Three days after six power plants faltered in mid-May, prompting calls for Texans to raise thermostats and conserve energy, the chair of the Public Utilities Commission and interim executive director of the Texas Electricity Reliability Council — or ERCOT — insisted that Texans would not. . Experiencing a power outage this summer.
It will take some luck.
Texas’ population and economy continue to grow, but the ability to generate from traditional electricity sources does not. This summer, Texas’ natural gas, coal, nuclear and hydroelectric plants will provide less electricity than they did in 2010 despite the Texas economy growing from $1.25 trillion in 2010 to $2 trillion in 2021. ERCOT has built on growth in the nation of Texas Leading a growing wind energy and solar fleet to support our shaky grid. But there are limitations to wind and solar energy. If the wind doesn’t blow or the sun doesn’t shine, these sources won’t help a crisis. Without cooler-than-normal weather, the ERCOT will be short on power this summer.
Meanwhile, new conventional power plants are not being built for a simple reason: it is profitable not to build. It is better for generators to wait for prices to rise and windfall gains than to increase supply and keep prices low. Results? Businesses win, consumers lose.
Entering the week of May 9, every generator and commodity trader knew something the public didn’t – that over 20,000 megawatts of generators were unconnected for maintenance. The approaching heat wave has guaranteed them a chance to make money. Under ERCOT rules, generators will be able to charge higher prices than usual because there will be fewer generators bidding in the market, and therefore less competition. sure enough, On Friday the 13th, six generators, less than 1% of the fleet, stopped, and the wholesale price jumped from $100 per MWh to more than $4,500 per MWh – an increase of 4,400%.
The entire market structure should be scrapped and redesigned to prevent this, but PUC’s May 10 contract with a consulting firm to “redesign” the market doesn’t do the trick. Who will make the investments to build a new generation? Given that it takes 12-18 months to build a new gas-fired power plant without any supply chain issues, it was supposed to start months ago to be ready for September 2023.
In creating an independent power grid for Texas, unencumbered by pesky federal regulations, Governor Abbott and former governors Perry and Bush followed the failed design of the California market closely. What has California done to reverse its course? CAISO, ERCOT’s California counterpart, is contracting new natural gas generators to help when weather fails to provide enough wind and solar power.
California’s second strategy – drawing electricity from other states – failed because the expanding heat waves that led to blackouts across California also hit California’s neighbors. Connecting to neighboring countries would take years of ERCOT, and there is no solution for one weak network connected to another weak network.
Meanwhile, we’re stuck with a malfunctioning grid in Texas — and a huge savings bill for the energy industry that has let us down. The state will oversee the borrowing of billions of bonds to support utilities and power generators, leaving consumers in limbo.
By any other definition, this is socialism. Texas will spend years paying it off while our elected officials continue to collect millions in campaign contributions from commodity traders and generators. Transparency is the hallmark of competitive markets, yet ERCOT hides behind legal smokescreens that claim to be immune from lawsuits and cannot disclose “competitive” information from market participants.
On Friday, May 13th, we were asked to set our thermostat to 78 degrees as the temperature outside rose. Just when we needed it most, state electricians demanded that we pay more and use less.
Ed Herz is the University of Houston Energy Senior Fellow. He studies energy economics in the Department of Economics.