A Tale of Two Grids: Texas and California

After Texas plunged into darkness and cold for much of an entire week, its grid operator told an apoplectic state legislature that “unlike California” and other regions in earlier years, Texas had avoided a full-on grid collapse by selectively interrupting service for large parts of the state. After a week of hardship, privation and at least 80 deaths, millions of Texans took no comfort from this assertion. And although both California and Texas recently faced traumatic weather events, the consequences for electric system reliability were dramatically different. Still, both underscore the need for electricity system reforms in an era of increasingly frequent extreme climate events.

In Texas, an epic February 11-17 cold spell drove daily statewide average temperatures as low as 11 degrees F, with widespread snowstorms making things even worse (4-5 inches in Dallas and 6-8 inches in Austin). For California and the West, three weeks of similarly epic region-wide heat last August and September pushed temperatures to 120 degrees in Los Angeles (with statewide wildfire miseries added on in even more than usual measure).

For California, the resulting interruptions in electricity service maxed out at 500 megawatts (less than 1 percent of systemwide demand) over two hours on August 14 and twenty minutes on August 15.

Texas outages reached 20,000 megawatts (40 times the California maximum, affecting more than 4 million households) and extended over most of three days. Half of Texas’s population also was coping with electricity-linked water service interruptions for days after that.

During its weeks of extreme heat, California avoided service interruptions by drawing extensively on its connections with other western states; transmission lines to the Pacific Northwest alone can carry ten times as much power (7,900 MW) as all of Texas’s very limited interconnections with its neighboring states (800 MW). Walt Pollock, a former Northwest utility leader, tells me that California’s total capacity to import and export power is about 20,000 MW (equivalent to the worst of the recent Texas blackouts).

Much has been written about the failure of Texas power plants and natural gas transfer systems under weather extremes that now are becoming all too characteristic of human-influenced climate change. But three other lessons bear particular emphasis here:

First lesson: Large, well-managed regional grids are essential for maintaining clean, reliable and affordable electricity service. Unlike every other state in the continental United States, Texas has isolated most of its electricity grid. The national system consists of two giant regional grids (serving the Western and Eastern United States), both of which have many decades of experience reducing costs and risks for all whom they serve.  Both have ample room for improvement (the West in particular is afflicted by unnecessary fragmentation in its operations), yet no state but Texas has seriously proposed going it alone. As the clean energy transition puts increasing emphasis on knitting together geographically diverse swarms of small-scale wind, solar and demand-side resources with variable operating characteristics, the potential reliability and economic benefits of regional grids will continue to grow.

Why does Texas, uniquely, insist on going it alone? Former Governor Perry says that it is “to keep the federal government out of [our] business,” and many Texas officials seem to believe this, but it sure isn’t working; the Federal Energy Regulatory Commission (FERC) already has legal authority (strengthened in 2005) to set reliability rules for the Texas electricity system, for example, and has signaled its intention to act aggressively in response to the statewide blackouts. Moreover, Texas hasn’t chosen to opt out of interstate highways, or pipelines, or air traffic, or any other consequential form of commerce in goods and services. Texas is fully subject to the jurisdiction of the federal courts and the full panoply of federal regulators in addition to FERC. And FERC itself, a bipartisan agency with strikingly non-ideological statutory mandates, was in fairly recent memory headed by distinguished Texans (President George W. Bush appointed his Austin-based PUC leader, Pat Wood, to chair the commission, and Wood chose as his chief of staff Alison Silverstein, a longtime resident of the ever-euphonious Pflugerville). One of Department of Energy Secretary Granholm’s first responses to the Texas blackouts was to urge an end to the arbitrary, dangerous and costly policy of Lone[ly] Star grid parochialism. Texas and its neighbors all would have much to gain. 

Second lesson: The fastest, cheapest and cleanest ways to relieve power grids’ weather-related stresses are on the demand side. For the Western grid, decades of region-wide investment in energy efficiency upgrades for buildings and equipment helped keep the summer 2020 heat wave from overwhelming the system. The Pacific Northwest alone had cut its power needs by the equivalent of five Seattle-sized cities through smarter electricity use, and the region proved long ago that savings from well insulated buildings steadily increase under extremely cold conditions. Such buildings also can “ride through” extended power interruptions much better than the ones most Texans inhabit without reaching dangerous interior levels of cold or heat. Their state has some 6 million electrically heated homes, most of them poorly insulated and heated by highly inefficient resistance units based on century-old technology.

My colleague Mohit Chhabra has calculated that Texas could cut wintertime demand by 2,000 – 3,000 MW for every million residential household upgrades (to high-efficiency standards for insulation, windows and electric heaters). Savings would be even greater under extreme conditions like those of February 2021, because the heaters wouldn’t have to work nearly as hard to maintain occupants’ comfort, and savings would surge again during the hottest summer days, reducing air conditioning needs. This only begins to illustrate economy-wide energy efficiency opportunities that Texas has been overlooking for decades (thanks in part to arbitrary legal restrictions on investment in energy efficiency by regulated utilities, who have long been prohibited from seeking savings that exceed 20% of predicted annual increases in their customers’ electricity use). ACEEE’s authoritative annual state energy efficiency rankings most recently awarded Texas exactly 1 out of 23 possible performance points on “utility programs” and “efficiency standards.” Texas can also do much more to create flexible “demand response” in homes and businesses – the capacity to shift consumption swiftly when grid stresses loom, in ways that minimize losses in comfort or convenience (for example, by cycling thermostats for electric space and water heaters up and down).

Third lesson: Texas’s unique residential electricity marketplace is a cautionary tale. Texas is the nation’s leading practitioner of “retail electricity competition,” in which every household and business is required to choose among multiple suppliers in a giant marketplace. The marketplace itself is not the problem; NRDC has long supported “wholesale” competition among power generators, which advances both economic and environmental welfare by pushing obsolete and inefficient units off the grid.

At the time retail competition was first introduced, more than twenty years ago, a Texas enthusiast told me during a public debate that “for the first time my mother will be able to hedge her fuel price risks in the marketplace,” and I wondered aloud why on earth she would want to add that responsibility to what presumably was already a full life. When Texas prices soared 40-fold or more during the week of February 14, everyone learned a lesson about just how challenging it can be to hedge your fuel price risks in the marketplace (as illustrated by a retiree’s now notorious $16,000 monthly electricity bill, which horrified a nation of households that pay about $100/month for this service, on average). My colleague Amanda Levin, who has analyzed the Texas market extensively, writes that Texas marketers all too often hook customers with “deceptively low ‘promotional’ rates that increase with no warning after 3-4 months,” subjecting them unknowingly to substantial market risks in the process; Houston Public Media recently exposed how many Texans are falling for this (25-30 percent). Amanda’s research has also uncovered repeated illustrations of how Texas retailers employ promotional pricing systems that encourage wasteful electricity use, sometimes to the point of literally paying bonuses to customers who increase consumption significantly. This is not to argue that people shouldn’t get time-varying price signals reflecting the actual cost of providing electricity service, but more protection from destructive abuses is an urgent priority for Texas. Of course, the best long-term price hedging strategy for electricity users everywhere is a diverse portfolio of inexpensive clean electricity resources led by energy efficiency.