Nearly a month after an arctic blast crippled Texas’ main power grid, questions continue to fly about how to prevent a similar disaster from occurring again.
Gov. Greg Abbott (R) has directed lawmakers to address the electricity crisis during their current session. He and others are also calling for power pricing errors to be corrected and for an overhaul of the grid operator.
But the state doesn’t yet have definitive answers on how to reform the grid, protect power plants and change its regulatory structure. The outcome in coming months has national implications as officials, companies and consumers across the country weigh how to prepare for the next disastrous weather event — whether a cold snap, heat wave, drought or hurricane-driven flood.
In Texas, experts say a number of steps, from coordination to weatherization, could make a big difference over time as the state braces for future extreme weather. Costs may stretch into the millions and billions of dollars, so funding options and the impact on customers’ bills will have to be weighed alongside improvements.
"The systemwide energy failure that occurred in Texas is unacceptable," Mauricio Gutierrez, CEO of NRG Energy Inc., told analysts this month, adding that NRG is committed to working with others "to prevent this from happening again."
The state’s free-market ethos was questioned after dozens of people died in last month’s cold weather and millions of residents lost power and access to clean tap water. State lawmakers promise that greater oversight is coming. Companies are voicing support for change, while skeptics still wonder about Texas’ willingness to act decisively.
Plans for reform are focused largely on the region managed by the Electric Reliability Council of Texas, the state’s primary grid operator.
The Public Utility Commission of Texas (PUC), which regulates electricity, and the Railroad Commission of Texas (RRC), which regulates natural gas, will have important roles to play.
Here are 10 ways Texas could overhaul its electricity system to help keep the lights on:
Coordinate gas and power
Experts across the energy sector say natural gas and electricity interests simply must work better together. That means more coordination among the PUC, the RRC and energy companies.
They could, for example, improve lists of critical energy facilities and make sure one sector doesn’t derail the other’s ability to deliver energy.
"The gas industry feeds into a critical piece of power infrastructure," said Pat Wood III, a former Texas and federal energy regulator who is CEO of the Hunt Energy Network. "And so you cannot look at one without looking at the other."
Gas is an important source of home heating in Texas, and close to half of the energy provided on the ERCOT power grid in 2020 came from gas-fueled generation.
But gas wasn’t always available at the pressures needed for power plants during last month’s crisis. The fuel had the most capacity offline in terms of power generation in the ERCOT region during the winter event.
Cold-weather failures on the gas side and a lack of electricity to power elements of the gas system are among the reasons cited so far. Gas prices skyrocketed amid supply shortages.
Joshua Rhodes, a research associate with the Webber Energy Group at the University of Texas, Austin, also suggested a look at moving power plants further up in line for natural gas during grid emergencies.
That could have reduced heating for homes during the recent crisis, he said, but it likely would have kept power flowing in more places. It’s also true that many modern gas furnaces can’t run without electricity.
Weatherize energy assets
Having power plants unprepared for cold weather was a major reason the ERCOT grid came close to a catastrophic blackout in February.
While some assets had winter preparations, Abbott is calling for change. The governor has made winterizing and stabilizing power infrastructure a legislative priority to mandate and fund. The price tag for that could be substantial, though all plants may not require the same level of treatment.
"It’s a big state," said Suzanne Bertin, managing director of the Texas Advanced Energy Business Alliance. "There could be a variety of solutions that need to be put in place to address the weatherization of generation in a way that makes sense."
Weatherizing could involve everything from insulation to applying a heat source to pipes, lines and other equipment, according to a 2011 report from staffs at the Federal Energy Regulatory Commission and the North American Electric Reliability Corp. Some plants also could look at having a secondary backup fuel in place.
Daniel Cohan, an associate professor at Rice University, argued in an opinion piece in the Houston Chronicle that preparation needs to happen for a range of extreme events.
"We shouldn’t focus only on freeze failures," he wrote. "We have to anticipate future disasters. We must weatherize, not winterize."
Rhodes said gas infrastructure also comes into play with weatherization. That may involve wellheads and gathering lines as well as compressor stations, including making sure they have power.
"All of our [gas] plants could have been winterized [but] if you couldn’t get gas to them, then they’re … no good," Rhodes said.
In a statement, the RRC said it does not mandate weatherization.
"We will work with the Legislature and operators to assess the next steps to further solidify infrastructure and communications to help strengthen emergency responses," the commission said.
Fix $9,000 per megawatt-hour
Companies and observers have said there are ways to modify Texas’ competitive power market without starting over, though some critics want drastic changes. Sustained wholesale prices of $9,000 per megawatt-hour have created financial havoc in the market in the wake of last month’s cold snap.
Legislators are expected to discuss issues with the ERCOT market at hearings again today.
Still, it’s not clear that state lawmakers have the appetite this session to engineer something like ending electric deregulation or instituting a capacity market to pay plants to be available. Arthur D’Andrea, the current chair of the PUC, has suggested a capacity market may not have been a big help in the recent crisis.
But there are efforts to rework how and when elevated pricing kicks in during times of scarcity.
For example, prices could start to go up sooner and have a lower cap than the $9,000 per MWh that caused financial stress when applied for days, and led to electric bills in the thousands of dollars for some customers. Some people have discussed the potential for a revised circuit breaker, or market mechanism, that could help prevent prices from staying too high for too long.
Concern about prices was evident this week as Abbott added an emergency item for lawmakers to consider — correcting billing issues related to ERCOT. His office said that "includes any inaccurate excessive charges and any issues regarding ancillary service prices."
The PUC previously declined to revise wholesale electricity prices related to a market monitor’s report of $16 billion of overcharges. Further pricing discussions may occur, including around ancillary services that involve power reserves contracted in advance.
Vistra CEO Curt Morgan told lawmakers he thinks "we’re going to have to come a little bit further on reliability and move the needle a bit here on the market design to make sure that it works and it’s reliable." Right now, it’s a feast-or-famine market in terms of prices, he said.
"I think it’s probably going to end up being something that sort of works within the existing structure but strengthens it," Colin Leyden, director of regulatory and legislative affairs for energy at the Environmental Defense Fund in Texas, said of possible market design changes. He said he’d work to stop efforts to give fossil fuel fleets an advantage over renewables.
There’s also the question of high natural gas prices. Rhodes suggested that an entity might need to step in if gas prices get too high, meaning a circuit breaker for power prices could also trip a circuit breaker for gas prices.
It’s a tricky situation because gas prices don’t fall under a price cap like electricity does in the ERCOT region.
Plan for climate extremes
Climate change can be a complicated subject in Texas, where oil and gas companies have long held enormous influence.
But discussing new climate realities isn’t always a partisan issue. Leaders in industry as well as government have said that Texas has seen storms that overwhelm traditional planning, whether in the form of hurricanes, floods or winter storms.
One lesson of 2021 is that it’s wrong to assume another extreme event won’t surpass expectations.
ERCOT undershot what it thought peak demand might be this winter. A higher forecast may not have prevented disaster, but it would have given the market more awareness.
Experts largely agree that Texas has plenty of power on typical days. In the meantime, ERCOT, the industry and its regulators can research extreme possibilities to see what areas may be stressed in the future.
As Rhodes put it: "Throw a bunch of different types of scenarios at it and see how many of them keep the lights on and how many of them don’t."
ERCOT appears to be taking steps to change. It recently announced the delay of its latest spring and summer assessments until March 25.
"The release date change is intended to accommodate new system stress scenarios and related report design changes being implemented, as well as ongoing support for various winter storm response and preparedness investigations," ERCOT said in a market notice.
Factor in renewables
Not all generation numbers are the same, which is a common point of tension as renewables become more prominent on the grid.
Planners don’t count on wind and solar facilities to run all the time. Instead, ERCOT projects how much intermittent generation can be expected at various points. That power can flow on the grid alongside traditional plants that run much of the time or that can be called upon.
Some in industry say Texas has to find a way to retain sufficient generation that it can dispatch on demand when intermittent sources like wind and solar are at reduced levels, but the debate may not be an easy one to resolve.
It reflects a broader one about the energy transition in the U.S. power sector, as baseload fossil fuel plants come with emissions. To have them continue to play a part in a decarbonized future, carbon capture or other technologies may be needed.
However, carbon capture is not common at power plants at this point, and coal isn’t likely to stage a resurgence. At the same time, expanding the use of energy storage could provide more backup power.
Vistra included some market design ideas in a list of policy response options it filed with the PUC to help address grid reliability, such as increasing generation reserve purchases and assigning incremental costs to intermittent renewables. It said costs could be allocated based on the expected reliability of renewable megawatts produced and included in renewables bids.
But Bertin called for a holistic look at the system and not making renewables bear the burden of the recent event, given that all technologies had issues.
"If the Legislature makes a move to increase costs on those technologies, then it ultimately ends up being a tax on consumers, because it raises overall wholesale market prices," she said.
The fact remains that ERCOT’s region boasts a fairly diverse setup. Natural gas supplied almost half of the energy on the ERCOT grid last year, followed by wind, coal and nuclear. Sources such as solar and hydro play small roles, though solar installations are climbing.
Battery storage is still trying to gain widespread traction across the United States, and adding it at strategic locations around Texas could help alleviate issues if not solve everything.
"I think storage helps avoid the situation we had where you couldn’t do rolling blackouts," Leyden said.
Texas state Sen. Kelly Hancock, a Republican, is sponsoring a bill that would create a path for transmission and distribution companies to contract for energy storage.
Concerns among some clean energy advocates may linger about limits of that proposal, however, as well as a bill that would assign certain services costs related to reliability and intermittent wind and solar to renewable operators.
Harness the ‘cheapest energy’
Better protection against the elements shouldn’t be limited to energy infrastructure, according to energy efficiency advocates.
Taking actions to lower people’s power consumption at home can help when extreme temperatures send demand surging.
"If we’re going to talk about weatherization, we need to make sure we also talk about weatherizing homes," Leyden said. "We know that folks in low-income neighborhoods really kind of suffered a lot under this crisis."
He said the "cheapest energy we can get if we have to shed load is, you know, the energy that you don’t use."
Leyden called for boosting efficiency efforts through electric distribution companies to help improve homes, update air conditioners and take other actions.
There also could be more demand response for everyday consumers in addition to large industrial customers, he said. That could mean paying customers to shed load at crucial times.
Bertin of the Texas Advanced Energy Business Alliance said there are potential upgrades to make in distributed energy resources broadly — such as through energy efficiency, demand response, on-site solar, energy storage and electric vehicles.
"I think it’s very clear that the state needs to do more on what I would characterize as community resilience," she said.
Learn to rotate
Controlled power outages last month were devastating because, in many areas, they didn’t rotate from location to location as originally envisioned. That meant that some residents lost power for days, while others may have only had brief outages or none at all.
During the crisis, ERCOT called for power cuts, and it was up to wires utilities, or the transmission and distribution utilities that control poles and wires, to implement how that was distributed.
Experts said the performance of those utilities must improve.
"Due to the volume and rapid succession of these load shed orders, by 2:24 a.m." on Feb. 15, CenterPoint Energy Inc. "could no longer automatically rotate customer outages on our system," Kenny Mercado, an executive vice president at the Houston-based company, said in written testimony to lawmakers last month.
In a statement, CenterPoint told E&E News it "identified a method to rotate outages safely for a portion of impacted customers as system conditions allowed. During rotating outages, we must try to ensure critical infrastructure, such as hospitals, fire departments, and water and sewer plants, are not interrupted."
Leyden said Texas could look to make circuits more granular and tap software to have finer accuracy to protect essential services — and enable more use of rolling blackouts. As the crisis progressed, the PUC sought to limit the duration of controlled outages.
"Like all of these things, we need to stop suggesting what should be done and start actually telling folks what needs to be done," Leyden said.
Rhodes said there could be a better back end for the Texas smart meter system to remotely turn power off and on at the home level.
Link the grid to other regions
The crisis last month spurred debate about whether Texas’ largely isolated grid contributed to power outages, with analysts disagreeing about whether integration with other states would have prevented the disaster (Energywire, Feb. 19).
Texas’ main power region may be able to add limited connections to other regions without triggering new federal oversight or becoming completely tied to other areas.
ERCOT only has a small number of connections to bring in electricity from outside its region at this point. That has helped it remain under the PUC for primary regulation and not the Federal Energy Regulatory Commission. Texas has long enjoyed a level of independence in how it approaches electricity policy, a position that some supporters say decreases costs. Others disagree.
"It’s been a political hot potato," Leyden said. He said some extra power from the West may have helped during the Texas crisis last month.
Some observers point to the Southern Cross Transmission project as a vision of what’s possible. It remains to be seen exactly when that might become a reality as it works through various requirements. Construction could start in 2022 and be finished in 2025.
That project could feature a high-voltage, direct-current line that helps connect the main Texas grid and its wind energy with markets in the U.S. Southeast. The line could send power in both directions, potentially helping Texas during tight conditions.
In a statement, Pattern Energy Group LP said it’s moving forward with developing Southern Cross with a plan that would not affect ERCOT’s independent status. The company said it would be a 2,000-MW interconnection to the east of Texas.
"Building out transmission that links geographically diverse generation is essential to enhancing reliability of transmission systems, and their ability to withstand extreme weather events, whether extreme cold, extreme heat waves, wildfires, hurricanes and such," Pattern said in a statement. "Studies have shown this time and time again. Planning processes must take these inter-regional benefits into account."
Consider a secretary of energy
Fresh perspectives are coming to ERCOT and its main regulator, the PUC, but far-reaching changes may need more time to build momentum.
Dade Phelan, the Republican Texas House speaker, included reforming ERCOT in his list of electric legislative priorities — including that all board members should be required to live in Texas. Still, some critics have grumbled at the idea that non-Texans create an issue on the board.
A number of ERCOT directors have resigned already — including the chair and vice chair. And CEO Bill Magness also is on the way out.
At the PUC, two of three PUC members have resigned in recent weeks, while some observers have advocated for a switch to elected commissioners instead of having ones appointed by the Texas governor.
Rhodes floated the idea of establishing a secretary of energy for Texas who could help bridge the division between the PUC for power and the RRC for natural gas.
"Having the ability of someone else to kind of call the shots while things have gone sideways … would be good to have," Rhodes said.
Another idea is to bring the duties of the RRC and the PUC together under a new body.
Chrysta Castañeda, a Democratic candidate for the RRC last year, argued in a recent op-ed for The Dallas Morning News that it’s "time to create a new agency to assume jurisdiction over our integrated energy portfolio and to plan for future needs."
Creating a new Texas Energy Commission may not be likely right now, but having it on the radar reflects a desire to change how and to what extent energy is regulated in Texas.
Communicate with the public
Communication — or the lack of it — came up repeatedly during recent Texas legislative hearings on the power crisis.
ERCOT and state officials were faulted for not alerting the public clearly or urgently enough to the potential grid problems. And once the lights went out, it was hard for people to understand when power might return.
Phelan and other lawmakers are talking about a new statewide disaster alert system. ERCOT and the PUC also may need to rethink how and when they talk directly to Texans, despite a focus on power companies that operate in the market.
Rhodes said better communication is something that could happen in the short term. That could mean making sure people know as soon as possible if rolling blackouts aren’t going to roll.
"If we had another cold snap like this in two weeks, the exact same thing would happen," Rhodes said. "It takes years, if not decades, to build infrastructure, so yes, we need to start now if we’re going to have a chance of … dealing with any of this."
