The Wood et al. op-ed/policy analysis is a whitewash of epic proportions. Maybe the Titanic did not sink, and renewables forcing was not the iceberg behind Texas’s failed electricity grid in February.
Why did natural gas underperform during the Texas power crisis? Why did Atlas Shrug? Incentives matter.
The RMS Titanic sank, and the Electric Reliability Commission of Texas (ERCOT) failed in an ocean of government intervention. But you would scarcely know the latter from the narrative offered by experts, regulators, planners, and heads at the Public Utility Commission of Texas (PUCT), the governing body behind ERCOT.
The narrative is predictable. Natural gas was the problem. Corrective regulation from the Texas Legislature and the PUCT is needed. ERCOT needs a promotion with more experts and planners. Fine tuning, not fundamental reform.
The narrative hides the real culprit: the takeover of the Texas grid by industrial wind turbines and, increasingly, solar arrays. In short, intermittent ‘unreliables’ crowded out and economically wounded the ‘reliables’.
This brings me to a June 4, 2021, editorial in the Houston Chronicle, “We helped design ERCOT, here’s how to prevent another major Texas electricity failure,” by no less than six authors–Pat Wood III, Robert W. Gee, Judy Walsh, Brett Perlman, Becky Klein and Alison Silverstein. Their effort is but the latest attempt to whitewash the Great Texas Blackout of February 2021.
Think experts. Think regulation. Think central planning. “All authors are past commissioners of the Public Utility Commission of Texas who served in the 1990s or 2000s,” the Chronicle byline reads. (Where are the other more recent PUCT chairs–hiding behind lawyers?)
And add system architect William Hogan of Harvard University, who stated that the PUCT/ERCOT system “worked as designed.”
I reproduce the Wood, et al. article with my critical comments.
The Arctic weather system that hit the South Central United States in February 2021 led to the deaths of almost 200 Texans (many more by some estimates), extended power outages for two-thirds of Texas residents and caused more than $100 billion in damages to Texans’ homes and property. These outages were a wake-up call that, as our power system evolves and threats increase, we must do more to keep our electric system reliable.
COMMENT: Yes, this was an epic mal-coordination–the worst in the history of the U.S. electricity industry. And it was one of the greatest economic failures in the history of the country, pick any industry.
But note the vague statement “as our power system evolves and threats increase, we must do more to keep our electric system reliable.” The very term “keep our system reliable” contradicts the event itself. Make our system reliable goes with the authors’ “wake-up call“.
What about the many years of warnings that system reliability was being eroded by–yes, you guessed it–renewable energy taking over the grid from the ‘reliables’?
“It is well known that Texas is undergoing a major challenge in maintaining resource adequacy due to improper price signals,” stated Josiah Neeley back in 2012. “Less well known is that a significant portion of the problem can be laid directly on the doorstep of subsidies for wind generation.”
As past commissioners of the Public Utility Commission of Texas, we helped to design and implement many elements of the Electric Reliability Council of Texas’ electric system and market structure between 1995 and 2004. Some of today’s problems were not obvious then, and much has changed in ERCOT over the last decade. The February 2021 disaster resulted from multiple policy, operational and planning failures across our state’s electric, natural gas and water systems. We must address those failures to protect Texas’ future.
COMMENT: The early architects of failure? “Some of today’s problems were not obvious then ...” neglects the work of the Texas Public Policy Foundation (TPPF) and numerous free-market critics who emphasized the threat of loading up on wind and solar, as well as disadvantaging reliable generation (natural gas, coal, and nuclear) in the price selection process.
The Texas Legislature has just passed new laws to address many of the problems behind this disaster. Requiring minimum winterization standards for power plants to prepare for extreme events is a strong first step. Changes to electric scarcity pricing rules and securitization of some of the high bills from the February disaster are also helpful. But there is more to do to protect customers and ensure that our entire energy infrastructure supports a robust Texas economy. We offer 20 recommendations to Texas officials and citizens for this purpose.
COMMENT: The authors endorse more regulation, not less. To go in the other direction is not even considered. In fact, there is a cogent, powerful alternative of privatizing the power grid, demoting government experts, regulators, planners, and agencies in the process (see here and here).
Mandating increased costs neglects the reason why weatherization was not done in the first place. In many cases, low margins from government-favored (‘predatory‘, in effect) competition made prudence unaffordable or just too risky.
The climate experts, from the modelers to the weather agencies, predicted warmer winters to market participants. (“NOAA’s winter forecast for the U.S. favors warmer, drier conditions across the southern tier of the U.S., and cooler, wetter conditions in the North, thanks in part to an ongoing La Nina.”) Climate/weather experts were part of the problem too.
Because we all share a common grid, failures by some players affect everyone.
COMMENT: “Common grid”? How about socialized grid, as in de facto infrastructure socialism?
Centrally planned grid? Yes, ERCOT, regulated as one-size-fits-all for almost all of Texas by the PUCT and the state legislature, government writ very large, is the opposite of competitive.
Natural gas will remain an essential fuel for Texas power generation for years to come. Thus, natural gas supplies must be more reliable in the future, with formal performance standards for the natural gas production and delivery systems.
COMMENT: Years to come? How about decades to come. And perhaps centuries to come (the mineral-based energy economy is quite young in human history).
Why did natural gas underperform during the Texas power crisis? Why did Atlas Shrug?
Incentives matter. Numerous natural gas executives have explained how and why the rug was pulled from under them. Renewables ‘market failed‘ natural gas–natural gas did not market-fail renewables.
Add in all the talk about “decarbonization” of the grid and net zero. Let the parasitic energies eat at the woodwork of the market, year after year.
Natural gas as Bad–wind wind and solar as Good? It is just the reverse in the real world of energy and economics. Intermittency, infrastructure-inflated, distant wind and solar are liabilities parading as assets.
In February, as gas deliveries fell off, prices rose by 100 times or more. We need to figure out how to determine when natural gas prices reflect market-appropriate scarcity versus price gouging.
COMMENT: More and new government intervention to fix prior intervention? New price-cap methodologies? What caused “price gouging” under the rules of PUCT/ERCOT?
Price controls … The ghost of Richard Nixon and August 15, 1971, lurk. Price ceilings would not be rescinded for a full decade with petroleum, hardly an example to follow for Texas power market.
We need to weatherize our homes too. The spike in demand that led to February’s outages occurred because too many Texas homes have inefficient heaters and air conditioners with little thermal insulation. We must adopt better building codes for new homes and make existing homes more energy efficient. Homes that are easier to heat and cool will reduce the burden on the electric grid, protect Texans’ health and comfort during future storms and heat waves, create jobs and save money.
COMMENT: Again, more and new intervention to fix prior intervention. Failures on the supply side leading to new government programs on the demand side. From price controls to shortages to end-use regulation–the Mises interventionist thesis is at work.
We must handle grid emergencies better. Instead of voluntary emergency programs, we should pay more customers to cut their load when grid conditions are tight. If we ever need to roll outages across the state, industrial and commercial customers should drop load before cutting residential neighborhoods. We should treat all critical infrastructure equally, protecting all from load cuts while requiring them to have better backup power systems.
COMMENT: “We” … “must” … This is code in the experts/regulatory/central planning world where finger-pointing, edicts, and programs must substitute for a genuine free market.
Utilities need to segment their systems into smaller pieces so they can rotate load fairly among customers. And ERCOT must reexamine methods to restart the grid after any future collapse.
COMMENT: Utilities need to run their businesses, not defer to outside experts/planners/regulators. Control and operation of the grid should be returned to the owners–and PUCT/ERCOT should be dissolved at the end of the transfer. At the same time, franchise protection for suppliers needs to end and rate regulation fully phased out. Exit contracts negotiated with regulators/ratepayers could ease the privatization/deregulation process.
Reliability is too complicated and important to be outsourced via government coercion to political/governmental bodies.
ERCOT is responsible for short-term and longer-term system planning. They must build more extreme weather threats and compound failures into seasonal and long-term planning analyses.
COMMENT: ERCOT should be demoted, fired (see above). PUCT/ERCOT failed in historic, unforgettable, unforgivable fashion.
Positive change won’t occur without better governance. Although the Legislature is adding two more commissioners to the Public Utility Commission, it must add additional staff and funds as well.
COMMENT: More governance, more government–not less. Central planning hardly needs a promotion out of the carnage of February 2021.
The Legislature also changed the ERCOT board structure. Still, this crucial entity should be run by an independent, non-political board made up of the best engineers, economists and policy experts in our nation.
COMMENT: Really? “Independent, non-political board made up of the best engineers, economists and policy experts in our nation” is naivete on stilts. Central planning cannot be disguised in the shell of a “nonprofit corporation.”
And if this is really the case, appoint experts who favor the genuine free market over the status quo. Let’s have a real debate, a real audit, a reckoning in ERCOT’s desperate hour.
Last, good decisions require good information. All investigative findings of the February outage should be made public so that the public and policymakers understand where and why natural gas supplies, power plants and the market failed and who profited from the disaster.
COMMENT: So natural gas failed. Nary a mention about why natural gas failed, which gets to the unmentioned cause: renewables.
Are alternative opinions allowed? Can the role of renewables in the underperformance of natural gas be investigated rather than ignored? Can the modus operandi of central planning and the gestalt of global warming be openly debated and criticized? Intellectual diversity, anyone?
And although there is some transparency into the electric system, there are minimal data collection requirements for Texas natural gas production and pipeline performance. The state should fix this with appropriate data collection requirements.
COMMENT: Natural gas again, not renewables setting up natural gas for failure, is the culprit. And more and new government requirements are the answer to these planners.
We do not recommend creating a capacity market or a backup generation reserve at this time. Those are complicated and costly changes that may not be effective.
COMMENT: The central planners are in a quandary about how to price to achieve reliability. They thought they had it and failed. They think they can get along without major changes.
PUCT/ERCOT needs to get out of the pricing business and let private parties negotiate rates and reliability. Two-part rates–volumetric charge and demand charge–historically have served this function. But this time the providers will not have a franchised territory, a geographical government monopoly.
We had enough steel on the ground in February; the issue was that some of it simply wasn’t ready or fueled up for the extreme weather. If we have more reliable power and gas supply and lower demand, we may not need a costly backup capacity mechanism. The new law gives specific guidance to the PUC and ERCOT how to address this issue.
COMMENT: Wood et al. utterly fail to understand the why-behind-the-why of the PUCT/ERCOT debacle. And that gets right to wind and solar–the unreliables demoting and wounding the reliables.
The role of renewables? Crickets. Political correctness reigns. Climate alarmism and forced energy transformation is the secret agenda that cannot be derailed by Blackouts, even systemic, lethal ones.
Many of the above measures can be implemented using state agencies’ current authorities. Others will need future legislative action.
COMMENT: Legislative action? The authors previously stated that ERCOT was to be governed by “an independent, non-political board….” ERCOT is government run, operated, and influenced.
Texas is the world’s ninth-largest economy. The future power grid is coming of age here thanks to our rich wind, solar and hydrocarbon base, and welcoming open market. We owe it to our fellow Texans to learn from this event so events similar to this major electricity failure never happen again.
COMMENT: ” … coming of age”? We just went through an unprecedented, yet predicted, coming of disaster.
“[R]ich wind, solar and hydrocarbon base” as if renewables and natural gas are not competitors where natural gas is losing badly? Coal too. The authors do not understand, or want to understand, that the battle is between renewables and conventional energies.
The authors’ recommendations, “Never Again: How to prevent another major Texas electricity failure,” are available at cgmf.org.
COMMENT: All in all, the Wood et al. op-ed/policy analysis is a whitewash of epic proportions. Maybe the Titanic did not sink, and renewables forcing was not the iceberg behind Texas’s failed electricity grid in February.
All authors are past commissioners of the Public Utility Commission of Texas who served in the 1990s or 2000s. Wood III is the CEO of Hunt Energy Network, an energy infrastructure firm. Gee is president of Gee Strategies Group. Walsh is retired. Perlman is the CEO of the Center for Houston’s Future. Klein is principal of Klein Energy LLC, an energy and water consulting firm, and founder of the Texas Energy Poverty Research Institute. Silverstein is an independent consultant working on grid reliability, resilience and the clean energy transition.