Why Did the Lights Go Out in Texas?
Ethan Gray / March 23 / Natural Disaster
Photo: Ap News
In mid-February, The US state of Texas experienced one of its worst winter blasts on record. A result of what scientists call the "Polar Vortex." Cold air pushed out of the arctic made its way south, blanketing the central United States in temperatures far below average. The Lone Star State experienced its longest stretch of days below 45 degrees Fahrenheit since 1940 and 44 consecutive hours of freezing temperatures. Poor planning for extreme events left most of its grid susceptible to extreme cold, which led to rolling blackouts across the state. Texas also opts to operate an independent electrical grid, leaving it unable to draw power from its neighbors. In this case, its pseudonym, the "Lone Star State," is quite fitting. The story of the United States' largest energy producer failing to provide power for its residents is multifaceted, and a case study on how poorly designed policy can directly harm citizens.
At the turn of the century, Texas deregulated its electrical grid and privatized the market. Deregulation comes with benefits in most industries, typically around cost, as competitive markets fight to lower prices in the interest of acquiring more consumers. This holds true in Texas, where energy bills have been far lower than the national average. However, is deregulating an industry that consumers rely on as a fundamental utility in their lives a prudent decision? For all their economic success, unregulated markets have a track record of failing because negative externalities are left in account.
In Texas, the unaccounted-for externality was winter weather. In their bid to keep costs low, Texas utility companies were allowed to cut corners. In most states, prices are higher from regulations that account for unlikely events which can cause a catastrophe. Texas did not have electricity reserves maintained at adequate levels. It did not invest in weather tolerant systems, and the Electrical Reliability Council of Texas (ERCOT) has leaders from utility companies sitting on its board of directors. While February's storm was the most widespread and destructive in recent memory, it is not the first. In 2011 a similar storm led to rolling blackouts, albeit less severe and sustained. Even still, experts recommended incurring a higher marginal cost to weatherize the system now and avoid another expensive event in the future. It should be no surprise that a market-oriented sector ignored these warnings because the state did not compel them to implement the changes by law. The taxpayer will inevitably bailout subsequent disasters. It is in the companies' interest to maintain profits if allowed to do so, which led the state back to square one in 2021, with taxpayers inevitably facing a steep cost for policy failures supported by the politicians they elect. The moral hazard Texas politicians encourage by forcing taxpayers to bail out a marketized energy sector with little regulation is not only irresponsible and costly but also deadly.
Shortages of gas, electric and fuel were commonplace.
The Washington Post is reporting more than 30 deaths in Texas as a result of the storm. Official numbers will not be available for at least another month, but they are likely to climb. Hypothermia and carbon monoxide poisoning are leading causes. As people tried to stay warm, some resorted to running their cars in a garage or lighting grills inside. This proved harmful for many and fatal for some. CBS News is reporting that damages could top a staggering $200 billion, potentially making it the most expensive weather event in US history. Property damage from burst water lines and broken power systems are the most apparent expenses caused by power failure. The storm is shaping up to generate the most extensive insurance claim event in history. For those that had proper coverage, it will take months or years to recover. Those that did not face financial ruin barring the intervention of state aid. Many customers are also being hit with extreme electrical bills. Some individuals are being charged upwards of $10,000. Customers can opt into a variable, rather than a fixed rate, with some electricity providers. In normal circumstances, variable rates can help balance demand and supply. In extreme circumstances, where demand far outstrips supply due to market failure, rates spike. Even moderate electricity usage becomes unbelievably expensive, and many customers do not understand what is happening. The Governor has promised the state will assume the cost of astronomical electrical bills, but that bill falls to the taxpayer once again.
Renewable energy has been the scapegoat for Republican commentators and politicians rather than their failed policy. Around 25% of Texas' power comes from renewable sources, primarily wind. Some wind turbines froze, and solar cells were blacked out. However, renewable critics cannot omit that natural gas and nuclear capacity also went offline. They combine to produce 57% of power in the state and were the majority of the lost capacity. In reality, none of these sources should have been an issue. The midwest endures freezing temperatures for months while operating thousands of wind turbines, nuclear and gas plants with no issue. The reliability of energy sources is not a factor if the infrastructure which generates it is appropriately equipped. In Texas, it was quite clear that no energy source was adequately prepared.
Past events led to similar calls for change, and they were largely ignored. Despite that scale of loss in 2021, a similar path of inaction will likely be taken. The party that passed up chances to effectively regulate Texas' grid remains firmly in power. If there is no strong opposition to the Republican majorities that allowed a deregulated energy sector to persist, what incentive do they have to change? Texas has been receiving a massive influx of businesses from around the country. Once the story is out of the headlines, that influx will continue due to the favorable business environment. Comprehensive reform to Texas' energy infrastructure can coincide with a friendly business environment. Unfortunately, as with any increase in regulation, prudent changes will be politicized as an overreach by the government. Public discourse in American politics has lost the ability to disentangle intelligent policy from party politics. This will inevitably leave taxpayers footing the bill to reconstruct after a disaster caused by political malfeasance. Unless Texas’ citizens hold their elected officials accountable at the ballot box, the same story will be told again within this decade.