Mark Twain had a famour quip about Texas — “If you don't like the weather in Texas, just wait five minutes.” The effects of multiple winter storms, the first one to hit Texas on February 12, crippled the State beyond belief. Universally known for hot summers and mild winters, Texas suddenly looked more like Alaska. But that would be an unfair comparison. Texas has a population of about 30 million people, but Alaska only has 750,000 people spread out over a wilderness that is twice as large.
On February 15, inclement weather caused temperatures to drop precipitously. It felt like -7F (-21 Celsius) in Dallas that evening. The warmest point in the State was still several degrees below freezing. The first casualty was electric power. As residents cranked up the heat and stayed home, the demand for electricity shot up. At the same time, giant wind turbines in the large western plains of the state stopped turning as the cold temperatures froze the bearings. The output of natural gas-powered stations suffered as pipes feeding the generators got so cold that restricted gas flow, and hence, pressure. The Electric Reliability Council of Texas (Ercot), the state’s power grid manager, warned that it would have to resort to rolling blackouts of an hour each to conserve power.
Rare blast of winter weather
One official, U S Rep Dan Crenshaw, R-Houston, summarised this in a tweet.
On the ground, Ercot’s one-hour blackouts would have been heartily welcomed as reasonable but the situation became far worse. In Houston, Plano, Katy, Frisco, and Coppell, entire substations failed, plunging homes into total darkness during the night of February 14 when the storm had not yet reached its peak. Homes that had wood fireplaces saw the entire family bundling up in the family room. But many newer homes use natural gas, triggered by an electric spark, to turn the fireplace on. Without electricity to start the fireplace and near-frozen natural gas pipes, these homes experienced plummeting temperatures inside, just as did the millions of homes that relied on central heating run by electric pumps.
Food in refrigerators stood the risk of going bad in 24 hours. Without the ability to reheat food in microwave ovens or make fresh food on electric cook tops, residents had to survive eating cold staples. Stepping out to buy groceries became impossible as snow piled up on driveways and the streets, roads froze, and stores shut down as employees were forced to stay home. It is said that the entire state of Texas has fewer snow removal machines than Chicago’s O’Hare airport.
Sudden spike in demand
Critics have already called for investigations about how an energy-rich state underwent such a crisis. But for supporters, such events are bitter pills to swallow to celebrate the unique energy market in the state. Texas, along with Alaska and Hawaii, is different in the way it generates and distributes electric power. It does not belong to a national consortium of power grids and relies on its own grid. The State is thus exempt from federal oversight and has used this freedom to innovate. The very concept of energy trading originated in Texas.
A fully market-driven energy sector has allowed the State’s residents to benefit enormously from low costs, as electricity is delivered at prices that vary by the second. Texas is alone in breaking the electricity value chain into three discrete components — generation, distribution, and retail selling. Hundreds of companies exist in each of these verticals, buying and selling from each other, innovating to deliver the best product at the lowest cost.
When consumers sign up with their provider, they can stipulate the source of their energy — such as from renewable plants or traditional fossil fuels — thereby balancing their propensity to pay against their sense of commitment to the environment. Consumers can also play market conditions to their advantage, such as locking in on long-term two-year price contracts, or just three-month agreements when energy prices are steep, hoping to ride out the highs.
But if there’s one thing true about markets, it is that what goes down can rise just as easily. During the peak of the storm, CNN Business reported that electricity prices jumped by over 10,000 percent as power outages caused dramatic imbalances between supply and demand. The hardest hit were still-open businesses that must continue to keep operations going even though customer traffic had reduced to a trickle.
The adage that we take electricity for granted became painfully obvious. Power distribution companies sent out frantic messages requesting households to limit consumption and turn thermostats down to 68F. Many homes had dialled up their settings to 73F as temperatures outside dropped ominously.
On the rebound
In many cities, there were collateral casualties. In Tarrant County, rolling blackouts affected the local water utility’s ability to distribute water. Failing water-pumping stations and burst pipes shut off water to thousands of homes, while water leaks froze on the streets. Worse, line breaks caused an increase in demand for water supply that was already going scarce. In Austin, a city-wide boil water notice was issued due to power loss at The Ullrich Water Treatment Plant, the city’s largest water treatment facility, and drops in water pressures below minimum standards. The notice failed to mention how city residents in all-electric homes could boil water in the first place.
What happened in Texas this week is a routine weather event in far colder regions of the world, such as Canada, the Nordic countries, and Russia. Wind farms are common in these regions and temperatures remain sub-zero for six to seven months in a year. But these places have ‘winterised’ their infrastructure to combat hostile winter conditions and operate seamlessly during very low temperatures.
In market-driven Texas, companies do not have the incentive to invest in such technology because severe cold weather events are rare, happening about once a decade. Extreme weather, like what crippled Texas this time, probably occurs once in 25-40 years. Shareholders would be furious if capital expenditures were increased to pay to avoid these rare winterisation disruptions.
But when disruptions do occur, they can be extremely painful for ordinary citizens who have no skin in the game other than being at the receiving end. In about a week, however, as the weather warms up again, free-spirited Texans will likely forget this past week's nightmare and move on as the hot summer months loom on the horizon.