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The Texas Freeze: Why the Power Grid Failed

The Texas Freeze: Why the Power Grid Failed

A fundamental flaw in the freewheeling Texas electricity market left millions powerless and freezing in the dark this week during a historic cold snap

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A fundamental flaw in the freewheeling Texas electricity market left millions powerless and freezing in the dark this week during a historic cold snap.

The core problem: Power providers can reap rewards by supplying electricity to Texas customers, but they aren’t required to do it and face no penalties for failing to deliver during a lengthy emergency.

That led to the fiasco that left millions of people in the nation’s second-most-populous state without power for days. A severe storm paralyzed almost every energy source, from power plants to wind turbines, because their owners hadn’t made the investments needed to produce electricity in subfreezing temperatures.

While power providers collectively failed, the companies themselves didn’t break any rules. Texas officials don’t require plant owners to prepare for the worst by spending extra money to ensure they can continue operating through severe cold or heat. The high prices operators can reap from such periods of peak demand were supposed to be incentive enough for them to invest in safeguarding their equipment from severe weather.

Bill Magness, chief executive of the Electric Reliability Council of Texas, or Ercot, which operates the state’s power grid, explained during a Thursday news conference how the system was supposed to work: High peak prices provide the incentive for producers to keep operating in all weather. Generators that can’t produce power when it is most needed risk missing out on windfalls. “They’ll face financial consequences in the marketplace,” he said.

This post first appeared on wsj.com

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