Why Texas Broke: The Crisis That Sank the State Has No Easy Fix

(Bloomberg Businessweek) -- The Houston skyline was lit pink for Valentine’s Day. It was cold—really cold, at least by the standards of the Gulf Coast, where wintertime lows are generally around 50F. That Sunday night it was below freezing; the forecast called for the first snow in years.

Earlier in the day, the Electric Reliability Council of Texas, better known as Ercot, the nonprofit that manages the state electricity grid, had gently urged Texans to be mindful during the storm. “We know it’s cold. But if you turn down your heat to 68 degrees and put on a fleece, you can help keep the power flowing for everyone,” the group tweeted earlier in the day. Another post showed a picture of a KitchenAid stand mixer: “Unplug the fancy new appliances you bought during the pandemic and only used once.”

This was all comically inadequate. That night, icons on a massive screen at Ercot’s Austin headquarters that corresponded to the status of the state’s regional power plants started flipping from green to red. They were shutting down—spontaneously and unexpectedly because of the extreme cold—even as residents across the state cranked up the heat. Faced with the very real prospect of a catastrophic outage that would leave homes and businesses without power for months, Ercot ordered power to be cut from more than 2 million homes in the state. It was the largest forced power outage in U.S. history.

We’d been warned about possible rolling blackouts that might last anywhere from 15 to 45 minutes, so most people assumed their lights and heaters would kick back on soon. My power was still on, so I turned down the thermostat to do my part. The next morning, Texans woke up to videos of skiers taking Austin’s windy 2222 ranch road like it was a run in Vail and photos of dogs seeing snow for the first time. Later in the day, CenterPoint Energy Inc., a major power provider in the Houston area, warned that if customers didn’t have electricity they shouldn’t count on getting it by nightfall. Texas’ famous energy network, one of the most expansive in the country and a source of state pride, was crumbling.

The Friday before, I’d written a story for Bloomberg News, where I cover energy in Houston, about Chris Bird, president of a Tulsa oil and gas company. He’d spent much of that day driving around Osage County, in northeastern Oklahoma, with a propane torch, trying to melt ice off old wells. Many of these wells hadn’t made money in years. But natural gas prices had climbed more than 4,000% over two days, and Bird was hoping to cash in. His wells were faring better than the much newer ones that make up Texas’ rich shale fields. By the end of that week, there were rumors that some producers were experiencing freeze-offs, when heavier hydrocarbons and water in the gas form hydrates, basically ice crystals, that block the wellheads.

Prices for electricity in some parts of the state had already hit $9,000 per megawatt-hour, the highest an energy seller is allowed to charge. For a Texas household, that translates to about $9 per kilowatt-hour. That’s a lot. Normally, Texans pay an average of around 12¢ or so. “I’m not sure ‘Black Swan’ can properly define what we are currently experiencing,” one power trader texted me a day before the outages as prices were climbing. Blackouts were more probable than not, he predicted. Demand was set to rise significantly, and the grid was already struggling.

By Monday afternoon, local and state officials were urging Texans to stay off the roads, which were slick with ice. That left the millions in the state who were going on 12 hours without heat with a choice: Bundle up indoors, or brave the streets to stay with friends and family who still had power. The Texas National Guard was deployed to move the elderly into warming shelters. Air travel in and out of Houston was halted.

A facility storing Covid-19 vaccinations lost power, forcing county officials to race to distribute more than 8,000 doses. A friend had dropped her brother off at Houston’s sprawling Texas Medical Center to try to get one and urged me to do the same. “Just go,” she said over the phone.

The line at Ben Taub Hospital, one of the distribution sites, wrapped around the building. It was 4:45 p.m., and the sun was starting to set. Either because the county was out of vaccines or because officials didn’t want hundreds of people outside in temperatures that were predicted to fall to the teens that night, security guards told new arrivals they were done with distributions. If there’s an experience that feels like the apocalypse, it’s watching hundreds of masked people line up hoping to get vaccinated against a pandemic virus during a widespread blackout in the middle of a snowstorm—in Texas.

Texans, particularly those of us near the coast, know how to prepare for a storm. A hurricane warning triggers a familiar routine of gas station trips, bathtub fill-ups, and H-E-B grocery runs. Talk of a winter storm had been mounting for days, so we’d prepared, sort of. I checked to make sure I had a pallet of water, pulled out my winter jacket, and bought a few bottles of wine. But while the state’s power plants and residents alike can function in extreme heat, it had been decades since Texas had experienced a polar vortex like the one that hit on Valentine’s Day.

Homes here are usually warmed by underpowered electric furnaces or baseboard heaters, which are turned on maybe a few weeks a year in some parts of the state. Almost nobody has a more efficient oil or gas furnace, and insulation is designed to keep our homes cool in the summer, not warm in the winter. Pipes are often exposed to the elements. In New England, when all else fails, you drip your faucets to keep the pipes from freezing and bursting. But in Texas, where much of the water distribution depends on electric pumps to pressurize lines, officials worried power outages would cause a drop in water pressure. “Please do not run water to keep pipes from bursting,” Houston Mayor Sylvester Turner begged on Twitter. “It is needed for hospitals and fires.”

On Sunday and Monday, Ercot’s capacity—the amount of electricity available on its grid—plummeted nearly 40%, to just under 44,000 megawatts, leaving wide swaths of the state in the dark. The grid was already handicapped: Several power plants had been taken offline for weeks of maintenance. The purpose, ironically, was to ensure they’d be ready for summer demand, when energy usage normally peaks.

Even as iPhone batteries drained and Wi-Fi cut out, much of the conversation online centered on a tweet from a local oil and gas industry lobbyist that showed a helicopter attempting to de-ice a wind turbine. “A helicopter running on fossil fuel spraying chemicals made with fossil fuels onto a wind turbine made with fossil fuels in the middle of an ice storm is awesome,” the post said. The photo was from Sweden in 2014. No matter. It kicked off a mad dash to assign ideological blame. “We should never build another wind turbine in Texas,” Sid Miller, the state’s agriculture commissioner, wrote on Facebook. “Texas’s Blackouts Are The Result Of Unreliable ‘Green’ Energy,” read the headline to an article in the Federalist.

Elsewhere, the fault was ascribed to the state’s choice to avoid federal regulation of its electric grid. Former Governor Rick Perry, who later served as U.S. energy secretary, dismissed this by arguing that a few days of blackouts were preferable to interference from Washington. Tim Boyd, the mayor of Colorado City, Texas, resigned after telling constituents in a Facebook post that they should “think outside of the box” rather than seek government assistance and that “only the strong will survive.” He apologized and said he’d been angry about a situation over which he had no control. The political schadenfreude extended to Senator Ted Cruz, who was spotted boarding a flight to Cancún, Mexico, while power outages —and freezing homes—were widespread. He later apologized.

Texas’ grid is almost entirely disconnected from the rest of the country, which exempts it from federal rules but also means it’s unable to pull power from neighboring states in times of crisis. In 1999 the state went further, passing a law that deregulated its power market. The effects of that decision are visible today. Drive anywhere in Houston, and you’ll see billboards from power companies competing to one-up each other, advertising free electricity on nights or weekends, for instance. One especially enterprising provider, Griddy, offers customers the chance to pay the wholesale rates utilities pay themselves.

Under the same 1999 law, Texas declined to implement a forward-capacity market, a system common in other states where power has been deregulated that’s designed to ensure power plants have adequate resources to meet future demand. Lawmakers saw forgoing the market as yet another way to keep rates low.

Having connections to other states or a functioning forward-capacity market could have helped a little in February, but even a more conventional energy system might not have saved Texas. “If $9,000 per megawatt-hour isn’t enough motivation to supply power, then I don’t know what is,” said Daniel Cohan, a Rice University environmental engineering professor. The bigger problem, according to most experts on the state’s energy system, has to do with thermodynamics. Texas’ energy infrastructure simply isn’t built for cold temperatures.

The freeze-offs that shut down shale fields were just the beginning of the disruptions. Compressors, which push gas into pipelines, were too cold to function—and that’s if they had power at all. As demand for electricity spiked, utilities diverted power to homes and hospitals, leaving the oil fields unable to thaw frozen equipment. As one executive of a big independent shale producer said, it was a death spiral. There was no gas to produce power, and no power to produce gas.

Gas accounts for a little more than half of the state’s electricity production, but it wasn’t the only power source affected. About an hour southwest of Houston, a feedwater pump leading to a reactor at the South Texas nuclear power plant tripped, causing one of the two reactors to shut down. And though the viral windmill photo was fake, the problems turbines faced were real. Like airplane wings, turbines don’t work when they’re covered in ice, and wind farms in West Texas, unlike those in North Dakota, generally don’t have de-icing technology. A full week before the crisis reached its peak, ice had begun forming on the blades at one Texas wind farm. By the middle of the day on Feb. 9, it stopped producing energy. Even coal plants, normally seen as reliable, were not immune. Coal-fired generators need to heat water into steam to spin their turbines, but the water at some plants wasn’t insulated from the elements and began freezing.

Maybe some of the plants that were down for maintenance could have come back, but most of those were forced to stay offline. That’s because plants and substations have to be in sync with the rest of the system. Starting up a plant early can lead to a “cascading outage,” said Matthew Gomes, director of development at solar company Origis Energy USA Inc.

On the evening of Feb. 16, I lost power. It was cold, but bearable. I live in an apartment, and big buildings retain heat better than single-family homes. I don’t think my unit ever got below 50F, but many people in Houston could see their breath in their living rooms. Others kept warm using camping stoves indoors or sleeping in their cars, leading to numerous deaths from carbon monoxide poisoning. There were also cases of exposure, including a man who was found dead on a median and a sixth-grade boy who never woke after his family’s mobile home in the Houston suburbs lost electricity. Warming shelters saw their own electricity falter.

Wednesday morning brought a new crisis: water. Treatment plants weren’t operating at full capacity, and water pressure was so poor that the system was vulnerable to bacteria. Major cities, including Houston, told residents to boil water before drinking it. But you can’t boil water unless you have a gas stove or electric power—and many Texans, including me, had neither. My parents in Austin had no water at all. I drove to a gas station down the street to top off my tank and sent my boyfriend in for snacks and a few extra bottles of water. He came back with some jerky and Takis chips, but the water was already gone. By that afternoon, my folks were melting snow to flush their toilets.

The oil executive I talked to had used an actuarial term to describe the sudden freeze—“a three-standard-deviation event.” Others have called it a 100-year storm, though it’s hard not to wonder if such events might occur more often now. Scientists are still studying whether extreme cold spells could become more common as weather patterns shift with climate change. “The question for everybody, and that’s all players—whether it’s independent power players, natural gas producers, regulators—is: To what level of reliability should you build?” said John Arnold, a Houston philanthropist who got his start at Enron and later founded a successful hedge fund. “To what level of reliability does one build a house? Do we weatherize the pipes, even though it adds cost, to save yourself during the one-in-every-X-number-of-years event? Do you buy a generator?”

Michael Webber, a University of Texas at Austin professor who specializes in energy and who serves as the chief science and technology officer at French utility Engie SA, sees the need for billions of dollars of investment to make homes more efficient, weatherize power plants, and create connections to grids in other states. He recommends building more storage capacity and adding more high-voltage lines capable of delivering power over long distances. It would also be good to build “microgrids” that serve as decentralized power stations in case of systemwide problems. “Sorry,” he said. “I know I just rattled off, like, six things.”

The focus of many Texans’ frustration is Ercot. Texas Governor Greg Abbott blamed the grid manager for failing to provide a realistic assessment of the state’s generating capacity prior to the severe cold snap. “Ercot has failed,” Abbott said at a media briefing on Feb. 18. On Feb. 23, five Ercot board members, including the chair, announced their resignation. Abbot also demanded state lawmakers make winterization of power plants mandatory. The last time that recommendation came, it was from federal regulators following a 2011 winter storm that left millions without electricity. That summer, the Federal Energy Regulatory Commission and the North America Electric Reliability Corp. urged the state’s utilities to use more insulation and to ensure pipes could be heated during cold snaps, among other steps to prepare for extreme temperatures. But plant operators largely ignored those directions, and Ercot has pointed out there’s not much the grid operator can do about that. “There aren’t regulatory penalties at the current time,” Dan Woodfin, Ercot’s senior director of system operations, told reporters on Feb. 16.

On Wednesday evening, I could see from my window that the golden arches of McDonald’s were once again glowing and attracting cars to the drive-thru like bugs to a light. By the time I got there, the line was already spilling into Westheimer, a main drag, so I parked and went to the Thai place next door. Other people waiting to order were talking about plumbing and which stores still had water. “Can you believe it?” one woman asked, shaking her head. A little more than an hour later, I walked away with two orders of pad thai. It wasn’t what I’d ordered, but I didn’t care. I don’t think anyone did. As I was leaving, I heard someone say that they’d tried going to McDonald’s. It turned out it wasn’t even open. The lights came on automatically once the power returned, and now dozens of cars were lined up to get burgers that weren’t being served.

On Thursday morning, I was on the phone with an editor when I noticed the ceiling fan in my room spinning. The power was back, and Wi-Fi soon after. I checked in with colleagues. Another energy reporter had spent two days trying to keep his daughters, age 5 and 18 months, warm. At one point, he loaded his family into the car and called around in search of a hotel. The closest one he could find was four hours away in Alexandria, La., and even it couldn’t guarantee that the power would still be on by the time they arrived.

“It was a horrible, horrible episode for millions of people,” said Arnold, the philanthropist, on Friday, as power was being restored. As we talked, more than 14 million people were still unable to drink their water. My parents’ bathtub was full of dirty, half-melted snow—still the only source in the house. Grocery stores had enormous lines but little on the shelves, and customers of Griddy, the Texas energy company that promised access to wholesale prices, were now facing bills in the tens of thousands of dollars. “I think there will be a lot of pressure,” said Arnold, meaning from very unhappy voters.

But even with that pressure, it’s not obvious where to begin. Should power plants be forced to invest in cold weather protection if shale wells and gas pipelines are freezing too? James Coleman, an associate professor at Southern Methodist University’s Dedman School of Law in Dallas who focuses on energy, suggests they might be required to source gas from producers that have weatherized their infrastructure. Or perhaps, he offers, the Texas Railroad Commission, tasked with overseeing the state’s oil and gas industry, could step in and make weatherization mandatory for companies that drill for and ship natural gas. So far, the agency has done little to push weatherization, and one commissioner recently echoed other Republican leaders in saying wind power was to blame.

“There will be changes,” Coleman said. “The scale of this outage—and the human consequences—are too large to shrug off.” —With Mark Chediak, Kevin Crowley, Naureen Malik, Shannon Sims, and Catherine Traywick
 
Read more: Ercot’s 711-Page Training Manual Tells a Power-Grid Horror Story

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