Texas made few power reforms despite warnings. ‘An incredibly dangerous situation’

FORT WORTH, Texas — Over a couple frigid days in February, as demand for power soared, generators across Texas tripped up and failed to operate in wintry conditions. Long outages ensued across the state, and millions of Texans were left without power. Even more wondered how something like this could happen here. “You would have never thought you would see the day in the energy capital of the world,” said one oil company CEO.

Plenty of sentences like those have been written in the last 48 hours, but everything described above is actually from 2011. Yes, Texas has been here before. Although temperatures throughout the state have touched record lows over the past few days, creating a perfect storm to stress the power system, severe outages on Texas’ deregulated, independent grid are not unprecedented.

Leaders in both the private and public sector knew something like this could happen. They have called for investigations over weather-related energy failures and quickly arranged hearings at the Capitol before, just as they are doing now. And their inability to make lasting reforms after previous winter storms left millions of Texans in danger during one of the worst weather events in the history of the state.

“It may not be an event that you plan for, but it’s got to be an event that you are prepared for,” said Jim Robb, President and CEO of the North American Electric Reliability Corporation, which has authored reports on Texas’ grid.

The power started going out in large swaths of Texas on Sunday, as grid manager ERCOT selected areas for blackouts to avoid the system being overworked. ERCOT CEO Bill Magness said ERCOT knew extremely cold weather — and a resulting increase in demand — was coming, but the organization was surprised to find how much the energy supply had dropped.

By Tuesday, 45,000 megawatts had tripped offline, potentially enough to power 22 million homes. (About one-third of the lost power came from wind sources and the rest from fossil fuel sources.) In 2011, the estimated total that unexpectedly dropped from the grid was 8,000 megawatts.

The exact causes for what tripped up the power supply will be investigated and determined. So far, ERCOT officials and outside experts have pointed to a few likely reasons, none of which are new. For one, the ability to move natural gas appeared to falter because of the weather and was made available at first priority to consumers, rather than power generators. The move helped the general public with their heating needs but may have prevented some generators from getting the natural gas they need to produce electricity at their plants.

The other reason is purely about the cold: The power generators’ equipment, both for wind energy operators and fossil fuel operators, was not ready for the extreme temperatures. “It’s those private companies that generate power that are not working,” said Gov. Greg Abbott in a TV interview. “Some of them literally froze up, and were incapable of providing power, and some are still incapable of providing power.”

The deep freeze and blackouts of 2011 were caused by almost the exact same reasons. Less than two weeks later, the Texas Legislature and Public Utility Commission held hearings, coming up with a bill on winterizing techniques for generators.

But the only requirement of the bill, which was signed into law that June, was timing: Generators must file a weather preparation report with ERCOT by Dec. 1 that ERCOT sends to the PUC. There are no standards for generators to meet or any methods for sanctioning them. Even turning the report in on time has been a challenge: More than 30 generators filed theirs late this year.

“These companies are … not spending the money to make the necessary upgrades,” said David Blackmon, a longtime energy industry analyst based in Mansfield. “I think the proof is we have 3 million Texans with no power, and that’s an incredibly dangerous situation.”

Comptroller and former Republican state Sen. Glenn Hegar sponsored the winterization bill in 2011. He noted the need for more reform in a statement to the Star-Telegram. “The most immediate issue is getting power to the millions of Texans who have experienced prolonged outages that threaten their lives and property,” he said. “However, once the grid is back to being fully operational again, we must address why, after 10 years have passed, are we in a worse position today than in 2011.”

Blackmon, a former lobbyist, has one theory: The special interests representing wind, coal and natural gas pointed fingers at each other, and legislators allowed themselves to get tangled in the mess. “There wasn’t any one of them willing to be the person to lead the charge and make real change happen so we ended up with these half measures,” he said.

For this session, Abbott declared an emergency item to enhance Texas’ electricity grid. Numerous legislators have also called for investigations and reforms, from Republicans like Fort Worth Rep. Craig Goldman to Democrats like Grand Prairie Rep. Chris Turner.

However the hearings unfold, they may arrive to a thornier question beyond winterization: Why didn’t the state have enough energy reserves for the extreme weather?

“We have been worried for a while about whether or not the Texas market is attracting enough investment in power generation to meet the loads that have been developing there,” Robb said. The NERC made note of this concern in recent assessments. “Most of those were written with summer loads in mind because of the high amount of heat and air-conditioning load. But even our 2020 winter assessment highlighted the risk of extreme weather leading to load shedding events like we’ve seen here,” he said, noting the stretch of frigid temperatures the last few days was beyond what they had expected as extreme.

In the summer, ERCOT has successfully managed demand to avoid rolling blackouts, which, Robb says, “is something to be very, very proud of.” But what would really help, both in high-demand summer and winter periods, according to experts, would be more power plants. That’s easier said than done here.

Unlike most places in the U.S., Texas has a deregulated electricity grid. So private companies decide to invest in new power plants when it makes sense from a profit standpoint, and they decide how much power to generate based on how much they will be able to sell at the best price. As the state population has increased, the amount of power plants, as well as reserve power supplies, have not kept pace.

As far back as 2013, energy industry analyst Edward Hirs warned Texas’ ERCOT-managed, deregulated model could lead to a focus on short-term prices that create long-term capacity issues. He told Houston’s NBC-2 news station on Monday, “This has been a fool’s errand since it was passed into law 20 years ago. And it just totally needs to be revamped.”

Former Republican state Sen. Troy Fraser, who co-sponsored the 1999 bill that deregulated Texas’ grid, defended the system in a Tuesday interview with the Star-Telegram. “If you have a gold-plated system that can handle any problem you could potentially double the price of people’s electricity,” he said. As for more energy supply, he said Texas could incentivize but not force companies to build more plants. “We don’t have the reserve margins to handle events like this. There’s not enough extra capacity available.”

The power went out for Fraser, who lives about a quarter mile from a power plant in Horseshoe Bay. He said he used his fireplace for heat, and for making coffee, and was not deterred by what he described as two impactful weather events in 20 years. “I’m sitting here without power and without heat, but one day of being inconvenienced is not a reason to redesign the market,” he said.

To others, the coming weeks will be an important time for seeking reforms.

“It’s up to the legislature and the PUC and the Governor and Lieutenant Governor,” Blackmon said, “to see if they want to use the bully pulpit to really force some real change.”