Texas and its standalone utility grid ERCOT continue to make headlines as they struggle to adapt their profit-seeking utility business to the extreme weather that climate change has, and will continue to, exacerbate.
ERCOT, which ironically stands for Electric Reliability Council of Texas, manages the electricity flow from utility providers for 90% of the state. As a state, Texas has its own utility grid that is not connected to the rest of the United States grid.
While extreme cold might have been a reasonable “excuse” for the winter shut-off back in February, Texas should be prepared for heat. Although climate change is making weather more extreme and unpredictable, there is no excuse for a state that reliably has summers with high temperatures to be unable to supply power to its citizens in the summer.
This standalone grid and utility company that is built for profit, not reliability, makes it more difficult for the Texas grid to handle unexpected demand surges or weather-related damages. Most recently, as the state began experiencing some of the first scorching days of summer, many of Texas’ power plants were closed for repairs. As a response, ERCOT asked Texans to turn up their thermostats to reduce demand and quell the stress on the grid.
Although reducing demand to help keep the grid running is not unique to the Lone Star State, the Texas electricity grid certainly is one of a kind.
What makes Texas’ utility grid so different?
The Texas grid runs the same way as capitalism; in a free market. This means that energy rates fluctuate, based on supply and demand, instead of being at a set rate.
While this can make power extremely cheap, it can also lead to prices as high as $9,000 per megawatt hour when there is little energy to be had, which is something known as scarcity pricing.
Running under the classic economic rule of supply and demand, scarcity pricing up to $9,000 per megawatt hour is supposed to encourage power companies to supply more energy, since they will get paid more for it. But if your power plants are shut down for repairs or are frozen, no price can get them up and running.
The reason for the market forces at play in Texas is because as a state, in terms of electricity generation, they did not want any Federal oversight.
And though no oversight might mean a lower cost when all is going well, it also means that there is no safeguard when, inevitably, things go wrong.
The problem with Texas' grid
Texas’ energy supply is run by an energy-only market, which means that power producers only get paid for the energy they put into the grid. Most other utilities operate with a capacity market, meaning they get paid for electricity they generate for future use.
An energy-only market creates an incentive to not have backup power, since utilities won’t get paid for any excess they produce. No excess power means no safety net during times of unpredictable energy demand.
For example, wind power produces more power than is used on a given day, which leads to less opportunity to increase the cost of its power. But increasing the price of power during moments of scarcity is how Texas utilities remain profitable - so excess wind power means bad business for them.
With more renewable energy generation available within the grid, there is less of an incentive for new thermal power plants (which are powered by coal or gas) to be built, or for existing ones to be updated. Building and updating plants costs money - and there is no guarantee that the utilities will make additional money with less scarcity pricing in place. So while the Texas grid ages, more extreme weather is testing its limits.
And while government oversight avoidance is in full force in Texas, energy manipulation seems to be fair game, as well. In fact, recently, Texas customers signed up for a money-saving sweepstakes through their smart thermostat companies and unknowingly gave utilities permission to manipulate their smart thermostats during unexpected power surges in order to reduce demand.
In an effort to ease the burden on the grid, utilities wound up turning up the air conditioning in unwilling customers' homes without them knowing. While technically, these homeowners consented, the details were in the fine print, leaving most completely unaware. While it’s practical to conserve energy to ensure that other people have access to power, utilities interfering with customers' temperature settings is extremely unethical.
Why can’t the Texas grid handle the heat?
In June, the first real month of predictable Texas summer heat, 11,000 megawatts of power sources - or 15% of the power grid’s total capacity - were inexplicably all shut down at once for repairs.
11,000 megawatts is enough to power 2 million homes - and Texas’ grid is built like a “just-in-time” supply chain, only providing enough power for the exact amount predicted, not to cover unexpected reduction in supply. This was a huge problem.
There was no excess power for the grid to pull from, and therefore, Texans were asked to ease the burden on a grid that was not built to keep them safeguarded during extremes. And it wasn’t the first time - this also happened during the winter, and the $9,000 per megawatt hour rate was initiated, leading to Texans receiving electricity bills that were thousands of dollars.
Understandably, homeowners were unable to pay the outrageous bills, so energy companies and utilities were left stuck with the costs. To pay them back, Texans will pay an extra couple of dollars each month for potentially 30 years.
During the Texas Freeze of 2021, the narrative that renewable energy was to blame because the cold rendered them useless, while false, was an easy target to point to, instead of recognizing and fixing the issues within the utility grid. Although the problems surrounding the reliability of the grid during extreme weather were known for at least a decade, upgrading it was put on the backburner.
80% of the power shortages in early June can be blamed on closed thermal power plants, which are typically powered by coal and gas. It is fair to say that low wind reduced the supply of wind energy, but it was this, coupled with the thermal power plant repairs that made for a suddenly unreliable grid.
While June maintenance on power plants is apparently not atypical, ERCOT would not provide detail on why all of these plants needed service at once.
Texans are choosing solar at record rates
One way for customers to mitigate the risk of unreliable power and demand price spikes is to invest in solar panels and solar storage batteries, something Texas residents and utilities are doing, to the tune of 1.5 gigawatts in Quarter 1 of 2021.
As a matter of fact, since early June, SolarReviews has seen an increase in solar pricing requests from Texas residents that is consistent with the increased interest in energy resilience.
The reason why so many are turning to solar-plus-solar storage is because they are looking to have energy independence in the event that the grid goes down.
Your backup battery will be able to power your home and get charged by the sun for, hypothetically, an endless amount of time; how’s that for no Federal oversight?
The future of energy in Texas
Homeowners installing solar in Texas is bad for ERCOT’s business model because the more people who do so, the less likely it is that the utilities will be able to charge them at scarcity pricing rates.
But as a sunny state with increasingly unreliable power, and a place that prides itself on a rely-on-yourself attitude, solar and storage might be the most natural next step.
Why rely on any utility at all if it will charge you for its own mistakes? For now, there have not been any upgrades to the grid to fortify it for extreme winter temperatures, and it is yet to be seen if summer temperatures will continue to stretch the grid's limit.
So if you want to take energy production - and stability - into your own hands, consider installing a solar system paired with battery storage.
Heide Pfeiffenberge
Marketing & Communications Manager
Ana is the Marketing & Communications Manager at SolarReviews, working within the solar industry since 2020. With a Master's in Climate and Society and professional experience within marketing, she helps communicate the value of solar to homeowners and build out awareness of the SolarReviews brand.