When deregulated utilities collapse in the face of severe weather events
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By Martin Mantxo (A Planeta)/Proofreader: Caitlin Schroering (PhD Candidate, Sociology, University of Pittsburgh) And thanks again for suggestions to Jai Sen (World Social Movement)
The Texas power system collapsed from February 13 to February 17, and 4 million people were left without power on some of the coldest days this winter. According to the latest figures, the death toll has risen to 58. In the eye of the hurricane, or rather, of the icy storm, is the Texas electric distribution management company, ERCOT (Electric Reliability Council of Texas)1. ERCOT’s function is to coordinate, control and supervise the operation of the electric power system to more than 25 million customers (90% of the total in Texas)—all of which went wrong.
The fact is that one of ERCOT’s responsibilities was to guarantee energy access to all its customers and that did not happen. It is true that the cold that had an effect on the distribution network and energy production, but this should not have been the case if measures had been implemented. Fossil fuel plants, especially natural gas plants, were the biggest problem, as pipelines were not insulated and equipment was not winterized. On February 17, 46 GW of energy were missing from the grid, 40% of the electricity demand for the state. Of this, 61% was electricity produced from gas, coal, and nuclear power. Wind and solar power accounted for 39%.
But, the system was also seconds or minutes away from a total blackout, which, if it had happened, would have required rebooting the entire system from scratch. That process is even more difficult, time consuming (weeks or months), and costly.
It is important to keep in mind that such an event has serious economic consequences because it also paralyzes production. Texas, as an economy, would rank tenth if it was considered as an independent country. Therefore, its weight in the U.S. economy is also very important. This is not a statement in support of the current economic or energy model, but rather an acknowledgement that changes to this system will need to be gradual: a transition, in which people suffer the least possible harm, instead of what happened in this case with 4 million people significantly impacted.
It is not that ERCOT was unaware of the fact that something like this could happen, because days before it had advised customers to use electricity in moderation and to prepare for the cold, and the weather forecast predicted the extreme temperaturas weeks before (although it could be that they had underestimated the effect associated with the climatic emergency). Additionally, the same extreme weather conditions occurred in neighboring states who did not experience the same consequences. Similar blackouts have also happened before in Texas in 1989, 2003 and 2011. After the 2011 disaster, there was a need to reinforce the electric and gas infrastructure, but recent events suggest that not enough was done.
A 2019 NERC Reliability Assessment Report also concluded that ERCOT had one of the lowest forecasted reserve margins in the United States and was the only part of the country without sufficient resources available to meet forecasted peak summer electric demand. As many point out, the disaster was caused by a lack of investment because profits (rather than meeting the needs of the population) were prioritized, as there was evidence that the power system needed to be upgraded.
ERCOT does not generate electricity, it only manages it. The electricity ERCOT manages is owned by third parties, private companies. According to former energy trader Marcus Pridgeon2, there is little room for maneuver, as private companies always apply measures as they please. As Pridgeon says “don’t be shocked; this is the free market”. It is the theory of non-intervention. For this former energy agent “the culprit is the competitive energy market (of ERCOT)”, the free market.
However, ERCOT’s connection to the rest of the (private) energy system is evident in its board of directors, where eleven of its fifteen members have ties (now or formerly) to the energy industry. Five of them, including the chairman, do not even live in Texas. As a consequence of the debacle, five members resigned on February 23.
A blackout in the world’s energy powerhouse
The problem is that it happened in the United States, in theory the economically strongest country (in other aspects as well) in the world and also in terms of energy, since recently with fracking it had recovered its position as an oil and gas extractor, but also as a power in the field of nuclear, hydroelectric technology, etc.
Instead a replica of what happened in Venezuela in March 2019 occurred (although the crisis goes back much earlier and still continues) in the free-market, deregulated state of Texas. In Venezuela, energy production depends on few power plants and is mega-concentrated: thermal power plants and a mega-dam (Guri, 10,325 MW)3. The centralized and concentrated system has problems when the supply fails or one of the power plants fails. In the case of Venezuela, the problema was, in addition to oil depletion, corruption, which diverted budgets for the power plants.
Also, in the case of Venezuela’s Guri hydroelectric plant, something that is recurrent all over the world, due to the climatic emergency, occured: the water capacity of the reservoirs is lower and cannot produce the energy it used to produce under optimum conditions. And to all this, add the serious situation of the country, attributable to many causes, among them the collapse of the price of oil, the resource on which its economy is based, or even the sanctions imposed by USA and supported by many other countries.
Venezuela’s problem is easily replicable in any other place, because, despite rhetoric off competition and the “free market” the chosen systems of capitalist electrification have always opted for the concentrated and centralized model. So it was in Puerto Rico (also in 2017) when the island spent more than 11 months without electricity because Hurricane Maria devastated everything, including oil-fired power plants, but especially power lines, indispensable to transport electricity in a centralized production. It seemed that the institutional solution was going to be to opt for gas instead of oil, which in addition to costs and environmental and climate impacts, was going to give continuity to the same model. But in August 2020 the Clean Energy Act was passed, which commits Puerto Rico to renewable energies, in part in a decentralized way – the same one that were the solution in that crisis.
There are also parallels to the Texas situation with what happened in Puerto Rico, where severe weather phenomenas have increased, in large part, as a result of the climate emergency—a crisis caused by human beings and an energy model dependent upon fossil fuels.
The centralized, concentrated and monopolized energy model
In the case of Texas, there is another problem: the concentration and centralization of production. Also the independence of its grid, with no connection to the grids of other states. And another aspect that must also be taken into account when we talk about energy or electricity management: the ownership of this management. In the case of Texas, it is not trivial that this is the only state in the Union in which electricity is totally privatized and deregulated (not to mention that nationalization is not a total guarantee of good management – to this we should add systems of monitoring, follow-up, transparency, social participation, etc.).
But we must also add that the option of privatization, as in many other cases in the world, has been proposed as a solution. The first consequence of privatization was an increase in the Texas electricity bill. Texas customers have paid $28 billion more than public utility customers since 2004.
During last week’s crisis, electricity prices skyrocketed to a peak price of more than $ 8,000 per MW/hour. One of the reasons was the state incentive system for power plants to supply more energy that was reflected in variable tariff bills.
Now, another problem raised is that the cost of this investment (necessary to prevent this situation in the future and to get energy supply back up and running) is being charged to the consumers—individual people. So, the corporate negligence, deregulation and privatization that caused the blackout, has now had a very high economic cost and damages to the people of Texas, which needs to be repaired.
It is important to note that the severe cold caused 58 deaths (known up to this moment), but that they are attributable to the lack of means to keep warm, to the lack of electricity, because the supply fell. An 11-year-old boy from a migrant family, Cristian Pineda, perished of hypothermia when in his mobile home. His family has filed a $100 million lawsuit against ERCOT and Entergy Corporation. According to the boy’s mother, the utility giants “put profits over the welfare of the people.”
To add to the problem, and which shows how severe the consequences can be if our energy model depends on a few power plants or one resource (to be taken into account with the depletion of some of them), the lack of electricity also affected the operation of oil refineries4. These were forced to burn the gases to avoid damage to their processing units, thus releasing 152,860 kg of pollutants (benzene, carbon monoxide, hydrogen sulfide and sulfur dioxide) into the atmosphere. This burning was visible by large flares. Between February 11 and February 18, 174 so-called emissions events occurred in Texas at these facilities, which contrasts with between 37 and 46 in previous weeks. In addition to its climatic effect, this event meant more pollution than normal for nearby communities and ecosystems.
This also adds more surrealism to the accusations by some politicians of renewables as the cause of the blackouts and the crisis, because wind power generates 23% of Texas’ electricity. The truth is that half of the wind turbines also froze, but again, because they were not properly insulated, as wind turbines work perfectly well in more severe conditions, such as in Minnesota, or Denmark or Siberia. In this situation, politicians took advantage of the situation to charge against the Green Deal. Here we must also point out that, although renewable, most of this production belongs to large companies, and is therefore monopolized and produced in a centralized and concentrated way (large parks).
Avangrid, another private power company in Texas
Another aspect is the purpose of this energy, and in the current electricity market, as the name indicates, it is for the “market” or profit. The concentration of production and management means the enrichment of a few. This profit objective, together with the production model and other corporate aspects such as large investments in advertising or in supposedly altruistic activities, means an increase in the price of the bill.
For example, we accept that a company like Avangrid (Iberdrola) comes out after the disaster announcing its “Support for Texas”, with a contribution to the American Red Cross of $ 50,000 . This could also be viewed as a publicity stunt. Especially considering that it is the electric utilities that are the target of criticism, and that Iberdrola’s invests significantly in publicity! The meteorological disaster, as sad as it may seem, is fertile ground to be used to promote the company’s own agenda.
Avangrid (Iberdrola) is one of these companies, now referred to in Texas as PNM. Iberdrola bought PNM Resources on October 21, 2020. This power company operated in New Mexico and Texas. AVANGRID thus became one of the largest U.S. utilities (4.1 million customers). Avangrid has been denounced in the US as well, because its ways there are not different from those it has used elsewhere, from altering bills and raising prices. In 2016 it was condemned by the Washington courts for overcharging consumers’ bills in California with 371 million dollars too much, during the energy crisis in this state between 2000-2001. The judgment forced Avangrid and Shell to pay $7.7 billion, refund the money of defrauded customers and reinstate the rate to its price.
Disaster within disasters
We also remember that this disaster does not come alone, but happens at the time of the Covid 19 pandemic, which is affecting Texas, the United States, and the world at large in severe ways. In the USA it is affecting more because of the bad management resulting from the denialism of those who should manage it, and also because of aforementioned economic policies (privatization, cutbacks, lack of budgets, etc). There are already 500,000 fatalities in the USA from Covid19, victims of government mismanagement and inaction.
The blackout also exacerbated the health crisis, as infrastructure is totally dependent on electricity to operate. It affected the vaccination process, with the blackout putting thousands of vaccines at risk to be ruined. It was possible to salvage many of them, but it is estimated that 1,000 were lost– still too high a number when there is already a shortage of vaccines. This also meant that the vaccination process was stopped, because without refrigeration you cannot run the risk of more vaccines being lost.
Going beyond the current problem caused by the blackouts, we run into the government that allowed and encouraged privatization, lack of upgrades to the electrical system, etc, and next to it, the whole international system that has promoted deregulation and privatization as a solution, as a magic recipe of neoliberalism.
The first conclusion is that the weather emergency means increased and more severe weather phenomenas. In this case, it is obvious that, despite the fact that in these conditions it is possible to operate in other places, in Texas the weather caught many by surprise and there was an absence of preemptive meassures necessary to prevent problems or to enable normal activity, including energy production.
The Texas blackout occurred a month after Donald Trump left office. His administration has been characterized by its denial of the climate emergency and resistance to pursuing any solutions to address the crisis. In fact, climate effects that have brought colder weather (like the recent freezing temperaturas in Texas) were used by Trump as reasons to deny “global warming”.5
On the other hand, as has happened in other cases such as hurricanes, floods, etc., the climate emergency affects all people in one way or another. We cannot exclude ourselves. No matter our economic or geographic position. In theory, wealthy countries like the U.S. (or the state of Texas) have the economic resources to put resiliency strategies in place to protect residents from the most severe effects of climate change; however, there is a demonstrated lack of political will to do so.
Further, there is an argument to be made that as one of the main contributers to the climate crisis due to its exponential use of fossil fuels, that the U.S. also has a responsbility to act to reduce dependency on fossil fuels and reduce its significant contribution to the climate emergency. Texas has long been a center of oil exploitation and one of the centers in the USA. The USA has now recovered its position as an oil and gas extracting power thanks to fracking (not for long, however, because, as we have explained in other articles, it has also started to decrease6).
And Texas continues to be a powerhouse because some of the main extraction areas are located there, including the Eagle Ford and Permian, and part of the Anadarko (the other part is located in Oklahoma) and the Haynesville. Together they extract more than a third of the country’s fracking oil.7 But the major extraction by fracking is that of gas, which is almost 6 times greater than that of oil. In this resource, Texas is also a power8 and has become a gas exporter9, although due to the crisis it has had to stop it.10
In addition, Texas also receives oil and gas pipelines for conventional exploitation and fracking from all over the United States, and even tar sands from Canada. Texas is the great center (called the “hub”), and it is there where the pipelines, stations, refineries, etc., are all piled up, as can be seen in the Fracktracker Alliance map11 (consequently, it is also one of the main spillover areas). There is also the main shipping and export port in the USA, Corpus Christi, with 8 oil export facilities.12 In that port are Bill Greehey’s Valero and Three Rivers refineries and gasification plants. The other major oil hub is Houston. All of these things place Texas as a significant contributing factor to the global climate emergency. And despite having so many resources, the climate emergency has also affected humans and economy to that extreme, because the wealth doesn’t go to benefit all Texans.
We understand that it was not the main cause, but the fact of stopping exports to redirect them to self-supply, as well as the aforementioned decrease in fracking production, only correspond to one reason: the decrease in resources, and more specifically in fossil fuels such as oil and gas. Therefore, although this blackout in Texas is not directly related to this, situations like this will become more and more common, and instead of being so abrupt and with such drastic consequences, it’s advisable to make a real transition from the fossil to the renewable model as soon as possible.
The other conclusion that emerges from the analysis is that the system must be decentralized without depending on large production centers. It also must be democratic, so that the citizens know what the situation is, and not only know that there is a guarantee in case of severe wether, but also so they can decide what model they want (centralized or not, fossil or not, big companies or not, public or not, etc.) but also decide what to invest in, to be able to pay what is fair, etc.
In Texas, again, it has been proven how dependent our society (civilization) has become on energy, and for that, besides the model and types of energy, the main solution will come by overcoming that dependence and consuming less.
In Texas again, it has been demonstrated the use given to energy in this economic system, not as a basic good, but as an object of speculation and profit, so that companies prefer not to invest in improvements or prevention, so that it reverts to their profits at the expense of people now, or the environment in other cases. At the cost of Life. Of Lives.
The problem has also been the privatization of these companies, which is presented as the great solution. Although the companies will be forced to pay some compensation, they will not pay for the economic damages caused to that economy, nor the health expenses, etc., which will be covered again by the public treasury, therefore with the money of those people who pay so much in their bills. Meanwhile, the salaries of those who manage these companies, so high, in theory, for their level of responsibility and knowledge, will remain the same, despite the fact that they have proven not to meet expectations. In Texas, once again, the neoliberalism that proposes the privatization of public services and resources as the optimal form of management, proves once again to be not only a social, economic and environmental failure, but a great disaster, and a benefit for a few, for an elite.
4ExxonMobil’s Baytown Olefins and Motiva and Valero refineries in Port Arthur, and Shell’s plant near Houston.
5Trump always dismisses climate change when it’s cold. Not so fast, experts say. www.washingtonpost.com/climate-environment/2019/01/29/trump-always-dismisses-climate-change-when-its-cold-not-so-fast-experts-say
In the cold of January 2019 he said “Wouldn’t be bad to have a little of that good old fashioned Global Warming right now!”. In another tweet: ““In the beautiful Midwest, windchill temperatures are reaching minus 60 degrees, the coldest ever recorded. In coming days, expected to get even colder. People can’t last outside even for minutes. What the hell is going on with Global Waming?”
7Anadarko: 992 oil barrels per day; Eagle Ford: 2,227; Haynesville:19; Pérmico: 1,142
Anadarko: 5,447 gas barrels per day; Eagle Ford: 7,347; Haynesville: 11,448 ; Pérmico: 2,150 www.eia.gov/petroleum/drilling