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Drive for energy independence set Texas on path to disaster

Texas Energy Disaster 1
Texas Energy Disaster 2

With no power in their apartment, the Traugott family of Austin, Texas, play a game of Uno next to a wood fire.

Texas deregulated its entire electricity network in 1999.

Houston | Across the plains of West Texas, the pump jacks that resemble giant bobbing hammers define not just the landscape but the state itself: Texas has been built on the oil and gas business, since the discovery of oil on Spindletop Hill near Beaumont in 1901.

Texas, the United States’ leading energy-producing state, seemed like the last place on earth that could run out of energy. Then last week it did.

The crisis could be traced to that other defining Texas trait: independence, from big government and from the rest of the country. The dominance of the energy industry and the ‘‘Republic of Texas’’ ethos became a devastating liability when energy stopped flowing to millions of Texans who shivered and struggled through a snowstorm that paralysed much of the state.

Part of the responsibility for the nearcollapse of the state’s electrical grid can be traced to the decision in 1999 to embark on the most extensive experiment in electrical deregulation in the US, handing control of the state’s entire electricity delivery system to a market-based patchwork of private generators, transmission companies and energy retailers.

The energy industry wanted it, the people wanted it, both parties supported it. ‘‘Competition in the electric industry will benefit Texans by reducing monthly rates and offering consumers more choices about the power they use,’’ said then-governor George W. Bush as he signed the deregulation legislation.

Mr Bush’s prediction of lower-cost power generally came true, and the dream of a free market electrical grid worked reasonably well most of the time, in large part because Texas had so much cheap natural gas and abundant wind to power renewable energy.

But the newly deregulated system came with few safeguards and even fewer enforced rules. With so many costconscious utilities competing for budgetshopping consumers, there was little financial incentive to invest in weather protection and maintenance.

Wind turbines are not equipped with the de-icing equipment routinely installed in the colder climes of the Dakotas, and power lines have little insulation. The possibility of more frequent cold-weather events was never built into infrastructure plans in a state where climate change remains an exotic, disputed concept.

‘‘Deregulation was something akin to abolishing the speed limit on an interstate highway,’’ said Ed Hirs, an energy fellow at the University of Houston. ‘‘That opens up shortcuts that cause disasters.’’

The state’s entire energy infrastructure was walloped with glacial temperatures that even under the strongest of regulations might have frozen gas wells and downed power lines.

But what went wrong was far broader: deregulation meant that critical rules of the road for power were set not by law, but by a dizzying array of energy competitors.

Consumers got a direct shock last week when those who had chosen variable rate electricity contracts found themselves with power bills of $US5000 ($6350) or more. While they were expecting extra-low monthly rates, many may face huge bills as a result of the increase in wholesale electricity prices during the cold wave.

Governor Greg Abbott said on Sunday (Monday AEDT) the state’s Public Utility Commission had issued a moratorium on customer disconnections for nonpayment and would temporarily restrict providers from issuing invoices.

There is regulation in the Texas system, but it is hardly robust. One nonprofit agency, the Electric Reliability Council of Texas, was formed to manage the wholesale market. It is supervised by the Public Utility Commission, which also oversees the transmission companies that offer customers an exhaustive array of contract choices laced with more fine print than a credit card agreement.

But both agencies are nearly unaccountable and toothless compared to regulators in other regions, where many utilities have stronger consumer protections and submit an annual planning report to ensure adequate electricity supply.

One example of how Texas has gone it alone is its refusal to enforce a ‘‘reserve margin’’ of extra power available above expected demand – unlike all other power systems around North America. With no mandate, there is little incentive to invest in precautions for rare events.

A surplus supply of natural gas – the dominant power fuel in Texas – near power plants might have helped avoid the cascade of failures in which power went off, forcing natural gas production and transmission offline, which in turn led to further power shortages.

In the aftermath of the days-long outages, ERCOT has been criticised by politicians, lawmakers and business executives, a rare display of unity in a fiercely partisan and Republicandominated state.

Mr Abbott said he supported calls for the agency’s leadership to resign and made ERCOT reform a priority. The reckoning has been swift: this week, lawmakers will hold hearings to investigate the agency’s handling of the storm and the rolling outages.

For ERCOT operators, the storm’s arrival was swift and fierce, but they had anticipated it and knew it would strain their system. They asked power customers across the state to conserve, warning that outages were likely.

But late February 14 it rapidly became clear that the storm was far worse than they had expected. As the weather worsened the following day, residents cranked up their heaters and demand surged.

In the electricity business, supply and demand need to be in balance. Imbalances lead to catastrophic blackouts.

The outages and the cold weather touched off an avalanche of failures, but there had been warnings long before last week’s storm.

After a heavy snowstorm in February 2011 caused statewide rolling blackouts and left millions of Texans in the dark, federal authorities warned the state that its power infrastructure had inadequate ‘‘winterisation’’ protection. But 10 years later, pipelines remained inadequately insulated and heaters that might have kept instruments from freezing were never installed.

Another potential safeguard might have been far stronger connections to the two interstate power-sharing networks, East and West, that allow states to link their electrical grids and obtain power from thousands of miles away when needed to hold down costs and offset their own shortfalls.

But Texas, reluctant to submit to the federal regulation that is part of the regional power grids, made decisions as far back as the early 20th century to become the only state in the continental US to operate its own grid – a plan that leaves it able to borrow only from a few close neighbours.

 

By: Clifford Krauss, Manny Fernandez, Ivan Penn and Rick Rojas

Photo: NYT

Source: New York Times 23 Feb 2021 - Australian Financial Review

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