By Nancy Spannaus
Feb. 20, 2021—The dramatic failure of the electric grid in Texas this week, which at one point left more than 4 million of the state’s residents without electricity, should be an object lesson to the country. Texas’s deregulated energy grid is quintessential energy insanity; unfortunately, much of the rest of the country reflects the same problem.
Until we as a nation reject practices of deregulation and “cheap fix” practices which allowed this Texas crisis to happen, and invest, FDR-style, in rebuilding our vital infrastructure with the most advanced technologies, the failures in Texas this week are only harbingers of worse to come.
The Texas System
The mindset behind the problem was writ large on Feb. 17 in comments by former Texas governor Rick Perry, who told Rep. Kevin McCarthy, “Texans would be without electricity for longer than three days to keep the federal government out of their business.”
(Would he say that to the yet-undetermined number of people who have lost their lives, along with their power and water? To those who lost their livelihoods or access to the products [especially food] Texas contributes to the nation’s economy?)
Perry went on to say that the solution lay in making the electric grid more resilient, and with an adequate baseload. Yet this requirement is precisely what Texas was unable to achieve because it has structured its power supply system to be “independent” of outside interference, and as cheap as possible. (see grid map) That “independence,” which exempts Texas from regulation by the federal authorities, was negotiated way back in 1935, when the FDR administration was moving to regulate utilities for the general welfare.
As currently set up, most of the Texas electric grid has virtually no connection with other major electric grids in the country, which means it cannot import needed electricity in an emergency. At the same time, it has organized its power supplies through a market system with minimal mandates for necessary preparations for emergency, and maintenance. The watchword is to keep costs low for the providers in favor of their short-term profits, no matter what the long-term cost. That doesn’t necessarily mean lower costs for customers; and when a crisis hits, customers’ costs can skyrocket.
Thus, the “free” market has come to mean being free of reliable electricity!
Despite the fact that Texas was hit by power outages caused by a crippling cold wave back in 2011, which demonstrated the need for upgrading and winterizing the power grid, very little had been done. The Electricity Reliability Council of Texas (ERCOT) which coordinates the sale and supply of electricity around most of the state, made recommendations for winterizing the grid, as did the National Energy Reliability Council, but the state provided no mandates. After all, those mandates would cost the utilities, and raise their costs.
In this current cold front, admittedly more severe than 2011, the most significant problems lay with the gas pipelines and generators, since natural gas accounts for approximately 46% of the state’s electricity production (some estimates are over 50%). Some estimates say production from natural gas was cut by half due to these problems. In addition, as demand for gas rose to meet residential use, supplies for electricity production were cut as residential use is prioritized. That created huge problems for the three-in-five households in Texas that use electricity to heat their homes.
The second largest component of Texas’s power supply is wind power (23%), and there, the icing-up of wind turbine blades in the storm’s cold also sharply reduced output by about half, according to state officials. This problem is handled in the northern states by de-icing, but Texas companies have not invested in that.
Less vulnerable were the coal and nuclear plants, which provide 18% and 11% of the state’s power respectively. But coal stacks froze up, and their generating plants failed as well.
Nuclear was the bright spot. One of Texas’s four nuclear reactors did shut down, due to the failure of a feedwater pump. It turned out that the pump shutdown was triggered by a false sensor reading (related to the cold). The error occurred on the non-nuclear part of the unit. The other three reactors suffered no failures, and the plant that was shut came back online the next day. Nuclear reactors are known to run better in cold weather and are not susceptible to the problem of getting fuel supplies; they are right there in the reactor.
Of the 30,000-45,000 megawatt capacity lost in the crisis, only 4% can be attributed to the nuclear plant shutdown, according to Forbes magazine reporting. Compare that to ERCOT’s calculation that approximately 65% of the losses were due to gas and coal, and 30% to renewables (mostly wind).
A Side Note on Renewables
As remarkable as the failure of Texas’s energy grid was, equally remarkable is the aggressive campaign of wind and solar advocates to defend their plants’ performance. Renewables were not the cause of the failure, read the headlines; even Google images rushed to label pictures of frozen turbine blades as “misleading.”
Yet the only reason renewables are not the main reason for the failure is that most of Texas’s electricity depends upon natural gas. And, in fact, Texas’s wind industry relies on backup from the natural gas it so fervently despises. Failures of the wind-turbines were the second largest problem.
Some Relevant History
Regulation of the nation’s power supply for the general welfare was a major preoccupation of President Franklin Roosevelt. Following American System principles, FDR enacted both the Public Utility Holding Company Act (PUHCA) and the Federal Power Act of 1935 against tremendous opposition by the power industry, especially the massive holding companies which were gouging customers across the nation. While PUHCA forced holding companies to stop corrupt stock pyramiding and to submit to the authority of the SEC, the Federal Power Act created the Federal Power Commission, which was charged with establishing
just and reasonable rates for the transmission and sale of wholesale electric power in interstate commerce. It also regulates permanent interconnections of electric utilities and promotes the adequacy of interstate electric power service.
FDR also launched dramatic initiatives to increase the amount of power available to the nation, with his Four Quarters dam projects, and to extend affordable electricity to rural America through the Rural Electrification Administration. His policy was indispensable to improving our living standards and our productivity, not to mention winning World War II.
In 1977 the Federal Power Commission was replaced by the Federal Energy Regulatory Commission (FERC), which continued to have a mandate to regulate pricing and the state of the nation’s electric industry on the wholesale level. The states maintained the obligation to regulate retail rates.
Starting in 1978, however, the federal regulatory function began to include mandates for purchase of renewable energy and increased competition. Over time, those mandates have expanded state by state, and been permitted by a FERC which has clearly downgraded its concern for reliable supply (not to mention reliable supplies in the future), to below that of immediate cost and “free markets.” Maintenance has been cut, and a haphazard system of deregulated suppliers arisen, while subsidies for wind and solar, plus the availability of cheap natural gas, have undercut the financial viability of efficient energy sources like nuclear.
Throughout this process, Texas has remained unique, as the powers of federal regulators technically apply only to electric power which crosses state lines. Texas’s energy distribution and pricing are managed only by the ERCOT, which is answerable to state authorities. ERCOT by all accounts has prioritized keeping energy costs cheap for Texas utilities, to devastating effect for consumers under conditions of stress.
A Change of Mindset
Electric power, like transportation, requires an outlook that has been in painfully short supply in the United States for decades—a long-term, national perspective. I began to outline that perspective in my recent post on the need to vastly expand our national investment in nuclear fission, especially the new generations of reactors now moving successfully through safety checks by the Nuclear Regulatory Commission.
As proponents of the American System in the 18th and 19th century were well aware, the concept of “cheap” is usually the deadly enemy of policies for successful economic development. Cheapening labor is a recipe for slavery. Cheap imports are the road to bankrupting local industry and lowering the living standards of our working population. Cheap construction (and “savings” by cutting maintenance and improvements) leads to infrastructure collapses, too often with deadly results.
Investments in our nation’s well-being should be judged by their long-term effect on our people’s prosperity. A study of the most successful periods of our history, and that of other nations, shows that increased capital-intensity and energy density, high wages, and the most advanced infrastructure in connecting the nation are crucial elements in achieving progress. They will likely not produce short-term profits, but will increase the nation’s power to produce for itself and the future.
As the concept outlined in the 2020 National Infrastructure Bank bill (H.R. 6422) shows, there is no shortage of funds to carry out the necessary major investments in nuclear energy, and other upgrades of our electric grid. Major portions of our already-incurred national debt can be used as a capital base, and progress can immediately begin.
For the sake of the nation, it’s time to put “Texas cheap” behind us for good, and invest in a modern infrastructure for the future
 American System economist Friedrich List, in his Outlines of American Political Economy develops this concept, as an alternative to the views of Adam Smith.