Why is Texas not subject to FERC regulations?
The Texas Interconnection was started after the Federal Power Act of 1935. The Texas Interconnection was designed to expand and interconnect Texas grid to help with rural electrification. It was bottom-up effort. What came of that was Texas wanted to retain independence from federal jurisdiction over operation of its grid. I think the way that worked out both in terms of history and politics was Texas didn’t allow for synchronous flow of energy outside the state. It kept the flow of power intrastate. It’s not just a big energy consumption state but also a huge energy production state. It’s able then to have more control over the way the grid operates and remain independent from the federal energy market. In the 1970s, ERCOT was created to more formally manage and operate the Texas grid.
In some ways that has let Texas be a really interesting experiment in operation of electricity markets. Some say it’s a utopia. It controls both wholesale and retail sales of power, without federal regulatory oversight. That has been praised because Texas doesn’t have to worry about any tension between federal and state jurisdictions. Some blame that tension for the power system failures in California with its market policies. But in Texas you’ve got one regulator, one person that you can point finger at. In some ways you can see that as a more effective approach.
Some commentators have suggested that Texas’s growing share of renewable energy sources, such as wind and solar power, underlies this past week’s grid failure, but others have quickly pointed out that renewables are not the dominant power source in the state. What is your perspective?
I agree that the renewables claim is factually bogus. In the wintertime, renewables comprise about 8 percent of the energy in the ERCOT-managed grid, and that’s primarily from wind sources. It’s true that some wind turbines are frozen or were frozen. But the failure this week has been primarily a failure in natural gas generation. There are a bunch of reasons. First of all, Texas is heavily dependent on natural gas. It’s a big natural gas production state as well as consumption state, but it doesn’t need a lot of storage for the natural gas, because production facilities are in-state. In many other states, natural gas is imported from Pennsylvania, Texas or other states and stored in tanks for later use. Most of Texas is very dependent on real-time production of gas. And the gas production infrastructure, as well as the electric power infrastructure, has been hobbled by freezing. Also, the state’s gas production requires electricity supplied by the state’s grid for its operations. So when you shut down the grid, you shut down gas production, and it becomes a house of cards. Heavy dependence on natural gas, along with the lack of natural gas storage, has really put the state in a difficult position here.
A big issue that looms after disasters like this is proposals for a national supergrid to connect all the nation’s grids, including that of Texas, and thus stabilize markets and transmission for buyers and sellers. But there’s local resistance among suppliers and others. Does the power disaster in Texas change the outlook for a national supergrid?
We’re increasingly going to see more interconnection of the grid. This might be an example of how it becomes necessary. And just thinking about this, Texas may have a lot to gain here, because it’s a huge state now with the production, not only of gas, but growing with the production of wind. To the extent wind supply in Texas becomes a resource they want to export—well, you can’t just take the wind resource and put it in a pipeline. It has to be transmitted over interstate wires. That creates a political interest group in the state that now might want to see Texas more interconnected with other states. I think that’s the direction we’re going to move in as we see a growth in renewables.
And with the emphasis on infrastructure and the political impetus behind the Green New Deal, we’re likely to see states wanting to accept federal funding. You may see the federal government holding out carrots in terms of funding, the way it did with interstate highways. We’re also more likely to see states cooperating among themselves in terms of regional bottom-up efforts to hopefully try to manage these programs on a regional basis.