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by Jeff St. John
February 22, 2021

After a week of the country’s worst power grid collapse in decades — an event that's taken a dreadful toll in dozens of lives lost and billions of dollars in economic damage — the lights are back on in Texas. But even as the freezing temperatures that caused the crisis have waned, the political stances over who should be blamed have been hardening.  

Texas Republicans including Gov. Greg Abbott have attacked the state’s growing share of clean energy, pointing to the loss of generation capacity from frozen wind turbine blades. But these attacks have run up against the cold fact that the state’s natural-gas infrastructure played a central role in its broader grid failure. 

Freeze-ups of wellheads and pipelines that led to pressure drops across the state’s natural-gas network and widespread power plant outages due to equipment failure or lack of fuel accounted for the majority of the generation losses. These forced state grid operator ERCOT to call for blackouts that left millions of customers in the dark for days. 

Along with a significant share of the state’s ample wind power fleet that lacked the cold-weather hardening typical of wind farms in northern climes, coal and nuclear power plants also tripped offline as safety instruments and cooling systems froze up. 

“We had generator units of every type that went offline,” Dan Woodfin, ERCOT’s senior director of system operations, said during a Tuesday press conference, including “coal units, nuclear units, gas units, wind turbines, and...even reductions in solar. In different ways, the very cold weather and snow has impacted every type of generator.” 

Critics of Texas' deregulated energy regime point to its reliance on market forces rather than on regulations to force investments to harden the system against extreme weather as a key factor in the collapse. ERCOT is the only transmission grid operator in the country allowed to operate outside the regulatory purview of the Federal Energy Regulatory Commission, due to its separation from synchronized transmission networks that cross state lines — a separation that left it unable to receive electricity from other parts of the country that might have helped it weather the storm. 

That freedom from federal oversight has also enabled Texas’ decades-long experiment in radical energy market deregulation, which has abandoned the capacity and resource-adequacy regimes that pay for generators that sit idle for most of the year but are available to keep the grid running during emergencies. 

Instead, ERCOT’s energy-only markets rely on massive price spikes to encourage private investment in the resources needed when grid demand threatens to outstrip supply. That’s allowed the state to run its grid with far lower levels of reserves than other parts of the country while managing to keep the grid up and running during summer demand spikes. 

Why winterization efforts have fallen short

But those market signals have failed to encourage enough investment in hardening those resources against unexpectedly cold weather. Similar cold-weather failures in 1989 and 2011 led to investigations that cited the state’s lack of insulation or heating for key control and cooling systems as a cause of the failures. 

Voluntary winterization measures created after these events haven’t been backed by regulations that could force compliance, however. 

“We must address why, after 10 years have passed, are we in a worse position today than in 2011,” state comptroller Glenn Hegar told The Washington Post. A bill he sponsored as a state lawmaker a decade ago to require generators to report annually on their efforts to harden power plants against cold weather has failed to drive changes needed to prevent last week’s breakdowns, he said. 

A 2018 cold snap didn’t lead to massive outages, which gave the impression that those voluntary measured had worked, ERCOT President and CEO Bill Magness said in a Wednesday press conference. “But this weather event was a lot more extreme than either of those.”

Meanwhile, the North American Electric Reliability Council, which does have oversight over reliability standards for the U.S. utility industry, is still working on standards that would apply to the Texas power plant fleet, Woodfin said. 

Judah Rose, executive director of consultancy ICF, noted that a thorough investigation into the causes of last week’s collapse will need to sort out “how much of the problem was inadequate gas, perhaps inadequate gas arrangements, problems on the wires, or problems with the power plants.” 

But with preliminary reports indicating that the majority of the problem stemmed from faltering gas supplies and equipment, it’s likely that the Texas legislature, the Public Utility Commission of Texas and ERCOT will focus on those two areas, he said. 

After the polar vortex events of 2014, Northeast grid operators PJM, NYISO and ISO New England took steps to insulate and heat critical parts of power plants, such as instruments and cooling systems that allow them to operate safely. They also took steps to insulate natural-gas compression stations and pipelines, and to remove moisture from natural gas to prevent it from freezing in transit.  

Grid operators with mandatory capacity markets have driven these kinds of investments by imposing penalties on power plants that fail to show up when they’re called on, Ric O’Connell, executive director of the Oakland, Calif.-based GridLab, noted in a Twitter thread last week. 

“That means firm gas contracts, dual-fuel capability or winterizing your plant,” he wrote. In other words, beyond hardening power plants to allow them to keep running in subfreezing temperatures, natural-gas power plants must prepare for the threat of having their fuel supplies constrained or cut off entirely. 

“In capacity markets in the Northeast, you have to pay a penalty as a generator if you fail to generate power if you don’t have firm gas supply,” said James McGinniss, co-founder of New York energy retailer David Energy. “In Texas, a large reason for the supply shortage is that they had not contracted for firm supply for gas to show up when they needed it.” 

Wade Schauer, Americas research director at Wood Mackenzie Power & Renewables, noted that some Northeast U.S. natural-gas plants have installed distillate oil tanks to provide an alternative fuel when natural gas supplies are interrupted. 

Reconsidering the Texas free-market model 

Whether ERCOT needs to create a capacity market to force these changes is an open question, however, given the massive scale of generator outages. 

Texas regulators will doubtless be considering more aggressive steps to ensure its natural-gas fleet takes steps to winterize and secure adequate supplies, said ICF’s Rose, a former student of Harvard professor William Hogan, one of the architects of Texas’ energy-only market construct. 

“But the way you can get around that is just by retiring” power plants that owners decide won’t be cost-effective to operate under the new regulations, he said — and Texas has “had a tremendous amount of retirements” over the past two decades. 

At the same time, the promise of ERCOT’s $9,000 per megawatt-hour price peaks to entice generators to invest in improvements to serve during future cold snaps may well be an inadequate mechanism for solving the problem of serving the grid during such rare winter events. 

In fact, the corresponding spike in natural-gas prices may have put some power plant operators in the position of risking losing money on electricity sales, even when prices spiked to their maximum last week, Rose said. 

Indexing that maximum price to the price of natural gas could be a free-market solution — but only if the natural gas needed can get to the power plants that need it. And given the fact that some Texas electricity consumers exposed to last week’s price spikes are facing massive electricity bills, it’s unlikely that any steps that could lead to that price increasing will be well received by regulators or lawmakers.  

Climate change and an interconnected natural-gas and electricity system 

Natural gas has been touted as the “bridge fuel” for moving the U.S. electric grid away from coal-fired power plants. But natural-gas power plants rely on an extensive pipeline network to keep running, which creates interdependencies that can multiply into complex breakdowns during winter emergencies. 

As climate change leads to more extreme weather, grid planners and regulatory structures will need to take these interdependencies into account, said Patrick Milligan, ICF energy power markets manager. A first step may be considering the threat of “correlated outages” — the fact that power plants using the same fuel tend to fail together, not independently of each other. 

Grid planners tend to consider their reserve margin needs by calculating the likelihood of power plants failing in isolation from each other, he said. “But often, outages are highly correlated,” with extreme weather causing similar breakdowns across entire fleets of similar power plants simultaneously. 

Michael Goggin and Rob Gramlich of Grid Strategies wrote in a Wednesday note that a growing body of research has highlighted the risk of correlated outages, and thus the risk of relying too much on generators using a single fuel source. Accounting for these risks would “significantly reduce the resource adequacy value assigned to conventional resources that experience such outages” and “show the value of generation diversity, confirming the intuitive fact that because all energy resources can be disrupted, being overly dependent on any one isn’t wise.” 

This is a problem for grids beyond Texas, Rose noted. “As far as I know, there’s no grid that plans for correlated gas outages,” he said. “How do you deal with the fact that the grid is going to [be powered by] majority natural gas?” 

Transmission interconnections as a solution 

Gramlich and Goggin are among the advocates of a plan to significantly increase transmission capacity to interconnect different regions of the country as one solution to this problem. “Weather events are typically only at their most extreme in a relatively narrow area,” giving hard-hit parts of the country the option of drawing on resources from far-away regions via transmission links.

These linkages may have helped MISO and SPP, the two grid operators neighboring Texas, better withstand similar cold weather that forced power plants offline, they noted. Both SPP and MISO experienced rolling blackouts, but of far smaller scale and shorter duration than ERCOT’s — and both were able to draw at least some power from grid operator PJM to the east, although congestion in the relatively slender linkages between them did constrain the flow of power. 

“Texas’ strong internal transmission network also allowed solar, inland wind and coastal wind resources to work together to help keep the lights on,” according to Gramlich and Goggin. For example, while West Texas wind farms had to shut down amid subfreezing temperatures, coastal wind farms were able to keep running. 

Texas now has only a few high-voltage, direct-current connections to outside grids, including about 800 megawatts of capacity to the Eastern U.S. and about 400 megawatts to Mexico, ERCOT’s Woodfin noted in Wednesday’s press conference. Even that limited import capacity was unavailable during the peak of the crisis due to capacity shortfalls in those regions, although it did become available later in the week. 

Building more high-voltage, direct-current links between ERCOT and neighboring regions, such as the proposed 3,000-megawatt Southern Cross intertie from Texas to Louisiana and Mississippi, could expand this cross-border power-sharing. 

But if Texas were to choose to interconnect its high-voltage grid into the broader alternating current systems to the east and west, it would have to give up its status as being independent from oversight from the Federal Energy Regulatory Commission. That would force it to adhere to FERC regulations regarding resource adequacy, as well as to FERC’s current limit of $2,000 per megawatt-hour for energy prices, essentially ending its two-decade approach to energy prices as the primary driver for grid investment and reliability. 

Rick Perry, the former Texas governor and U.S. Energy Secretary under the Trump administration, wrote in a blog post that Texans would rather “be without electricity for longer than three days to keep the federal government out of their business.” 

But FERC Chair Richard Glick said during FERC’s Thursday meeting that Texas may want to revisit its go-it-alone approach given last week’s crisis. "Does it really makes sense to isolate yourself and limit your ability to get power from neighboring regions, just to keep FERC at bay?"