ERCOT becomes a 4-letter word in the media

As a lifelong energy wonk, I have been amused by listening to politicians and the media try to explain to the public how the electric grid works. Putting aside the human tragedy that has resulted from the blackouts and loss of heat and water, there has been nothing close to a consensus on the cause of the problems, at least in the public domain. If I look at energy industry sources, there is much more clarity, but that message seems to have a hard time penetrating the mass media market.

The simple answer is that the Texas grid is not winterized. This includes all forms of generation (nuclear, coal, natural gas, wind, solar) as well as the fuel delivery system (oil and gas pipelines). Pretty much every aspect of the energy generation chain failed in the extreme cold temperatures. However, in this case, there wasn’t really anything that the distribution utilities could do since it wasn’t primarily an issue with their system, just the generation getting to their wires.

No one involved in the Texas grid can claim ignorance or be surprised by this outcome. These are conscious decisions by industry players and regulators whether or not to winterize the system. It comes down to basic cost-benefit risk analysis on a system level, and of course profit calculations for the generators and distribution owners. All parties were willing to take the risk that this situation wouldn’t occur in order to save the costs associated with winterization.

It’s funny to an energy nerd like me to hear everyone blaming The Energy Reliability Council of Texas (ERCOT), as if it owns and runs everything on the grid. The reality is that ERCOT doesn’t actually own or operate any Generation or Transmission and Distribution assets. It coordinates the financial transactions between parties and sets the reliability market rules for participants to comply with. So of course ERCOT deserves some of the blame for not sending the necessary market signals for participants to be prepared for this type of situation, but ultimately it falls on the generation and fuel distribution owners to address the concerns.

We can’t act like this is the first time something like this has happened. There was a very similar situation in Texas in 2011. PJM endured the Polar Vortex in 2014. California suffered wildfires last year that led to hundreds of thousands of power outages. It seems like each individual region takes some small lessons learned from their specific situation and tweaks its markets. But there is no systematic review of best practices and lessons learned across regions, or even learning from other places in the world. It appears that Richard Glick, the new Federal Energy Regulatory Commission chair, wants to change that and take a holistic look at the national energy infrastructure framework.

So what are the potential solutions? There certainly is not one silver bullet, rather a spectrum of options with different economic and political ramifications:

·      The government forces the generators and distributors to winterize their assets

·      ERCOT creates new market rules to incentivize winterization (as PJM and ISO-NE have done to address winter issues)

·      Texas interconnects with the rest of the US grid to provide backup resources should something similar happen in the future

·      Transform the grid resource mix to make it more resilient, such as adding more distributed energy resources (DER) to disperse the risk of systematic failure.

I am still skeptical that this episode will hold the attention of the politicians long enough for substantial change, rather than band-aids. Either way, our climate will continue to change and the grid will need to adjust. Hopefully we as a society can find a way to minimize the human and environmental impacts in the process.