TEXAS – Gov. Greg Abbott announced Thursday he is calling on lawmakers to mandate winterization of Texas' power plants in the hopes that future winter storms won’t lead to the potential for blackouts.
“We have already begun the process to make sure that events like this never again happen in Texas and that starts with reforming the agency in charge of electric reliability in Texas, which is ERCOT,” Gov. Abbott said. “I’m asking the Legislature to mandate the winterization of generators in the power system. I’m calling for the funding needed to ensure that this winterization and modernization occurs.”
Texas uses various types of energy sources for its power, with generators across the industry forced offline in the extreme winter temperatures in the midst of increased demand for power. ERCOT said Wednesday that 40% of the state’s generation was lost in the storm because of a lack of winterized facilities, which led to frozen instruments like wind turbines and well heads. Most companies have just chosen not to invest in winterizing their facilities because winter storms are not frequent occurrences.
Of note, winterization of generators is not mandatory and is just a “voluntary guideline” for individual companies to decide if they want to follow winterization recommendations. The North American Electric Reliability Corporation, or NERC, has been looking at winterization standards but generators aren’t required to implement them. After the cold weather event from 2011, which saw sustained below freezing temperatures similar to this 2021 weather event, NERC and the Federal Energy Regulatory Commission (FERC) released a staff report that found that "generators did not adequately anticipate the full impact of the extended cold weather and high winds. While plant personnel and system operators, in the main, performed admirably during the event, more thorough preparation for cold weather could have prevented many of the weather-related outages. "
"NERC is the standard setting body for reliability with respect to the electric power system. And they regulate transmission owners, they regulate generators and other entities that operate in the power system, and under the auspices of the Federal Energy Regulatory Commission. And that standard setting group is working on a winterization standard. And that's an ongoing process. It’s not completed yet, but that would be a most likely route for some kind of regulations like that,” said ERCOT Senior Director of System Operations Dan Woodfin.
ERCOT noted it sent out notices to its generators to ensure that they were winterized properly, and ERCOT’s annual winter assessment assured the public that there would be enough power to meet peak demand this winter, however, that clearly was not the case, said the governor.
“ERCOT failed on each of these measures that they said they had undertaken. Texans deserve answers about why these shortfalls occurred and how they’re going to be corrected, and Texans will get those answers,” Abbott said. "And that’s exactly why I’ve issued an executive order that added emergency items to the legislative session asking the legislature to investigate what happened at ERCOT that led up to and during the course of in response to this winter storm.
Gov. Abbott on Wednesday declared ERCOT reform an emergency item, calling for the Legislature to investigate ERCOT. ERCOT CEO Bill Magness said he had “no objection whatsoever” to peeling back the curtain and showing what’s going on at ERCOT.
When asked about Governor Abbott's order for an investigation, ERCOT CEO Bill Magness says he has "no objection whatsoever" into showing the government the actions taken.— Stacy Rickard - Spectrum News 1 (@stacyrickardTV) February 16, 2021
"ERCOT is an entity that has to have the trust...if we don't, something's gotta change..." @SpectrumNews1TX https://t.co/QIfnlGHZXx pic.twitter.com/6kiNn3KKAb
“I have no objection whatsoever to opening up and showing everybody both in the government, as well as the market participants the actions we took, whether we made mistakes and having accountability around that. ERCOT is an entity that has to have the trust of the folks in the power markets including the governor, the legislature. And if we don’t, something’s gotta change at ERCOT,” Magness said.
ERCOT said during Thursday’s media briefing that Texas was “seconds or minutes” from total blackout that could’ve left Texans without power for months. That’s why ERCOT made the decision to forgo the rotating outages early Monday morning, and instead, reduce demand on the power grid by shedding load. The governor said he wants to see proof this was necessary, and that an investigation should give the state the answers they deserve.
In Thursday’s briefing, ERCOT officials said Texas was “seconds or minutes” from a complete blackout earlier in the week given the rapid success of generation units coming off, prompting the decision to reduce demand on the power grid & forgo the rotating outages @SpectrumNews1TX pic.twitter.com/XxkvLcSLyw— Stacy Rickard - Spectrum News 1 (@stacyrickardTV) February 18, 2021
"Is it true that ERCOT was on the verge of losing access to power in the grid which could’ve caused a longterm blackout in the state of Texas? If it’s not true, then there are serious consequences because of that. If it is true, there is serious action that needs to be taken by the state of Texas,” Abbott said. “We need to find out if the leaders of ERCOT sent the correct information to the generators of power in the state so that all generators of power in the state were up and running to provide the power that was needed to feed into the grid so they wouldn't get compromised. These are all important issues and questions that the Legislature must ask of these leaders to drill down into exactly what happened so that this never happens again."
University of Houston energy fellow Ed Hirs told Spectrum News 1 Thursday he predicted the failure of the Texas energy grid years ago, writing in Houston Chronicle Opinion piece that it's a "Soviet-era” power grid.
"ERCOT's software network instantly tests for relative costs of further supply across millions of possible combinations of power sources,” the 2013 opinion article read. "It is the present-day manifestation of Kantorovich's model for the Communist, centrally planned Soviet Union of 50 years ago. Its failure is in not having an implied price for future supply in a supply/demand market with growing demand for electricity. ERCOT's problem with the model has been made evident in the rolling blackouts across Texas over the past several years.”
One of the questions being floated by the public is whether generators intentionally didn’t protect or prepare their facilities ahead of this severe winter weather. Hirs says there’s been evidence of market manipulation by generators in the past.
"The generators absolutely know that when supply gets tight, they get market power, and the price will skyrocket, which is exactly what we've come into here. I'm not saying that there's a wanton manipulation here, but it's not something that can be dismissed,” Hirs said. “The economic incentives are for the generators to leave the grid. Get out of the grid, either permanently or just not be available to turn when they're absolutely needed. And we've seen incidents of generators manipulating the market over time. In 2014, one of the generators essentially took $300 million off the top of the market. Yeah, that was $19 per meter for everyone and, you know, ERCOT just said eh, it's no big deal.”
Before this winter storm, power on the wholesale market was selling for about $20 per megawatt hour, now it’s skyrocketed to $9,000. Hirs says this means generators could potentially profit from the high demand, and that “politics and profits” play a huge role in this.
“We won't know until there are investigations but this market has been rigged for, you know, since they put it in place almost 20 years ago,” Hirs said. “The problem is the structure of the ERCOT market doesn't encourage profits, except when things get really bad. And then we have a transfer of billions and billions of dollars from consumers to the generators.”
Hirs said the Texas grid was set up to fail, suggesting generators aren't investing in maintenance, meaning after their summer peak, they wouldn’t answer the call in the winter.
"If I've got six power plants that run in August and they're fully turning and I shut two down at the end of September, you know, tell those workers to go fishing. And I shut that down because I'm not expecting to have to bring it up during the rest of the year. And it doesn't make any money for me unless it's actually turning electrons into the grid,” Hirs said. "And then, you know, come February and I need to quickly bring those back up, you know, maybe I doddle, have an extra coffee, go out to lunch because every minute I do, those four plants that I have working are making multiples, absolutely multiples of what I'd make if everything were turning together in unity on the grid."
Hirs said had power plants winterized, Texas wouldn’t have been “seconds or minutes” from months-long power outages.
“There are really no enforcement mechanisms existing in ERCOT or with the Public Utility Commission (PUC). Nothing more than essentially a slap on the wrist,” Hirs said. “[ERCOT doesn’t] have any real enforcement ability. What they do is the generators bid in, ERCOT performs the market clearing function. But because it's just one buyer, you basically wind up with a situation where generators are competing against each other, just to cover operating costs, and they don't return capital for the most part, except in periods when there's a really tight market. They should have changed the market so that the generators have an incentive, a financial incentive to be ready to go."
Texas’ ERCOT power grid is one of three in the lower 48 states. While the two other grids, the Eastern Interconnection and the Western Interconnection, cover huge swaths of the country, ERCOT covers about 90% of Texas. ERCOT’s responsibility is to manage grid reliability and to coordinate with the various power distributors and power generators across the state. Being free from federal government regulation has been a source of pride for many in the state and is in tune with many political movements for the state to stand on its own, far away from the federal government’s oversight.
Hirs says he doesn’t have an issue with Texas being on its own power grid and even says he sees lots of benefits in it, but says the entire industry has let Texans down during this extreme cold.
“If you're gonna be independent, you need to take care of yourself. The Legislature, the governor, the PUC and the entire industry have let us down,” Hirs said. "I see a lot of benefit to the Texas grid being independent, you know. Several years ago, somebody threw the wrong switch in Arizona and all of Southern California went dark. You know, 20 years ago a tree fell in Cleveland and the entire Atlantic seaboard went dark. You know, the interconnects, it makes sense for efficiency, they make sense for emissions reductions. But for reliability, you know, maybe not so much.”