“In 2011, even though the market was caught by surprise by one of the hottest summers in Texas history, Texans did not experience any blackouts because of reliable generation. Today, however, the reckless rush toward renewables has changed the situation completely. ”
– Bill Peacock, Energy Alliance (below)
Bradley: How did the just-completed Texas legislative session deal with the February Blackout that caused so much damage to life and property?
Peacock: The session had two issues to address here. One was dealing with the aftermath costs; the other was reform to prevent it from happening again. The lawmakers did poorly with both.
Q: What did the Legislature do wrong in dealing with the aftermath?
A: The Legislature failed to appropriately address the massive financial costs of the blackout, most of which came from the Public Utility Commission of Texas’s (PUCT) panicked decision to raise electricity prices to $9,000 per MWh and leave them there for three days.
This panic raised wholesale costs during the blackout by more than $16 billion. Yet even though the commissioner’s decision was without merit and likely illegal, the Legislature refused to reverse the increase–which it could have easily done in line with ERCOT protocols.
Instead, the Legislature passed bills allowing companies to securitize the debts they incurred during the blackouts. Which means the companies are going to be able to keep the money they earned because of the high prices, and Texas consumers are going to be stuck paying higher bills for years.
Q: Some people claimed that reversing the PUCT’s decision would have disrupted the market.
A: It would not have disrupted the market. In fact, it would have done the opposite. A market where regulators can step in and arbitrarily raise prices contrary to their own rules is not a market at all. Now that the Legislature has affirmed the PUCT’s ability to do that, it is likely that business will be even more cautious about investing in the Texas market.
Q: Before we get to the Legislature’s attempts to keep future blackouts from occurring, what were the primary causes for the blackout in February?
A: Obviously, the proximate cause was a winter storm of historic proportions. Never in my lifetime has Texas experienced subfreezing temperatures for such an extended time. Yet, our analysis shows that it is quite possible [we] could have avoided a blackout if it were not for Texas’ rapidly increasing reliance on renewable energy. At the worst, Texans might have experienced temporary rolling blackouts rather than the extended blackouts that occurred.
Q. This is what occurred back in 2011 in Texas.
A. For the most part. Texas did experience a similar—though less severe—winter storm in 2011. Several million people experienced blackouts, but they were only rolling or temporary in nature. The major reason for the difference is that Texas was much less dependent on renewables in 2011 than we are today.
Q: Why do you place the blame for the blackouts on renewables? Natural gas, coal, and even nuclear generation shut down in larger capacities than wind and solar.
A: There was trouble with all types of generation during the deep freeze. Yet the failure of renewables–both wind and solar–was percentage-wise, comparing capacity to output, the worst.
Also consider that a lot of natural gas generation was shut down because of grid mismanagement by ERCOT. And something that has been completely overlooked is the malinvestment in intermittent, unreliable renewables for more than 20 years because of government policies favoring renewables.
This has led to a shortage of reliable generation options like coal and natural gas that could have kept the power on in February.
Q: Did the Texas Legislature do anything to address the harm being caused to the grid by renewable energy?
A: The Legislature whiffed on this. Actually, that might be overstating their effort. They didn’t even attempt to reel in renewables.
Sen. Kelly Hancock did put some good language in a couple of bills that would have required the PUC to make renewable generators pay for the costs imposed on the grid by their intermittency. But that language was weakened by the Senate then stripped by the House.
Sen. Brian Birdwell filed legislation to take away eligibility for renewable generators to receive Chapter 313 property tax abatements from school districts. But when it came time for the committee he chairs to address this issue, he allowed a bill to pass without his language.
Q: That being the case, did the Legislature do anything then to prevent the recurrence of another blackout?
A: Not really. The Legislature did not do anything that industry would not have done anyway. The Legislature mandated that generators winterize their facilities. But generators were going to do that anyway; they are now aware of how much money some of them lost by being offline.
The Legislature also ordered grid managers to make sure that electricity to natural gas facilities is not cut off during an emergency. But the grid managers–and everyone else–had already learned that lesson and were taking steps to prevent it from happening again.
Q: Why did the Texas Legislature fail to take on the harm caused by renewable energy? It could worsen in the future.
A: There are two main reasons. One is the renewable energy lobby is powerful and well-funded. Renewable subsidies in Texas have totaled $24.2 billion since 2006. The industry is willing to spend a lot of money protecting these revenue streams.
But perhaps even a bigger reason is that if legislators and statewide elected officials took on renewables they would be admitting that the blackout was really the fault of the policies they have been pushing on Texans for years. And politicians rarely like to be held accountable for their actions.
Q: If the Legislature failed to address the blackout problem this session, is there anything that can be done now or in the future?
A: There is still much that can and should be done to stop the harm being caused by renewables.
First, the Legislature or PUC should force renewables to pay for procuring electricity to maintain reliability on the grid when they don’t show up. Sen. Hancock tried to force this issue, but the truth is that the PUC already has the authority it needs to do this.
Second, when Gov. Greg Abbott calls the Legislature back in for the special sessions, he and the Legislature can remove all property tax abatements–from counties and school districts–for renewables.
Finally, the PUC commissioners should eliminate all subsidies for generators—particularly the Operating Reserve Demand Curve—while at the same time making it clear they do not have the authority to arbitrarily raise (or lower) market prices. These three steps would begin to make investors confident that Texas’s growing economy will once again provide attractive investment opportunities in reliable generation.
Q. What about requiring the users of the multi-billion-dollar CREZ transmission system to pay full freight? After all, it was built for wind and solar. As it is now, all ratepayers across Texas pay on their monthly bill for the privilege of wind and solar traveling hundreds of miles to the cities.
A. Good idea. To date, Texans have paid about $8.6 billion to subsidize the transmission of renewable energy across the state. The Legislature or the PUCT—which has the authority to do so—should make all generators rather than consumers pay for transmission costs.
Q: Others also have pointed to some of the failures of the Legislature in addressing the blackout. But they point to fixes like updating building codes, raising energy efficiency goals, and requiring backup power at critical facilities. How do you feel about these policies?
A: Most of the solutions from these critics involve more government interference with the electricity market. Which is what led to the blackouts in the first place. Plus, most of them are doing all they can to deflect blame away from renewables. The truth is that very few people in the Legislature, executive branch, or industry will do anything to reduce the bills totaling billions of dollars that Texas consumers and taxpayers are going to have to pay as a result of the Great Texas Blackout.
Q. Finally, a lot more renewable energy–wind and solar–is scheduled to come on the ERCOT grid in the next year or two. How is this going to play out?
A. Doomsayers are usually trying to increase government intervention in the market, so I want to be careful not to sound like Chicken Little. But we are headed for more trouble. Weather has always been a factor in grid reliability, but mostly because of damage to the transmission infrastructure.
In 2011, even though the market was caught by surprise by one of the hottest summers in Texas history, Texans did not experience any blackouts because of reliable generation from coal, natural gas, and nuclear fuel. Today, however, the reckless rush toward renewables has changed the situation completely. And two more years of renewables dominating new generation is going to make things worse.
Bradley: Thank you Bill. Best wishes with the Energy Alliance (Texas Business Coalition). Previous posts by Bill at MasterResource are here; his website is Excellent Thought: Faith, Policy, and Culture.