In mid-February 2021, the US state of Texas, much like the rest of the country, was hit by a series of three severe winter storms. The resulting near-arctic weather conditions have laid bare the long-standing weaknesses and inefficiencies of the Texas energy system.
When the winter storms hit, Texans all over the state cranked up their heaters to keep their houses warm and businesses running. As power-generating capacity in Texas was unable to meet this sudden surge in demand (for reasons described below), grid operators there resorted to so-called “rolling blackouts”, unplugging entire neighborhoods across the state from the electric grid to ease the pressure on the overall system.
This relief effort was largely insufficient, however, and the results were catastrophic. At the peak of the energy crisis, some 4.5 million Texans (nearly a sixth of the state’s total population, with marginalized communities hit disproportionately hard) were left without electricity for days in temperatures far below freezing in a state where residents have little experience with prolonged sub-zero temperatures. Dozens of people died during and after the blackouts, many of hypothermia or due to carbon monoxide poisoning as increasingly desperate residents resorted to using their grills and stoves to heat up their freezing homes. There was a knock-on effect of some 12 million Texans seeing their water supply disrupted as the water froze in the plumbing systems of their frigid homes and often burst the pipes. To date, it is estimated that Texas alone suffered a staggering $ 129 billion in economic losses due to these power outages.
How did the Texas power system fold so quickly and easily? Texas is, after all, the second most populous state in the US and home to the city of Houston, whose oil and gas production has earned it the epithet “the energy capital of the world.” Additionally, electricity supply in Texas is fairly diversified, with solar and wind sources accounting for one-fifth of the electricity produced in 2019.
In short, the root causes of the grid failure in Texas are threefold: the false promise of energy independence from federal regulation, the short-sighted deregulation of the energy market and the unwillingness to learn from similar incidents in the past.
In light of the global shift towards renewable energy sources, it is also critical to fairly assess the heavily-discussed alleged culpability of renewable energy sources for the grid failure in Texas. Only then we can draw broader conclusions from this example for the EU efforts to integrate energy markets, shift to less carbon-intensive means of power generation and reduce the grid’s vulnerability to the kind of “perfect storm” system failure that Texas has just gone through.
The continental USA, which means all 48 states except Hawaii and Alaska, has three major electricity grids – the Western Interconnection, the Eastern Interconnection – and Texas. With the exception of a few peripheral areas, the vast majority of Texas and its nearly 30 million inhabitants are covered by a stand-alone power grid that is largely insulated from the other two major power grids in the US. The Texas power grid is regulated by the agency ERCOT – Electric Reliability Council of Texas, which is not subject to federal oversight by US regulatory agencies precisely because its power lines do not cross state boundaries.
This cherished “freedom from the Feds” is the chief reason behind the isolation of the Texas power grid. Since it has virtually no connections to the other two major grids spanning multiple US states, ERCOT and other Texas-based entities are free to operate their power grid as they see fit, for better or worse.
Texas’ isolationist approach to energy policy stems from two major sources: the state’s long narrative of independence and opposition to the federal government (in fact, Texas was an independent republic for nine years after declaring its independence from Mexico in 1836). The second factor is Texas’ incredible abundance of carbon-based resources - coal, oil and natural gas. Texas not only had the political will, but also the resources to wall itself off from the US power grid. However, this energy isolationist approach also means that in crises, Texas cannot rely on an out-of-state lifeline supply of electricity to meet excess demand.
The Curse of Deregulation
In 2002, the autonomy of Texas’ power grid allowed then-Governor Rick Perry to implement sweeping deregulation of the state’s electricity market. Perry and his Republican colleagues embraced a free-market approach whereby electricity is auctioned off in a wholesale marketplace coordinated by ERCOT. This neoliberal approach to energy distribution assumes that “markets are better at coordinating than centralized planning is” in the words of Leah Stokes, Professor at UC Santa Barbara.
In Texas, this system of de-centralized auctions means that the price of electricity, rather than the reliability and stability of its supply, has become the chief concern of energy providers. A race to the bottom ensued among Texas power generators as they fiercely competed with one another to offer the cheapest electricity possible and neglected crucial long-term investments into their power generating systems, such as protecting their transmission networks against severe weather conditions.
Additionally, the barely-regulated auctioning system meant that electricity prices can and do fluctuate wildly, especially in instances of a sharp increase in demand and insufficient supply. On 15 February 2021, in the middle of the snowstorms crippling the state, the wholesale price of one megawatt hour of electricity in Texas was $9,000 a whopping 10,000 % increase from the pre-storm prices of $50 per megawatt hour. Many of those Texans who considered themselves fortunate to not have lost power were billed thousands of dollars for a few days’ worth of electricity supply during the period of peak demand.
A Crisis Foretold
The deregulated nature of the energy market in Texas and the sheer economic significance of the state’s energy sector results in an environment where major utility firms can effectively cultivate warm relationships with key politicians and the agencies, including ERCOT, that are supposed to oversee them. For example, Rick Perry, the former Republican Governor of Texas who also served as Secretary of Energy in the Trump administration, now holds a lucrative seat on the board of Energy Transfer LP, a Dallas-based pipeline operator. On 17 February 17 2021, Perry penned a blog post arguing that, more than anything else, Texas needs a greater baseload in gas, coal and nuclear and that “Texans would be [willing to go] without electricity longer than three days to keep the federal government out of their business.”
Even more dangerously, the political and lobbying clout of large Texas power generators meant the state’s energy regulators have not heeded the lessons of previous crises. While this year’s winter storm was very severe and long, it was not entirely unprecedented – large parts of Texas were hit by similar winter storms in 2011 and 2014, and a number of power plants saw their transmission networks freeze and go offline for prolonged periods of time.
An investigation carried out by ProPublica found that post-mortem reports ordered after those two near-misses concluded that Texas energy providers had failed to properly test the weather design limits of their networks and were not investing sufficiently into weatherization of their systems against severely cold conditions. ERCOT did issue winterization recommendations, but those were largely ignored by major Texas power companies, as compliance was merely voluntary.
The West Texas city of El Paso drew a much starker lesson from the 2011 power outages and spent millions of dollars to properly winterize and refurbish its own grid, which is separate from the main Texas grid. It also built a state-of-the-art dual-use power station that regularly relies on natural gas but can switch to burning oil when gas becomes unavailable. As a result, only a fraction of homes in El Paso lost power in February 2021 and the municipal power grid was far more stable than in most of the rest of the state.
Renewables Are Not to Blame
Despite their history in the exploration and production of fossil fuel sources, Texas-based power companies have lately been making massive investments into the renewable energy sector, especially wind and solar. In 2019 alone, Texas-based businesses were responsible for a quarter of corporate renewable energy deals globally.
The renewable energy sector in Texas was intensely critiqued during the 2021 grid failure, especially by prominent Republican politicians, including Senator Ted Cruz and influential Fox News anchor Tucker Carlson. The current Republican Governor of Texas, Greg Abbott, even attempted to tie the state’s freezing wind turbines to a broader critique of the Green New Deal, saying that it would be “a deadly deal for the USA.” Republican politicians across the spectrum seized the opportunity to use the Texas example as an argument against renewable energy at large and to praise, as Rick Perry had, the state’s baseload capacity in fossil and nuclear sources.
However, the attacks against Texas renewables, particularly its wind sources, are grossly misguided at best. Due to insufficient winterization and frozen wind turbines, just some 13 % of power outages across the Texas power grid were due to wind, while wind accounts for merely a quarter of the state’s electricity supply in winter. Thermal sources of energy lost twice as much power generation capacity during the grid failure. As uninsulated gas pipelines burst during the freezing weather, gas-burning power plants were cut off from their chief energy source and went offline across the state (unlike the El Paso plant that was able to switch to oil burning temporarily). Even one nuclear reactor in South Texas had to shut down as the water pumps in its system froze. Still, the lion’s share of the blame, according to multiple analysts, lies with the states’ gas-burning power generation capacities, which failed to deliver when they were needed the most.
Additionally, experts have pointed out that when properly equipped for cold conditions, wind turbines can work reliably even in extreme weather conditions, which is the case in Greenland or the Arctic regions of Sweden and Finland. Coincidentally, a widely circulated photograph of a helicopter de-icing a frozen wind turbine was wrongfully located in Texas at the height of the February 2021 crisis; in fact, the photo was taken in Sweden in 2014.
Implications for EU energy market transformation
While it is certainly too early to draw definite conclusions about what exactly went wrong with the Texas power grid in February 2021, this system-wide failure ought to be dissected and studied by energy analysts and policymakers worldwide. This holds particularly true for the EU and its energy market integration process, which is part of the broader European green deal strategy to achieve the climate neutrality of the whole bloc by 2050.
Presently, there are five main lessons that can (and should) be drawn by EU policymakers from the recent failure of the power grid in Texas:
1) Stronger together: The Texas energy crisis strongly reaffirms the belief that underlies the integration of the EU energy system. Texas, a state twice the size of Germany, with an exceedingly abundant supply of both fossil and renewable energy resources, was paralyzed by its own decision to isolate itself from the two major power grids in the US. The EU is right to see greater security for its energy supply in a system that transcends national boundaries and allows for efficient and timely transfers of electricity across the continent.
2) Learn from the past, keep distance from big utility firms: The biggest tragedy of the Texas grid failure is that it could have been largely avoided. After both the 2011 and 2014 partial failures of the grid, there were reports identifying the insufficient winterization of the network as a weak link that could break under stress. However, due to lobbying by Texas power companies and the insufficient regulatory power of the state’s own bodies, those recommendations were largely swept under the rug.
In addition to curtailing the lobbying activities of large utility firms, EU policymakers ought to carry out a frank reassessment of similar partial failures and near-misses across the EU and ensure that these are unlikely to repeat. A recent example of this is the investigation by ACER (the EU agency for coordinating national energy regulators) into why on 8 January 2021, the continental EU’s electricity system split into two independent grids for about an hour.
3) Prepare for the worst: The accelerating rate of human-induced climate change means that freak weather accidents, such as the severe winter storms that paralyzed most of the US in February, will become only more and more common. EU policymakers ought to carefully reassess their worst-case scenarios for the power grid and bring them up to date with the reality of increasingly volatile and unpredictable global climate patterns.
For ERCOT, the Texas energy regulator, climate change is something of a taboo word that does not really appear in the agency’s strategic planning documents. This short-sightedness resulted in a situation where no small part of the state’s power generating capacity was offline already even before the winter storms hit in February. This was because mild Texas winters have been traditionally utilized as a down time for the network and an opportunity to carry out maintenance work ahead of the summer season that typically has the highest electricity demand due to surges in air-conditioning.
In light of the cascading power outages in Texas, EU policymakers should also put more thought into “perfect storm” scenarios, however unlikely, and actively consider steps that can decrease the likelihood of system-wide failure in the EU energy system.
4) Play by the book and ensure minimum standards: Texas’ experience with the deregulation of its electricity market is a stark lesson that free-market price incentives are not, in and of themselves. sufficient to ensure minimum standards and structural investments into the stability of the power generation and transmission networks.
Christian Zinglersen, the head of ACER, cautions that the more interconnected the electricity network of the EU Member States becomes, the more important it is to continue to adhere to an ever-updating “playbook” of rules and safeguards to prevent shocks in the system and ensure that electricity can be moved across borders effortlessly.
5) Reduce the demand side: Part of the reason why Texas was struck so hard this February was that many of the state’s homes and businesses were not properly insulated against cold, forcing their owners to crank up their heaters more than should have been necessary, which in turn aggravated the surge in electricity demand that paralyzed the grid.
EU policymakers ought to double down on the Union’s commitment to renovate buildings and businesses across the continent (the so-called New European Bauhaus initiative). Further, continuing with introducing more stringent energy efficiency requirements for new appliances (along with proper labeling) would go a long way towards reducing the continent’s demand for electricity and heating, as well as to reducing vulnerability to sudden surges in power demand.
The recent experience of Texas strongly supports the EU conviction that joint action on energy markets is an important step toward deepening the stability and security of the bloc’s power grid, and that the benefits of energy isolationism and market deregulation are rather illusory.