Oops!...Texas did it again
It’s Tuesday morning, time for a fresh dose of Bright Ideas. I’m Julian Spector, L.A. based journalist covering clean energy for Greentech Media. This is my personal newsletter about how clean energy is taking on the world and winning. This week, though, I’ll dig into the massive failure of the grid system in Texas, which delivers lessons for clean power and fossil fuels alike.
I’m setting myself the unenviable task of telling you something about the Texas grid crisis that you haven’t already read somewhere else.
Bright Ideas has noted numerous circumstances in which clean energy comes out on top of market competition these days. The thing I’ve been contemplating from the Texas debacle is how it undermines the market-based worldview more than any other event in recent energy sector memory.
Texas, as I described in the memorable California v. Texas (let’s goooooo) debate, is the epitome of a market-based power grid. Other states chicken out and pay power plants to sit around and be ready in an emergency. Texas lets the market decide. Extreme demand sends the electricity price through the roof, which rewards investors who can deliver then, so they pay to build power plants for such eventualities. That’s pretty much the safety net they’re working with.
Most of the time, this works pretty well. The market keeps power prices lower in Texas than in many states that take a more hands-on approach to management. But the test of a good ideology is that it holds up under stress, whether it’s an unexpected pandemic or a prolonged cold snap.
When the snow fell in Dallas, it cooled the ground and attitudes towards untrammeled capitalism (Photo credit: M. Rader/Wikimedia Commons).
We’re all socialists in foxholes
The telling part here is how quickly the market-lovers abandon the philosophy when it gets tough.
Case in point: Republican Gov. Greg Abbott is attacking ERCOT, which operates the grid and the electricity markets for the state, for letting prices spike. He says he wants to protect customers from the bills they’re getting as a result of buying power within the market-based system.
Stories are already emerging of normal folks getting slapped with $17,000 bills for their electricity usage during the winter storm. Many of the eye-popping anecdotes come from customers of Griddy, a cutting-edge service that charges people according to wholesale market prices rather than the usual tiered or fixed rates many residents are familiar with. Normally you can save a bunch of money by paying wholesale rates; during a prolonged and record-breaking price spike, it’s a different story.
To recap, the governor is saying it’s a problem that the laws of supply and demand were allowed to work. Extreme weather froze gas pipelines and power plants, cutting off supply while demand skyrocketed. The market behaved like it’s meant to, and the result was untenable for Abbott, who wants to bail out customers.
“This system is truly designed to have high prices and huge fluctuations. And putting consumers through that by design is a bad process. It’s setting people up for pain.”
But this is also a problem for clean energy
Lest it seem like I’m picking on Texas for its spectacular grid collapse, let me assure you, this is a problem for the broader clean energy effort.
The kind of work Griddy does reflects a widespread conviction within the clean energy industry that customers should be exposed to more market signals for their power consumption.
In the old days, customers had to take what the monopoly utility gave them, at the rates it charged. These days, digital electric meters allow for dynamic rates, that charge for usage at particular times. This is useful because it unlocks what’s known as “flexible demand,” the idea that you can shift consumption based on market signals.
Why would anyone want that? Currently, we build power plants to meet the moment of greatest demand, and socialize the cost. But imagine a world where you simply shifted demand around in time so you don’t need another power plant for that peak moment. That’s less money, less fossil fuel burning, all by using the same electricity at slightly different times.
Avoiding unnecessary fossil fueled power plants is good climate sense, not to mention financial sense. But the exercise only works if there’s an organizing principle to shift when people run their dishwashers or crank their thermostats. That principle is the law of supply and demand.
If Texas last week was an experiment in exposing normal people to market signals for electricity, it doesn’t bode well for this project. It’s more tenable if those customers have smart devices like a Nest thermostat or a Tesla Powerwall that let them control when they use power. Without such tools, people are defenseless against price spikes. The system just sets them up for pain.
My loneliness is killing me
Last August, California ran out of power for a few hours across a couple days leading to some blackouts. At the time, that seemed like a really big and embarrassing failure. I explained it on Bright Ideas with reference to the Britney Spears hit Oops!…I Did It Again, which was released around the time California succumbed to its last major wave of blackouts. Those were the result of imperfect market design.
As it happens, Texas passed its power market deregulation law in 1999, the same year Britney recorded Oops!…I Did It Again. And the failure of the Texas power sector due to inadequate insulation was itself a repeat, as a similar thing happened during a winter storm in 2011.
Britney herself has reemerged in the news cycle, thanks to a new documentary by the New York Times. The film depicts Britney’s peculiar legal captivity, and it’s fascinating and infuriating.
An unfortunate run of events in 2008 prompted a court to give control of Britney’s body and finances to her father under an arrangement known as a conservatorship. That arrangement persists to this day, despite Britney having the wherewithal to conduct a successful performing career and bring millions of dollars into the control of her conservator.
This doubles as my “this week in quarantine” feature. It’s timely, because Britney’s isolation parallels the loneliness of Texas. The state resisted connection to the grid of the rest of the United States, to avoid federal regulation (we’ve all been there). Texas could have used some help, but it was cut off from from its neighbors, forced to survive on its own. It got lost in the game.