Texas Border Business

The Texas power grid passed another test recently, when a winter storm covered much of the state in a sheet of ice. Although there were significant power outages, some of which lasted a while, they were largely due to ice on lines and trees breaking lines and similar issues. We also had enough power to deal with the even more brutal cold in late December. 

Since Winter Storm Uri in February 2021 exposed vulnerabilities, countless hours and millions of dollars have been spent studying the reasons for the problems and proposing and implementing solutions. Some of the obvious things (such as making sure that power is not curtailed to natural gas producers during periods of high demand) have been fixed. 

Even so, neither of the recent cold snaps came close to Uri in terms of length, breadth, or severity, and issues remain (it also occasionally gets hot in the summer in Texas). For one, the State needs to ensure that there is sufficient power winterized and ready to go online even if the sun isn’t shining or the wind isn’t blowing. Battery technology is improving, and a number are being installed, but they are not yet a realistic solution for the entire system. That means conventional fuels or nuclear power (or both) will remain critical. Renewables are clearly a vital part of meeting needs, but they cannot do it all for the foreseeable future given the current state of technology. This reality is verified by projections from the US Department of Energy. 

I and others pointed out decades ago as Texas moved to a competitive approach that the lack of a mechanism to assure capacity was available would become a problem. Unlike the old regulated system, the market structure was designed such that suppliers only receive revenue when power is sold. There is no incentive to maintain reserve capacity because it’s too expensive to build if it’s not generating revenue (such as on a mild, breezy day when there’s more than enough wind power). This issue needs to be fixed.

The Texas population continues to expand, and more people means we will need more electricity. The economy is also growing, including in some relatively high power usage industries such as crypto mining and certain manufacturing. We are projecting long-term expansion at a pace exceeding most parts of the country, and meeting future demand will require additional generation and transmission capacity. 

The grid obviously wasn’t prepared for Winter Storm Uri or similar weather extremes, but some progress is being made. By contrast, the steady population and economic growth of Texas is readily apparent and somewhat predictable, and the need for additional capacity and resilience in the future is beyond question. Stay safe!!

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Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com), which has served the needs of over 3,000 clients over the past four decades.