By Gavin Dillingham, PhD, Program Director, HARC
Winter Storm Uri has plainly shown that the state of Texas has developed an electric power system that does not prioritize infrastructure resilience. Rather, it is a race to the bottom by generators to provide the lowest-priced power, improve efficiency, and ensure cost reductions. This is why Texas usually has some of the lowest power prices in the United States. Additionally, the low price of energy and minimal regulations add another arrow to Texas’s quiver in its bid to be a business-friendly state. The unfortunate outcome of this race to the bottom is that there is minimal investment in our power infrastructure. The market structure promotes under-investment to ensure a low pricing environment.
I was listening to the emergency Public Utility Commission of Texas (PUCT) hearing last Friday night, February 19th, after just getting power back on at my house. One of the key responsibilities of the PUCT is to regulate and oversee operations of our power infrastructure. ERCOT falls under their purview. At this meeting, they were trying to figure out different responses to Winter Storm Uri. The three commissioners had two areas of discussion. First, they were trying to figure out how to handle the oncoming tidal wave of retail electricity provider (REP) bankruptcies. A good number of the REP’s cannot pay the $9,000 MWh wholesale price for power over several days and remain solvent. The pricing mechanism was designed to promote investment in generation based on hours of summer peak energy use, not four days of peak energy demand. (The impact on consumers is the subject of another future post.)
Commissioners were also looking to open an investigation into what happened, which is obvious. The PUCT and our policymakers have not adopted resilience standards for our electric power utilities. The state of Texas is the only state without these standards and without standards the likelihood of generators taking the necessary action is low.
What works and what doesn’t work
Let’s be clear, the market has worked on many levels. The state has seen significant growth in low-cost energy resources, namely wind, with increasing investment in solar. This evolution can be seen on the ERCOT Interconnection Dashboard developed by HARC, the Houston Advanced Research Center. With Texas’ history of power generation development, there is typically plenty of power available to homes and businesses in the state under blue-sky conditions. The most recent ERCOT reports on generation adequacy indicates a reserve margin of 15.5% and increasing considerably over the next several years.
The issue is at hand is extreme weather conditions. As is indicated by events of this past week, Texas, as well as some of our southern neighbors are not prepared for these Green Swan events. These large events are rare but with high, disruptive costs, e.g. Winter Storm Uri or Hurricane Harvey. Traditional approaches taken by utilities cannot account for the possibility of green swan events (a climate event outside the normal range of expected events). Current methods of energy planning and infrastructure investment looking at historical data and assuming normal distributions are completely irrelevant when dealing with climate risk. Using the analogy of climate scientist, Dr. Katharine Hayhoe, our power infrastructure planners and regulators are driving forward while looking in the rearview mirror. With this approach, eventually, you will run off the road.
No doubt, it is difficult and very expensive to plan for and prepare for these green swan events. As a power generator and regulator do you prepare for freezing temperatures or extreme heat? Floods or droughts? Due to this uncertainty, much of our energy infrastructure sits within an adaptation gap. Business as usual continues in energy planning because that is the trusted and known approach. To lessen this adaptation gap and move from business as usual requires that other tools and methods be readily available that can improve energy planning. These tools must include climate change data and models. Energy planners can no longer ignore the impacts of a changing climate on our power system and must begin to incorporate climate models into their planning efforts.
Justifying large investments in public or private funds is particularly difficult when there is uncertainty as to the type, intensity, and impact of the next event. Utilizing currently available downscaled climate models aids planners in getting a better idea as to the likelihood and intensity of these events allowing for more optimal planning, decision making, and investment.
Resources are available
For the last few years, a significant amount of work has been done looking at climate risk impacts on the energy sector. The Department of Energy and the National Academies of Science have published a multitude of reports on the coming climate risk to our power sector:
The Pacific Northwest National Lab has been developing the IM3, an integrated modeling effort to help researchers better understand climate risk to the power sector.
HARC, the Houston Advanced Research Center, has been developing its climate risk analytics platform, Pythias Analytics, to help energy planners and utilities better assess their climate risk.
Winter Storm Uri has resulted in a humanitarian crisis for the state of Texas. Millions were without power, heat, and water for several days, and each of Texas’ 254 counties was affected in some way. We must focus our efforts on helping our communities to recover and to get people back to their normal lives. As we move forward, steps can be taken to mitigate the risk of future extreme weather events. The data and models tell us such events are coming. Unlike the 2011 winter outage events, our state leaders should pay attention to these signs and take appropriate steps to safeguard our communities and lessen the disastrous impacts of future events. Some recommendations for the PUCT, ERCOT, Texas Railroad Commission, and our state and federal policymakers follow:
Specific to communities, state and local leaders should require Passive Survivability — extreme weatherization of homes — to help people shelter in place in a safe environment when the power goes out, whether due to extreme heat or cold, hurricanes, floods, etc. Increasing the state’s energy efficiency resource standard (EERS) can also go a long way to ensure funding is available to do this. You can learn more at HARC’s Passive Survivability How-to-Guide.