Texas Failed Because It Did Not PlanBreaking News
tags: conservatism, Texas, deregulation, energy
America’s second-largest state was brought to its knees by winter weather. How could this have happened?
Here are three explanations. I won’t give away the ending, but they are many of the same issues that hampered the United States in its response to the COVID-19 pandemic. Too many crucial systems in this country are run on an ad hoc basis. A lack of planning, a reliance on just-in-time logistics, and a self-defeating trust in the profit motive are withering the American economy and way of life.
Yet why didn’t someone plan for a natural-gas shortage? A wintertime run on supply was entirely foreseeable. Pipelines could have been ordered to winterize; power plants could have maintained on-site backup. The natural aspect of this disaster had precedent: Although Texas saw brutal temperatures this week, they were within the historical norm.
Some researchers, including Cohan at Rice, have started to call Texas’s failure an “energy-governance problem.” This is a shorthand way of saying that society’s plans didn’t make sense, because they assumed that natural gas could do an impossible number of things at the same time. And nobody noticed this beforehand, because it was nobody’s job to notice.
In 1999, Texas restructured its power sector, dumping its old utilities and adopting in their place a new and totalizing market system. But this market looks little like the markets we know from everyday life. Consumers cannot buy electricity like it’s breakfast cereal or sell it like a used car. Instead, Texas has a market only a lawyer could love: a legalistic, mechanistic auction between power plants and distribution companies, funded with consumers’ utility bills.
In this market, ERCOT is less an administrator than an auctioneer. Governor Abbott vowed this week that Texas would “investigate what lapse of judgment ERCOT had with regards to preparing for this situation”—but as he likely knows, ERCOT judges in the same way that eBay judges who will take home this Walker, Texas Ranger varsity jacket. When Texas needs more power, the price of electricity on ERCOT’s market increases. For days this week, it approached $9,000 per megawatt-hour. (A megawatt-hour is enough to power several hundred homes. In Washington, D.C., where I’m writing this, electricity currently costs about $34 a megawatt-hour.)
At the core of ERCOT’s structure is a total trust in markets, says Leah Stokes, a political-science professor at UC Santa Barbara. To design a system such as ERCOT, “you have to believe that markets are better at coordinating than centralized planning,” she told me.
Whatever the virtues of that hope, they were not borne out this week. The city of El Paso has its own utility, separate from ERCOT’s market system. That utility maintained power while ERCOT drowned. Why? After a winter storm swept through Texas in 2011, El Paso planned for future cold-weather disruption by winterizing its natural-gas infrastructure. ERCOT did not. Nor did the Public Utility Commission of Texas, which regulates power generation statewide, mandate such preparedness.
In short, the Texas government assumed that high prices alone could guarantee grid reliability and incentivize power plants to prepare for the worst. This didn’t happen. The market failed.
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