OPINION

OPINION | ED HIRS: Why Texas is freezing

I began work on this piece with my manual Royal typewriter, by candlelight, because of the collapse of the Texas electricity grid. Like millions of Texans, I am without power, without water, cold and in the dark. The polar vortex is hammering the entire country. Why is Texas the only state with such a severe grid failure?

Texas’s predicament stems from a decision that state lawmakers made about 20 years ago to abandon the traditional model of fully regulated electricity utilities.

The operation of the electrical grid was consigned to the Electric Reliability Council of Texas. It is a nonprofit consortium that operates the grid for about 85 percent of Texas. ERCOT has no ability to invest in generation or infrastructure. It acts only as the air traffic controller for electrons on the network. Because it is contained within Texas, ERCOT is not subject to federal oversight.

ERCOT created a system whereby generators—companies that own power plants—compete by bidding to provide electricity for the “day ahead” and in real time during the day. It is called an “electricity only” market.

Think of it this way: If the players on the Washington Nationals were paid in the same fashion, only those players on the field for the game that day would earn a paycheck. Everyone else on the roster would be unpaid. Players would offer bids to play for the next day, each undercutting the other.

Like the Nats in my example, the generators, to sell any of their power, often bid their power so low they don’t make a profit. Some generators, strapped for cash, began to defer maintenance. Others played an even smarter game by closing power plants or not building new capacity to serve the growing population of Texas.

As demand inexorably increased, they could look forward to charging more for their electricity because there was less of it. It was destined to come crashing down, and the polar vortex of 2021 was the assault that finally broke the Texas grid.

Resolving Texas’s energy debacle requires major structural changes.

Ultimately, electricity’s value is not in the cost at meter, but rather what it allows us to do: care for the sick, conduct commerce, live in comfortable homes and communicate with our loved ones across the globe.

It’s not a mystery as to what’s going on, yet Texas’ leadership, including the governor, is promising investigations. But without fundamental changes to the state’s power grid, another failure is certain, and with it further loss of life.

What’s scarier is that other states are looking at Texas for inspiration on how to deregulate their own electric markets. I’m guessing those politicians across the nation pushing deregulation are now watching us shiver and having second thoughts.

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Ed Hirs is an energy economics lecturer at the University of Houston.

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