Texas (and California) should connect to a more reliable grid in case of emergencies. Mexico springs to mind.
I too have been trying all week to understand why some streets went down for four days while nearby streets never lost power for one minute. My power stayed on, for instance. It’s possible that the nearby tiny volunteer fire department was given grid priority, but that would be ironic considering that, like any sensible organization or household in a rural area subjected to power outages from things like hurricanes, the fire department is outfitted with a perfectly reliable backup generator. So is my house, obviously, and the house of nearly everyone on my street. Most of us also have fireplaces or wood-burning stoves, even though it rarely freezes here.
Your area and the Lamar FD are relatively new, so it may be the transmission equipment.
The real problem is that the ERCOT grid, and every other competitive electric market of which I am aware, have not found a way to properly incentivize dependability. Electric service is like firefighting – there are huge societal costs if there is inadequate supply when it is needed, and there is little warning when supply will be needed. In firefighting it doesn’t matter how many fire fighters are employed or how many fire trucks are owned. What only matters is how many fire fighters and fire trucks are available at the instant they are needed. Fire fighters off duty and fire trucks that are broken don’t count. Similarly, with power generation it doesn’t matter how much capacity is installed, it only matters how much is available at the instant it is needed. Competition is great at driving out waste and increasing efficiency. But in a competitive system, spare capacity is waste. However, for dependability one needs spare capacity. In competitive market systems power generators are only paid when they produce power. In some systems they get some money to provide capacity via capacity auctions, but the payments are typically small and contracts are short duration, so no one can finance fast start peaking electric generating units (EGUs). Fast start peakers are the most cost-effective means to handle the short duration, very high peak power demands that every power system experiences (approx. 20% of peak demand is driven by weather).
How many fire fighters and fire trucks would we have if we only paid them when there was a fire and had a bidding process among competitive fire fighting companies wherein the lowest cost bidder would get to fight the fire? Obviously, that makes no sense. Yet, ERCOT’s market structure uses exactly the same system for power generation.
One of the basic problems with energy markets in general and especially power markets is that price signals of a shortage come very late but the time frame to make the investments to solve shortages are long (typically years). The week before Texas’ power outage, the wholesale price for power was $20-100/MWh (2-10 cents/kWh) depending on the time of day and day of week; on Tuesday February 16, 2021 power prices hit ERCOT’s price cap of $9,000/WMh (900 cents/kWh).
As I stated this problem is not unique to ERCOT, similar problems with competitive markets have surfaced in California, Germany, and Australia in the last few years. The problems are exacerbated by reliance on renewable power but eventually power shortages will occur even without renewable power. If one doesn’t pay for something (e.g., dependability), eventually there will be shortage.
Finally, a well-researched, bipartisan (read factual), and sane explanation of how and why we are where we are in regard to this power debacle.
What a (warm) breath of fresh air! I agree with Pillage Idiot, “I have no idea if you are a Democrat or a Republican!”
Thank you, Mr. Bill King!
P.S. I used to work for LGBS.
We know that fossil fuels are finite, so it makes sense wind and solar are used as supportive forms of energy to conserve perhaps more reliable, but dirtier sources to last for even future generations. By conserving, this gives humans more time to find new ways to generate and harness much needed energy to live generations into the future.
I can only deduce from the findings that if Natural Gas provides Texas with 50% of its power, we could all agree it’s just good business and good sense to be winterized. To the argument that Wind had the largest failure, again its only used as an alternative energy source and preforms all over the world in sub zero temperatures when properly winterized.
All I know is, I’m getting a whole home generator. You can’t rely on anyone.
An insightful article that lays out the issues in a factual and non-partisan way. The key point is that reliability has a cost and it is the consumer who pays for it. So the question is how much reliability is enough and how do you pay for it (see Jason’s and SLEcoman’s discussions about risk management and cost above). There are different ways to impose more reliability on the electric system such as legislation to force all power sellers (retail power marketing companies and utilities) to show that they’ve acquired sufficient firm capacity margins or instituting a forward capacity markets (such as in PJM or NEPOOL in the Northeast) with meaningful penalties for delivery failure (which provides the funds for winterization capex). However, the costs are significant so its’ a trade-off as are most things in life. A fact based, non-partisan debate of the cost-benefits would be nice, but unlikely in the current environment.
Hi Bill!
Iowa derives more of its energy from wind than any other state except for… Texas. But their weather gets a whole lot colder there for a lot longer than most parts of Texas do, but it doesn’t put their power grid in danger. The difference may not be an over-reliance on wind as it is retrofitting equipment to function in warm and cold temps.
https://www.desmoinesregister.com/story/tech/science/environment/2020/04/16/wind-energy-iowa-largest-source-electricity/5146483002/
Thanks for the explanation…
This is spot on. Wind is not more susceptible to extreme weather. Wind power, from a reliability standpoint, is susceptible to CALM weather events. The catastrophe in Texas could have been avoided if all power sources had been weatherized. Hard stop. That’s it. Period.
King writes this following statement and fails to point out that wind turbines operated fine elsewhere and in far lower temperatures than occured in Texas.
“This is where the fossil fuel versus renewables debate has some relevance. While every source was affected, wind unquestionably failed at a much higher rate than did the fossil fuel plants.1 The great thing about wind is that it is very cheap power; the problem is that it is more affected by weather conditions than are fossil fuels, and therefore relatively less reliable. As fossil fuel plants (primarily older coal plants) have been replaced by wind, the system has become less resilient to extreme weather events.” Pretty obvious that King doesn’t want wind turbines. One other thing – the entire issue is not really complicated at all.
Here just one of many articles, readliy available, reporting that wind turbines, during the same time frame but in extremely lower temperatures than happened in Texas, operated just fine. https://bit.ly/37zgl8y
it is just a question of the failure to winterize the wind turbines in Texas, it was also a lack of wind. After a cold front moves through the winds typically go slack for several days and especially at night when heating demand spikes. Perhaps I should have said rather than wind “failed” at a much higher rate, it was “unavailable” at a much higher rate.
I have been in this area for 76 years with below freezing temps occurring in the 80’s. Houston Lighting and Power had 2 generation stations in this area The employees were expected to be on duty and winterize these plants during freezes, hurricanes, etc. The main outages were just downed tree limbs and the wonderful linemen promptly fixed them. It never made sense to tear down these generation plants with thousands of more people moving to the area. I’m sure HL&Psaved money by shutting them down, but you lost a lot of reliability and generation knowledge.
I also noticed the car delearships along 96 and 45 had blaring parking lot spotlights blaring with no outages also strip center with nonessential businesses while people were freezing with no heat in all electric homes for days! Also seems some homes in the newer more affluent subdivisions in League City never were rotated. Sounds like our older subdivisions need to updated or treated more equally!
I agree with previous comments put knowledgeable electrical engineers and power professionals in charge instead of political agencies and committees. We don’t care about politics when we are freezing!
PS I saw where the Texas Panhandle did fine as they are not members of ERCOT!
Yes, deregulation lowered prices but at what cost.
I live in the deep south. I didn’t notice the wind slowing down to any near stand still. Cloth banners in the yard were flapping almost straight out at night throughout this weather event. I don’t know what the wind was like 300 feet above the ground. I do know that one reason wind turbines have such large blades is for very slow breezes to produce rotation. Third generation turbine blades, which are very large, turn slowly. Gears do a lot of the mechanical work of producing electricity. And the passing of the cold front, meaning when the sun came out, was later in the week.
I feel sorry for Texans because they paid for cheap electricity and found out the hardest way what they actually paid for. I’m further sorry for Texans because the push to remove wind technology, which lowers the cost of electricity when it is added to the mix, will be probably be successful by people who own a lot of stock in oil and gas. Your governor reporedtly has received $26 million in political donations from oil and gas interests. Those are important items that just cannot be ignored.
There was an article earlier in the week that indicated someone called a stop to rolling blackouts and begin to stop flow of power to segments. Either ERCOT directed providers to do so when things started to get real bad, or the provider(s) did when their equipment failed.
What I have heard unofficially is that the power level fell so low that the distributor only had enough to power critical users, such as hospitals. But those critical users are not the only users on those circuits, so many non-critical users had power. But here was not enough to roll the blackouts without cutting off critical users.
You r numbers do not add up. You list percentages that add up to 98% WITHOUT wind and solar. Later paragraph list 28000 MW gas failed and 18000 MW wind failed. You further state that that was HALF of total available. How could this be if 18000 MW was over 20% of total? You contradict yourself.
The other 2% comes from hydro, solar, geothermal and biomass. 28,000 + 18,000 = 46,000. At the time about 92,000 was available (some was down for scheduled maintenance). 18,000 is ~20% of 92,000.
This may not be a “once in a lifetime” event. What if it becomes every year? A number of scientists are predicting/discussing/debating (due to reduced solar activity) that we may be heading for a solar minimum and little ice age as occurred in the 1700s.
Bearing sea ocean temps are 1-2 C (2-4 degrees F) colder than in the 1940s; the River Thames in England froze for first time in many decades.
Additionally, one prediction I recently read (based upon El Nino – La Nina Pacific Ocean current flows) is calling for a long cold winter later this year (winter 2021-22).
Do some reading at WattsUpWithThat.com and your eyes will be opened.