The Cost of Texas’ Independent Power Grid

As Texans continue to reel from a catastrophic winter storm that left millions without power and water for days and some residents under boil-water advisories as recently as Tuesday, the state’s unique power production structure has come under the microscope.

[COMMENTARY: The Case Against Texas’ Prices Hikes During an Emergency]

The majority of power in the U.S. still comes from fossil fuels but has been on a steady decline in recent years. The percentage of renewable energy sources such as solar and wind power, meanwhile, has been slowly increasing: rising from 7.5% in 2007 to 14% in 2017, according to a report from USAFacts.

It is similar in Texas, where coal and natural gas make up most of the state’s power production, but the usage of those sources has fluctuated over the past decade. Wind and solar energy in Texas, however, have both steadily increased in use — combining for about 69 million megawatt-hours in 2017, according to USAFacts.

While Texas produces and consumes more electricity than any other state overall, it is also the only one of the 48 contiguous United States that runs a stand-alone, independent electricity grid, according to the state comptroller’s office. The latter means that most of the state’s grid — the majority of which is operated by the Electric Reliability Council of Texas — cannot connect to other grids when a disaster such as the recent winter storm occurs, according to Reuters. Even under an independent grid, a Wall Street Journal investigation found that “deregulated Texas residential consumers paid $28 billion more for their power since 2004 than they would have paid at the rates charged to the customers of the state’s traditional utilities.”

Texas’ natural gas production was the main source of the recent power failures in the state, according to the Texas Tribune. But at least some of the causes of the state’s issues date back about a decade.

Texas dealt with a similar string of blackouts during a cold snap in February 2011. A joint report by the Federal Energy Regulatory Commission and the North American Electric Reliability Corporation found that many of the generators that experienced outages during a similar crisis in 1989 failed again in 2011, even after non-mandatory recommendations aimed at improving winterization were issued. The 2011 report also recommended that “all entities responsible for the reliability of the bulk power system in the Southwest prepare for the winter season with the same sense of urgency and priority as they prepare for the summer peak season.”

“I guess the role of ERCOT is not necessarily to mandate those kind of things,” said Dan Woodfin, the council’s senior director of system operations, during a Feb. 17 news conference. “There was some discussion about that back when, and there’s been discussions since then, because other regions of the country have had a similar issue.”

As if history wasn’t already repeating itself, FERC and NERC announced in a Feb. 16 news release that they were opening a joint inquiry into the “operations of the bulk-power system during the extreme winter weather conditions currently being experienced by the Midwest and South central states.” ERCOT on Tuesday announced plans for five board members, including the chair, to resign, according to a news release.

“We simply do not carry enough reserves to deal with such a systematic failure of so many generators,” says Ross Baldick, professor emeritus in the University of Texas–Austin Department of Electrical & Computer Engineering. “As a matter of course, it would be very expensive to do it. Although perhaps, if we had prepared a bit more for this particular event, we might have been able to do it.”

Baldick adds via email that he estimates the possible loss of welfare or “notional disbenefit” to consumers in the state due to the outages might be $5.4 billion — multiplying ERCOT’s price cap of $9,000 per megawatt-hour by 60 hours of blackouts exceeding 10,000 megawatt-hours. Assuming an extreme weather event such as the winter storm might happen once every 10 years, he says, the average disbenefit of failing to winterize might be $500 million per year. He cautions that these estimates are “literally back of the envelope and therefore very rough.”

The joint report from 2011 estimated that the cumulative cost of winterizing gas wells could vary from $125 million to $1.75 billion for 50,000 gas wells, based on equipment needs. Texas had nearly 123,000 producing gas wells in 2019, according to the U.S. Energy Information Administration.

[MORE: Governors Appear More Bipartisan in 2021 State of the State Speeches]

Representatives for Texas Gov. Greg Abbott, a Republican, did not respond to multiple requests for comment on the economic impact of the storm. Chris Bryan, director of communications and information services for the state comptroller, says via email that he doesn’t think his office has any early cost estimates yet.

“We are still very much assessing impacts even as recovery begins,” Bryan says. “The Comptroller has provided lawmakers with some general thoughts on impacts to revenues and some ideas on potential short term and long term economic impacts.”

The economic impact of the crisis — beyond the obvious human toll — has been clear in other ways. Texas utility regulators recently allowed the price of electricity to rise to $9 per kilowatt-hour, when the average price in the state during the winter is about 12 cents, according to NPR. Some residents have been sent electric bills with balances in the thousands, NPR also reported. This reality is how Texas Monthly recently described the power production structure in the state: “Our electric grid … was built to keep prices relatively low most of the time, at the expense of reliability in extreme weather.”

The 2011 report from FERC and NERC noted that “the cost of dealing with the aftermath can be more expensive than the preventative action that could have been taken.” Time will tell whether this turns out to be the case with Texas’ latest winter crisis.

“These are very relatively rare events, right? Perhaps once in 10 years,” Baldick says. “Climate change might make them more likely.”

More from U.S. News

Governors Appear More Bipartisan in 2021 State of the State Speeches

The Case Against Texas’ Prices Hikes During an Emergency

Explainer: Texas’s One-Of-A-Kind Power System Raises Questions During Price Spike

The Cost of Texas’ Independent Power Grid originally appeared on usnews.com

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