That is not going to produce a reliable system.” “Over the last 10 years, the revenues collected by the generators were less than the cost of providing the electricity. If the guys on the bench aren’t paid unless they play, they’ll eventually be bidding to play for less and less just to be able to feed themselves. The generators only make money when they’re delivering electrons into the grid.Īn electricity-only market is the same as the New York Yankees only paying the players who take the field. There is no capacity market paying generators to ensure there will be enough power to meet peak demand. Fundamentally, the difference between the Texas market and other energy markets across the U.S. Q: You’ve described the grid as antiquated and the generation capacity as needing upgrading, but you point to the Texas power market itself as the true cause of the crisis? But this cascade of failures was going to happen at some point it just needed a stressor to kick the legs out from under it. The energy grid is a system, and very few people think in terms of second-order and third-order conditions. Without the natural gas delivery infrastructure, some generators no longer had fuel.

In that category we include natural gas compression units around the state. The first users to lose power are industrial users. This was exacerbated by the rolling blackouts that the Electric Reliability Council of Texas, better known as ERCOT, started imposing to avoid losing the entire grid. Things that are routine in Wyoming, Colorado, Kansas, and Buffalo, New York, weren’t done, which meant in Texas the same equipment couldn’t be brought online when it was needed. That means 30 gigawatts of load sits on the bench not earning any money, so many plants just shut down.Īfter a similar storm in 2011, generators were encouraged to winterize, but they don’t receive payment to offset the costs, so many didn’t do it. Through the rest of the year, only about 45 gigawatts of load is required, on average. In Texas everybody knows that every power plant will be needed for the August peak, which is somewhere around 75 gigawatts. Power generators tried to fire up their plants, but many couldn’t get them going. On the night of February 14, when the cold dipped into the very southernmost parts of Texas and people switched on their heat, the grid began to deteriorate. Q: In February, millions of homes in Texas were left without power for several days.

Texas power utility