MEGAN BASHAM, HOST: Next up: lights out in the Lone Star State.
Millions of Texans suffered in the dark and cold last week after a winter storm crippled the power grid.
Texas Gov. Greg Abbott and others in state government are demanding answers from the Electric Reliability Council of Texas—or ERCOT for short. That’s the body that operates the state’s power grid.
MARY REICHARD, HOST: But answers to the big questions like what went wrong, and how does the state prevent it from happening again may not be as simple as some would like.
But that won’t stop us from trying our best to simplify it. Here to help us do that is Christopher Knittel. He is a professor of Applied Economics at Massachusetts Institute of Technology.
Professor, thanks for joining us!
KNITTEL: Thanks for having me.
REICHARD: Let’s start with the big question: What exactly happened here? This isn’t the first time Texas has seen below-freezing temperatures. So why wasn’t the power grid able to stand up to this winter storm?
KNITTEL: Yeah, so this was certainly a more serious storm than they usually see. Colder, even, than the big storm that they got hit with in 2011. But effectively the cold weather led to a number of cascading events that led to rolling blackouts for many.
REICHARD: The Texas power grid is different from those in other states. How so?
KNITTEL: Yeah, there’s a key difference. The Texas grid is actually an island. It’s not connected to the two other main grids in the United States. So what that means is that when Texas needs electricity, they can’t import electricity from other parts of the U.S. So they’re really forced to stand alone when something like this happens.
REICHARD: Why has Texas chosen to be an island, as you say, when it comes to its power grid?
KNITTEL: Yeah, well that’s sort of stereotypical Texas. So, because it’s an island and because that island lies inside of a single state, the electrons aren’t crossing state borders so that means the federal government can’t regulate the Texas electricity market like it would regulate another market, because of the Interstate Commerce Clause. So this was a conscious choice by Texas to allow them to effectively operate free of regulation from the Federal Energy Regulatory Commission or the FERC.
REICHARD: We’ve seen some pictures online of frozen wind turbines. And some have blamed renewable energy for the power problems. Other people say it’s the market design of the state’s power grid. What do you say to that?
KNITTEL: Well, it’s certainly the case that some of the windmills did freeze and could not operate. But we know two things. One is we could weatherize those. So, windmills can actually run all the way down to negative 30 degrees. So that, too, was a choice by Texas not to weatherize those. And the second thing, which is more important for this tragedy is that there was actually more natural gas, coal, and nuclear generation down than wind. Almost 10 times more natural gas generation was down than wind generation. So, if we’re going to point fingers, I guess we should probably do it proportionally to how much supply was down across the different technologies.
REICHARD: I’m wondering what changes do you see the state making after what just happened?
KNITTEL: Yeah, so I mentioned earlier that this happened in 2011. Not to the same scale as it did here, and one of the recommendations from the Obama administration back then was to weatherize the equipment. So, the natural gas supply went down because natural gas plants froze, too. Or at least components of the natural gas plants. Also there was just not enough natural gas to go around because that natural gas was being used to heat homes. And also there was no electricity to pull the natural gas out of the ground as well. And one of the key recommendations back then was to winterize the system, whether that’s to put pipelines lower underground, insulate the actual generation facilities, and so on. So, I definitely see that happening after this event. Whether or not Texas stops being an island, I actually doubt that that will happen.
REICHARD: One final question, professor, we’ve heard reports of some people getting power bills for thousands of dollars after this storm. What’s going on there?
KNITTEL: Yeah, so most people in the United States when they buy electricity, they buy electricity on what’s called a flat rate tariff. That is you pay the same price for every kilowatt hour of electricity you consume, regardless of when you consume it or regardless of what is happening in the wholesale electricity market. Some consumers, though, in restructured markets like Texas, might have the ability to sign a contract with their retailer where the price moves with the wholesale price. So those customers did just that. They entered into what’s called a real time pricing contract with their retailer. And the retailer is passing through the high prices that we saw in the wholesale market. So that’s why they’re getting such a huge bill after this event.
REICHARD: Christopher Knittel is a professor of Applied Economics at Massachusetts Institute of Technology. Okay, professor, thanks for your time!
KNITTEL: My pleasure, thanks.