This is another essay in Civic Way’s series on the recent energy debacle in Texas. Our last newsletter introduced the issue and this essay describes the power outages and subsequent political fallout. Future essays will address deregulation and possible strategies for avoiding future crises.

Highlights:

• By many measures, Texas has been a success story, but it faces a challenging future
• Winter Storm Uri revealed at least some of Texas’—and the nation’s—vulnerabilities
• The storm’s aftermath has, once again, put us on display as a “silly people,” fighting among ourselves instead of working together and solving our shared problems
• We must apply the lessons learned from Texas’ recent energy debacle (and from elsewhere) to the hard, but necessary work of designing a new energy management model for the entire nation

The Promise and Peril of Texas

Texas has been touted as a success story and, in many ways, it is.  Low tax rates and living costs, lean regulations, impressive diversity and culture, highly-regarded research universities. A relatively quick rebound from the Great Recession. The US Census estimates that over 500,000 people move to Texas every year. In the last ten years, the state’s population has increased by 15 percent. And many businesses, like Oracle and Hewlett-Packard Enterprise, have relocated there.

But, like most states, Texas faces some formidable challenges. The state budget and public investments have not kept pace with the state’s population growth. The economy remains heavily reliant on a besieged fossil fuel industry. With four of the nation’s 15 fastest-growing large cities, Texas is becoming increasingly urban. The political divide between the state’s local and state leaders is widening. Climate change will likely increase the incidence of severe hurricanes, scorching heat and winter freezes.

How Texas manages these challenges (and others) will depend in large part on its politics. For many years, its political leaders have bet on free markets, often promoting private enterprise over public regulations and short-term growth over long-term investments. Until this February’s winter storm, this bet seemed to pay off. But, if past is prelude, the future may test the state’s political calculus. Its ability to find the intersection between good politics and good government could depend on the lessons it learns from the recent energy crisis.

Uri’s Wrath

In mid-February 2021, Winter Storm Uri slammed most of Texas (and large swaths of the US) with subfreezing temperatures. Uri overwhelmed the state’s power infrastructure. Actual electricity demands eclipsed estimated worst-case demands and available power supplies. Massive outages left nearly 4.5 million homes and businesses without power, virtually without notice.

Virtually every power source—natural gas, coal, wind and nuclear—failed. Over 350 power generating units, representing 40 to 50 percent of the state’s power generation capacity, tripped offline. Gas- and coal-fired power plants went down. Equipment panels, pumps, compressors and plant instruments froze. Generators tripped. Wind turbine blades iced over. One nuclear reactor was immobilized for over 48 hours. Icy road conditions slowed repairs.

Ironically, at the storm’s peak, over half of the state’s natural gas supply shut down due to power outages, frozen equipment and weather conditions. It has been estimated that at least 20 percent of total power outages during storm were caused by inaccessible natural gas (i.e., power plants could not get enough gas).

The state’s efforts to mitigate the storm’s brunt, while herculean, fell short. It couldn’t cut demand enough by interrupting power to large industrial customers. It couldn’t increase supply enough by importing power from other grids (due to its isolated grid and the storm’s multi-state impact). So, it turned to rotating outages (rolling blackouts) to reduce system demand and dodge catastrophic failure. These rolling blackouts, which usually are measured in minutes, lasted three to four days.

Through March 5th, there were 57 deaths, mostly from hypothermia, accidents, water contamination, carbon monoxide poisoning and medical equipment failure. 590 public water systems in 141 counties reported service disruptions. The potable water supply for nearly 12 million people and every major city (except El Paso) was affected (many issuing boil water alerts). Bursting pipes, falling ceilings, inhabitable homes, overrun homeless shelters. Adding insult to injury, many Texans received outrageous electric bills.

Uri became the costliest natural disaster in the state’s history. And it could have been far worse. The rolling blackouts, while costly and, in some cases, deadly, averted a total grid collapse. A total shutdown, with uncontrolled blackouts, could have left millions of Texans without power for months. And it could have damaged or destroyed equipment, substations, power lines and other infrastructure, necessitating repairs that would have taken months, if not years, to complete.

Our Exceptionally Silly Politics

Shortly before Uri hit Texas, Lieutenant Governor Patrick was busy promoting the Star-Spangled Banner Protection Act, a law mandating the national anthem at all publicly-funded events. After the storm, the political nonsense, especially the typical partisan punching and counter-punching, intensified. Governor Abbott joined the right-wing chorus blaming the blackouts on frozen wind turbines. Ex-Governor Perry added, “Texans would be without electricity for longer than three days to keep the federal government out of their business.”

Democratic politicians quickly leapt into the fray, attacking the state GOP’s governing philosophy and pointing to the state’s energy crisis to strengthen the case for a green new deal. Commentators from all sides of the partisan debate seized the opportunity to boost their ratings, framing the issue as a binary choice between free markets and public regulation. Left-leaning observers lamented the costs of unbridled capitalism while right-wing pundits decried the dangers of excessive regulation and creeping socialism.

Within days, state leaders called for further investigations. The Attorney General launched an investigation into storm-related practices. State legislators filed several bills. Private firms, including retail power providers, absorbed $2.5 billion in underpayments. Texas’ largest power cooperative filed for bankruptcy protection. The state’s Public Utilities Commission issued several post-mortem orders. Several regulators resigned. In line with America’s leadership playbook, no official accepted responsibility.

In the storm’s wake, public officials blamed one another or tried to change the subject. The Texas Railroad Commission, which oversees the natural gas industry, blamed power generators and other regulators. Democratic legislators blamed GOP officials. Governor Abbott, after walking back his comments about wind turbines, and in the face of public health warnings, ended mask orders. Further evidence that we have become, as Lawrence (played by Peter O’Toole in Lawrence of Arabia) referred to warring Arab tribes, a “silly, little people,” too busy fighting among ourselves to solve real problems.

Some Criteria for a Modern Energy Management System

Instead of playing politics with the issue, our leaders should set aside ideological impulses, work together for the common good and build a new system for managing energy. That effort should begin with a sober, objective assessment of recent energy management crises. Instead of focusing on the mistakes of political opponents, our leaders should apply their assessments to pragmatic, long-term solutions.

What are the lessons to be learned? What issues must federal and state policymakers confront to avoid Texas-scale energy management failures in the years ahead? How can those lessons be converted into useful criteria for designing a new energy model for the next generation?

First, the model must be national in scope. Texas may be an outlier, but it is not alone. As a result of Uri, for example, Portland, Oregon experienced power outages, leaving 200,000 customers without power, some for several days. In 2020, six months before Uri, California experienced a heatwave and rolling blackouts that left 800,000 homes and businesses without power. While California’s grid is less isolated than Texas’ grid, its infrastructure (unless upgraded) is highly vulnerable to future blackouts.

Second, deregulation should not be discarded. Texas’ problem was not deregulation, but the way it was implemented. While it is tempting to blame the Texas energy debacle on deregulation, especially given the state’s prominence as a large energy-producer, deregulation did not singularly cause the power outages. Rather, state leaders made policy decisions that increased the system’s vulnerability and undercut deregulation’s potential benefits. Regulatory authority was fragmented. The grid was isolated (to prevent federal oversight). The capacity market was neglected. Critical investments were deferred.

Third, the regulatory structure matters. During the last 30 years, our energy markets have migrated from a fully monopolistic, state-based and vertically-integrated power system to a patchwork of regional and state-based grids with a wide array of market models. Part of the nation remains highly regulated, but many regions and states have adopted variants of deregulated models. We are in a transitional era, still seeking the best model for harnessing market forces, upgrading infrastructure and ensuring reliable, safe and affordable service. Texas is an all too compelling reminder of this transition.

Fourth, energy system resilience remains an ambitious, yet indispensable goal. Our power infrastructure was designed for a stable—not dynamic—climate. As climate change brings increasingly unpredictable weather events, the need for smarter planning, preparation and investments will be more acute. As the risks of power outages and human suffering rise, the need for a more agile regulatory model will be more evident.

Fifth, we must think long-term. We will need a model that incentivizes the requisite public and private investments in our power system infrastructure. One that regularly projects infrastructure needs, estimates long-term infrastructure costs, ensures a dedicated funding source for infrastructure and allocates sufficient funding for financing such infrastructure (e.g., grids, power lines and energy storage).

Finally, energy cannot be delivered and managed on the cheap. Customers ultimately pay electricity costs via higher rates or service interruptions. The challenge is to harness market forces to ensure safe, reliable and affordable service. To set prices that strike a balance between low-cost energy resources and long-term capacity investments. And to find the best way for customers to pay (e.g., taxes, flat fee, usage-based fee or hybrid). Ultimately, policy-makers must design a market-based model that synchronizes competitive pricing and broader societal goals.

For example, our power infrastructure must support our environmental goals. The traditional model was designed around fossil fuel sources. As our reliance on renewable sources grows, the power system must be able to adapt. For instance, during extreme weather events, renewable sources could make it harder to ensure sufficient supply. We must design a model that overcomes the limitations of renewables and facilitates the transition from fossil fuels to renewable sources.

Framing and Solving the Issue

The real issue is much bigger than Texas. It is about the triumph of impulsive, ideological politics over pragmatic governance. Of purity over compromise. Of instant gratification over far-sighted thinking. Of individualism over the common good.

Texas policy-makers bet on a particularly simplistic form of deregulation, one that failed to balance the allure of cheap energy here and now with the cost of investments needed to ensure long-term reliability and resilience. It framed the energy management deregulation as a simple contrast between unfettered market forces and socialistic regulation. The decision was never that simple, and their bet was reckless.

Instead, federal and state officials must recommit themselves to the design of a new energy management model, one with a dynamic blend of market-based competitiveness and gentle regulatory controls. This will require them to abandon any ideological bipolarism and partisan blindness. Instead of assigning all problems to political opponents, they must overcome those problems with bold, yet practical solutions.