Why is the Texas grid is such bad shape?

Texas blacked out.  (Its grid is separated from the rest of the USA.)

From The Climate Brink

The Texas grid, run by ERCOT, has had a rough few years. In 2021, winter storm Uri blacked out much of the state for several days. About a week ago, Hurricane Beryl knocked out power to millions of Houstonians, and a week later, hundreds of thousands of Houstonians still hadn’t had their power restored.

It might seem that these two events are completely different — one was a winter storm that caused a blackout by knocking out the natural gas supply, while the other one is a hurricane that knocked out the power distribution system.

But the root cause of these two incidents is actually the same. To understand what’s going on, you need to realize that keeping the power on is incredibly valuable to society and, when the power goes out, the damages are enormous. The Uri blackout cost well north of $100 billion. I have yet to see an estimate of the cost of Hurricane Beryl, but I’m guessing it’s also going to be eye popping.

But here’s the key fact: these costs are not paid by energy companies. When the power went out during Uri and pipes froze and burst, the energy companies didn’t pay those costs. Homeowners and insurance companies did. When the power outage caused Texans to freeze to death, the energy company didn’t pay, society did. Energy companies aren’t paying the expenses from Beryl, either.

Thus, power outages actually cost energy corporations very little money — maybe a few days’ revenue. Hardening energy infrastructure, on the other hand, is very expensive and entirely paid for by the energy corporations. This cuts into their profits and stock price.

Put slightly differently: Energy corporations pay the full cost of hardening infrastructure but capture only a small fraction of the benefits. Most of the benefits flow to society in the form of avoided burst pipes, avoided loss of income, avoided health impacts.

So why in the world would a corporation spend money hardening the energy system? The answer is there’s no reason. The net result is that the rational thing for corporations is to underinvest in making the grid resilient to extreme weather.

This is a market failure just like the carbon dioxide problem: There’s no incentive for emitters to reduce emissions because they pay the full costs of the emissions reductions but capture only a small fraction of the benefits of avoiding the impacts of climate change. In such a case, the rational thing for a profit-seeker is to keep emitting carbon dioxide.

The only solution is for the Texas State government to come in and force companies to invest in hardening the grid. Texas politicians understand that people demand action, which is why we heard Lt. Gov. Dan Patrick say that the government will fix the grid after the Uri blackout:


"We’re going to get to the bottom of this and find out what the hell happened, and we’re going to fix it."

And Gov. Greg Abbott sent a letter to the Public Utility Commission of Texas ordering an investigation into CenterPoint and deliver a report on its findings by Dec. 1.


“Maybe they have too large of an area for them to be able to manage adequately,” Abbott said. “It’s time to reevaluate whether or not CenterPoint should have such a large territory.”

But this will promise of action is entirely performative. When the cameras are rolling, they express outrage and promise action. Once the cameras are off, the outrage fades, and nothing changes.

History confirms this. After a big December 1989 blackout caused by lack of winterization of the energy system, fixes were promised. Those were never implemented and another blackout occurred in Winter 2011. A subsequent report laid out steps to make the grid more robust. Those were never implemented, so we had another blackout in 2021.

After the 2021 blackout, a natural gas billionaire made huge campaign contributions to prominent politicians and, lo and behold, nothing was done to make natural gas providers harden their infrastructure. If we had another Uri tomorrow1, we could once again see widespread blackouts.

The same will happen over the next few months with respect to the Beryl blackout: After the outrage theater dies down, nothing will be done.

This is one of the reasons, by the way, why Texas is so popular with corporations. They are never held accountable for pushing their costs onto society, as long as the people who pay the costs are the poor and middle class.

Ultimately, the problem is that Texas politicians legislate on behalf of corporations and not the citizens of Texas. Until that changes, episodes like Uri and Beryl are certain to continue.

Update: It has been pointed out that CenterPoint could have asked for a rate increase to pay for hardening the electrical distribution system. It’s not clear why that did not do it — did they not recognize the risk? Or was there political pressure to not raise electricity costs?

See also: 

The next Texas grid collapse

 

China's coal muddle

 China has promised to peak its emissions by 2030 and to reach zero emissions by 2060.   Yet last year, the country continued to build and plan nearly 100 gigawatts of new coal power stations.   This explosion of new coal generation is completely inconsistent with peaking emissions any time soon.  What is going on?

From Global Energy Monitor

● China commissioned 38.4 GW of new coal plants in 2020, over three times the 11.9 GW commissioned in the rest of the world. 

● Chinaʼs coal fleet grew by net 29.8 GW in 2020, while in the rest of the world net capacity decreased by 17.2 GW. 

● China initiated 73.5 GW of new coal plant proposals in 2020, over five times the 13.9 GW initiated in the rest of the world combined. 

● Chinese provinces granted construction approval to 36.9 GW of coal power projects in 2020, over three times the capacity permitted in 2019 (11.4 GW). 

● China now has 247 GW of coal power under development (88.1 GW under construction and 158.7 GW proposed for construction) – a 21% increase over end-2019 (205 GW), and nearly six times Germanyʼs entire coal-fired capacity (42.5 GW).

Excluding China, the global coal fleet has been falling for a couple of years now, and the decline appears to be accelerating.

So what is going on?

The growth in coal plant development in China is often based not on demand, but on misguided economic incentives from the central government. In 2016, new coal plant permits were restricted throughout most of the country by the central government, following a 2014–2016 province-level permitting boom that threatened to overwhelm the countryʼs 2020 coal power cap of 1,100 GW. 

Yet as the economy slowed in 2019, the central government began increasing the number of provinces allowed to greenlight new coal plants, reaching 25 of 31 provincial grids by 2020. The central government also expanded local lending quotas in 2020 and encouraged investment to offset the economic impact from COVID-19. The increased investment also included clean energy, and in 2020 China added up to 119 GW of wind and solar power to the grid, an all-time record and over double the amount installed in 2019 (56 GW).

Yet reforms discouraging coal power use have been incomplete and uneven across the country, resulting in high levels of commissioning for both renewable and coal power – effectively resulting in an “all of the above” power strategy. The increase in both coal and renewable power capacity has decreased the operating hours for coal generators. Since 2015, the average utilization rate of the countryʼs coal plants has been 50% or below, compared to a high of 61% in 2011. 

Recent electricity shortages in several provinces in Central China highlighted an apparent paradox – the country has far more capacity than it needs, but grid management issues and grid bottlenecks still led to electricity rationing in December 2020, because power plants were inoperational or unwilling to generate at a time of high coal prices, and there was insufficient transmission capacity. Yet the episode is increasing pressure on the planning agencies to allow a further expansion of coal-fired capacity in the next five years. The decline in coal plant use has lessened profits for coal plant owners. In 2018, an estimated 50% of the countryʼs coal fleet faced net financial losses, pushing some Chinese power companies to bankruptcy.

Any new coal plants in China will be commissioned within an already oversaturated market, and face a shortened lifetime given the countryʼs carbon neutral goals.

 

Note this very important snippet:

The increased investment also included clean energy, and in 2020 China added up to 119 GW of wind and solar power to the grid, an all-time record and over double the amount installed in 2019 (56 GW).

China is facing the same challenges all countries are facing as we shift the grid from fossil fuels to renewables:

• More interconnectors are needed.  In Australia, where each state used to have separate grids, the construction of interconnectors to allow power to be 'lent' or 'borrowed' from neighbouring states, where the weather conditions differ, is integral to higher penetration of renewables.  In China, each province sees itself as a separate electricity market.
• As well as the physical links, market mechanisms which allow power to be sent across province/state lines need to be developed.  In addition, pricing needs to be adjusted to allow for demand management, where big users are given a price discount in exchange for the right for the grid operator to cut power supplies to them during periods of peak demand
• Storage.  Battery pack prices in China are on average already lower than in the rest of the world, and for two hours of storage are cheaper than gas peaking. 

The problem is not that China is unwilling to switch to renewables.  It is already the world's largest investor in wind and solar, and even as substantial investments in coal were made last year, so was there a big jump in investment in renewables.  The problem is that utilities in China are owned by provinces and municipalities, and because the electricity market is really still nascent, getting price signals to squeeze new coal out is ineffective.  Central diktat will remain for now the only way new coal power stations will be stopped, though China is introducing a modest carbon price to nudge the market away from coal.  It's easy to see why China only expects to peak emissions by 2030, which means that the 50% global cut to emissions we need to see by 2030 to keep the rise in global temperatures to below 1.7 degrees is prolly not going to happen.