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Supplementing FTR 280, this program highlights the cynical, conspiratorial machinations of major energy companies, the Bush administration and the California Republican establishment in effecting California’s “energy crisis” of 2000–2001. Highlighting the interplay of Bush crony Ken Lay’s now disgraced Enron firm, an advisory task force headed up by Bush associate James Baker and the Bush administration energy commission headed by Dick Cheney, the program accesses a very important paper authored by Katherine Yurica. Be sure to check out this work at her web site. There are strong indications that California’s “energy crisis” was deliberately engineered in order to undermine Democratic governor Gray Davis, enrich the energy industry, and provide the rationale for the Bush administration’s foreign policy.
Program Highlights Include: Former governor Pete Wilson’s chairmanship of Arnold Schwarzenegger’s campaign; a very suspicious (probable) test of the California electricity-brokering infrastructure; the Baker advisory group’s citing of the California “crisis” as the basis for domestic and foreign policy recommendations; the Cheney group’s suspicious citing of the California energy crisis; highly suspicious and contradictory wording of the “National Energy Policy” drawn up by the Cheney commission; the Project for a New American Century’s discussion of the potential usefulness of “a new Pearl Harbor”; the destabilization of Jimmy Carter’s presidency by the oil industry, George H.W. Bush’s CIA and the Saudis.
1. A major contributing factor to incumbent governor Gray Davis’ unpopularity is the enormous increase in electricity prices due to the deregulation legislation effected by former governor Pete Wilson. Wilson is “outsider” Arnold Schwarzenegger’s campaign manager, giving the lie to Schwarzenegger’s claim that he will kick the special interests out of Sacramento. He is, in fact, a tool of those very same special interests.
“Admonished by his advisers not to make news out of the box, Mr. Schwarzenegger left his campaign chairman, Pete Wilson, the former California governor, to attack Mr. Davis as an incompetent spendthrift, and lesser political minions to explain his personal finances to a press corps demanding details, any details.”
(“In Full Field, It’s All About Schwarzenegger” by Charlie LeDuff and Alan Feuer; The New York Times; 8/11/2003;.)
2. Bush’s Svengali Karl Rove was apparently among those who helped to anoint Schwarzenegger as the standard bearer for California.
“. . . From what we’ve heard, the Republican hierarchy—especially those close to former Gov. Pete Wilson—would favor Schwarzenegger. At least that’s the word that came out of the Bohemian Grove this past weekend, where a number of state and national GOPers, including presidential adviser Karl Rove, happened to have gathered at a club getaway . . .”
(“Matier & Ross: Schwarzenegger to Decide”; San Francisco Chronicle; 7/23/2003; p. A21.)
3. Beginning the discussion of the deliberate manipulation of California’s deregulated electricity market, the program chronicles a startling fluctuation of rates in 1998. The author of this important, incisive article observes that this was apparently a test of the “power lifting” that destabilized Davis and boosted Schwarzenegger in a position to move to Sacramento. “This story begins with the California energy crisis, which started in 2000 and continued through the early months of 2001, when electricity prices spiked to their highest levels. Prices went from $12 per megawatt hour in 1998 to $2000 in December 2000 to $250 in January 2001, and at times a megawatt cost $1,000.” (“Fraud Traced to the White House: How California’s Energy Scam Was Inextricably Linked to a War” by Katherine Yurica; The Yurica Report; p. 1; available online at www.yuricareport.com/PoliticalAnalysis/FraudinWhiteHouse.htm .)
4.
“One event occurred earlier. On July 13, 1998, employees of one of the two power-marketing centers in California watched incredulously as the wholesale price of 41 a megawatt hour spiked to $9,999, stayed at that price for four hours, then dropped to a penny. Someone was testing the system to find the limits of market exploitation. This incident was the earliest indication that the people and the state could become victims of fraud. The Sacramento Bee broke the story three years later, on May 6, 2001. Today, Californians are still paying the costs of the debacle while according to state officials the power companies who manipulated the energy markets reaped more than $7.5 billion in unfair profits.”
(Idem.)
5. California’s “energy crisis” apparently served as a foundation for disgraced Enron chairman Kenneth Lay’s pivotal recommendations to Vice-President Dick Cheney’s energy policy task force.
“In April of 2001, Ken Lay handed Dick Cheney a two-page memorandum recommending national energy policy changes. The memo contained Enron’s positions on specific, rather technical issues, which were presented as a ‘fix’ for the California crisis. (Enron brazenly advised the administration not to place price caps on energy, which would be precisely the request California officials made to the president, and which the President and the Vice President would just as brazenly deny until public pressure forced them to capitulate.)”
(Ibid.; p. 2.)
6. Former Bush (Senior) secretary of state James Baker presided over an advisory report that also appears to have been central to Cheney’s energy directives.
“On October 6, 2002, a newspaper in the UK published a little known article about Mr. Cheney’s advisers. According to Neil MacKay, an award-winning journalist, writing for Scotland’s Sunday Herald, Dick Cheney commissioned an energy report from ex-Secretary of State James Baker III. The time of this ‘commission’ is not reported, but since the members of the appointed task force held three videoconferences and teleconferences in December, January, and February 2000–2001, Cheney therefore logically contacted Baker some time prior to the December 2000 meeting—during the presidential transition period.”
(Ibid.; p. 3.)
7. Baker’s law firm is the legal counsel for the Bin Laden-connected Carlyle Group. In addition, the firm is representing Saudi Prince Sultan in a trillion-dollar suit filed by the survivors of the victims of 9/11.
“James Baker was uniquely situated to fulfill Cheney’s commission, for among the many hats he wears, he is legal counsel to the Carlyle Group, one of the nation’s largest defense investment firms whose board consists of former high level government officials, including George Bush, Sr. Baker was also the ‘hired gun’ for George W. Bush’s campaign in Florida, along with Karl Rove. But among the hats he wears, none is more valuable than his ability to become invisible and leave no fingerprints behind. James Baker courts the press and is hailed a statesman; he also serves as the honorary chairman of the James Baker III Institute for Public Policy at Rice University, a think tank that was involved in aiding the George W. Bush presidential transition teams.”
(Idem.)
8.
“Equally intriguing is the fact that Baker has ties with both the Bushes and Ken Lay. Years earlier, in 1993, after Baker stepped down from his stint as Secretary of State, he and Robert A. Mosbacher—Bush senior’s commerce secretary—signed a joint consulting and investing agreement with Enron. The two men began a lucrative career making joint global investments with Enron on natural gas projects. Baker Botts LLC, James Baker’s law firm, flourished in its specialty of international oil and gas counseling.”
(Idem.)
9. Ken Lay was not the only energy-industry high roller to participate in the Baker task force.
“Since Baker walked in their circles, when he set out to select an energy team to advise the White House, he filled it with leaders of the oil, gas, and power industries. Three appointees stand out: Kenneth Lay from Enron, who was working on the Bush energy Transition team under Dick Cheney at the time; Chuck Watson, the then Chairman and CEO of Houston’s Dynegy Inc., and Dynegy’s General Counsel and Secretary, Kenneth Randolf. Both firms were deeply involved in illegally manipulating the California energy market at the time and eventually faced criminal investigations.”
(Ibid.; pp. 3–4.)
10. The California “energy crisis” appears to have played a key part in the recommendations of the Baker energy advisory group.
“The Baker energy task force produced a report titled, Strategic Energy Policy Challenges for the 21st Century, dated April 2001. There is no mistaking the fact that reasonable, detailed and important expert advice is meted out to the new president. However, this amazing 107-page report strikes a drumbeat for action that grabs the reader as it propels a picture of a naked, energy-scarce nation, subject to energy shortages and price fluctuations, across its pages. Contrasting the state of what is, against what should be, and mercifully making powerful recommendations that will ‘save our economy,’ it offers warnings such as: a sharp rise ‘in oil prices preceded every American recession since the late 1940’s.’ ”
(Ibid.; p. 4.)
11.
“The California energy crisis is raised again and again, along with the prophecy that America can expect ‘more California-like incidents’ in the future. There’s even a connection made between the California crisis and the Middle East, which according to the report, ‘will remain the world’s base-load supplier and least expensive source of oil for the foreseeable future.’ With that prophetic utterance, the stage is now set for a new actor, a new villain, and a new energy policy. . . .”
(Idem.)
12. Although it is not covered in detail in the broadcast, the Bush energy policy also had profound foreign policy recommendations, focusing on Iraq, among other issues. The broadcast reviews the disturbing observations about the potential usefulness of “A New Pearl Harbor” in a paper by the Bush-connected Project for a New American Century.
“ ‘The history of the 20th Century should have taught us that it is important to shape circumstances before crises emerge and to meet threats before they become dire.’ In fact, on pages 51 and 67 of the institution’s intellectual centerpiece, Rebuilding America’s Defenses, the authors lament that the process of transforming the military would most likely be a long one, ‘absent some catastrophic and catalyzing event—like a new Pearl Harbor.’ (How unfortunate for Americans, they got their needed event on September 11, 2001.)”
(Ibid.; p. 5.)
13.
“One of the most striking facts about the national report is that it makes 110 references to California’s energy crisis, which was ninety-nine more than the Baker report makes. Clearly, someone in the White House needed an impressive energy crisis to tout. How unfortunate that the crisis cited was fraudulently induced. Like the Baker report, the national report states, ‘The California experience demonstrates the crippling effect that electricity shortages and black outs can have on a state or region.’ Warnings abound: ‘America in the year 2001 faces the most serious energy shortage since the oil embargoes of the 1970’s.’ The 110 repetitions of the word ‘California’ linked with words like ‘energy crisis,’ and ‘energy shortages and price spikes,’ could turn the national energy report into an ad man’s prized primer.”
(Ibid.; p. 6.)
14. Reversing direction, the author (s) of one of the passages in the report reveals the he (or she) is aware of the true nature of California’s manufactured energy crisis.
“Notwithstanding its importance as an example of what could happen to other states, the author of a passage (at page 5–12) of the national report suddenly yields to an impulse to relate what really happened in California. In doing so, he completely contradicts at least 105 references to California throughout the report. The significance of this contradictory entry into the National Energy Policy must not be underestimated.”
(Idem.)
15.
“In the process of reversing the carefully construed ‘California experience,’ the author’s grasp exceeds his knowledge in that his understanding of the events in California go beyond what he should have reasonably known at the time of its writing. For he wrote, ‘The risk that the California experience will repeat itself is low, since other states have not modeled their retail competition plans on California’s plan.’ This is an astounding statement. If the California crisis was caused by a supply shortage as the author claims a line above this sentence, surely other states could suffer similar shortages. But no, the author is actually making an admission here: he is admitting the energy crisis in California can’t be replicated in other states because certain market means do not exist in the other states. How could the author know this? The writer of that sentence would have to be someone intimately involved in the California system; know the real cause of the state’s crisis; and be familiar with all the other state rules and market infrastructures.”
(Idem.)
16. Ms. Yurica discusses yet another revealing reversal of direction by the author of the report.
“But our knowledgeable author is not done. In trying to amplify what he just revealed, he tried to hide the true actors in the next sentence by misdirecting the reader away from the culprits to blame the state. This is a formula for incoherence. Nonetheless, the writer’s sentence found its way into the national energy report where it spoke for the Bush administration: “California’s failure to amend its rules, along with the flawed rules themselves, somehow had an independent power to ‘drive up wholesale prices,’ without an intervening acting agent. The only sensible reading left to us is that the flawed rules allowed power brokers to manipulate the system. But how could our author and his administration editors know this to be true without being in collusion with the wrongdoers? If they were not in collusion they would have reported the crime. But if they remained silent when they had a duty to report or stop the commission of a crime, they became accessories.”
(Ibid.; pp. 6–7.)
17.
“Continuing his unexpected analysis, the author tells us, ‘Actions such as forcing utilities to purchase all their power through volatile spot markets, imposing a single-price auction system, and barring bilateral contracts all contributed to the problems that California now faces.’ This is nothing more than the author, and through him the White House, attempting to throw responsibility for any wrongdoing by energy companies in California squarely at the feet of the state.”
(Ibid.; p. 7.)
18. Philosopher George Santayana stated that, “Those who forget the past are condemned to repeat it.” Foreshadowing the actions of George W. Bush’s energy-industry cronies in California, the petroleum industry, the Saudis and George H.W. Bush’s CIA helped to destabilize Jimmy Carter’s Presidency.
“The sources we interviewed for this chapter say that the oil industry had a well thought out scheme to deceive the president and control U.S. policy in the Middle East. The first part involved intelligence falsification on a grand scale. This was no small-time Angleton Vessel forgery. This time, our sources insist, the president of the United States was to have his ‘pants scared right off him.’ The CIA was used to produce phony oil data to show that the world’s two greatest oil producers, the Soviet Union and Saudi Arabia, were running out of oil. The Soviets would be forced to fight the United States for control of Middle Eastern oil.”
19.
“It is hard to recall why he [Jimmy Carter] was so despised when he ws in office. Much of it has to do with the secret history of oil politics. Even during the 1976 election campaign, the oil companies viewed the Democratic candidate as Public Enemy Number One. Carter certainly had some radical ides about energy policy, which made the oil companies fearful for the future and their profit levels.”
(Ibid.; p. 333.)
20.
“ ‘The whole phony scheme—the oil shortages, the predictions about Soviet troops in the Middle East, the Saudi arms buildup—all of that crap started coming out of the agency back in ’76. The CIA told their boss what he wanted to hear, and in those days, the head of the CIA was an oil man.’ ”
(Ibid.; p. 334.)
21.
“According to several of our sources, the scheme to manufacture phony CIA estimates and push them on Carter began in the last days of Gerald Ford’s term. They claim that a cabal within the CIA realized that Carter would be the new president, produced the first phony report, and then promptly gave it to Carter as soon as he won, knowing how it would affect his view of the energy crisis. It should be recalled that George Bush was the director of the CIA at the time the oil scam was put in place in 1976. There is some evidence to suggest that it was Bush himself who passed the fake oil estimates to Carter. In the immediate aftermath of Carter’s win, Bush traveled to Plains, Georgia, to brief the incoming president.”
(Ibid.; pp. 334–335.)
22.
“ ‘Don’t you get it?” asked one of our sources. ‘The gas shortage during the Carter administration was as phony as the CIA’s prediction about the Soviet oil shortage. The god damn Middle East was swimming in oil during the Carter administration, but less and less of it ws shipped to America. For chrissakes, there was so much oil in South America that they had to shut down refineries I the Caribbean to keep it away from the U.S.”
(Ibid.; p. 353.)
23.
“Under the Republicans, lucrative arms factories sprouted in what had previously been rural democratic states. The votes went where the jobs were. In the course of the Reagan-Bush administrations, the defense budget was increased to a point where more money was spent on arms than in all the wars in U.S. history combined. To accomplish this massive defense buildup, the Reagan-Bush administrations borrowed three times more money than all U.S. presidents combined The largest debt in American history was based on the faulty premise that the Soviet Union was going to attack the Middle East.”
(Ibid.; p. 355.)
Is Schwazi tied in with the Hapsburg boy’s UNPO.... did he get Maria through the Dalai Lama gimmick, or seek her for the Dalai Lama politicization gimmick? Maybe you noticed how one of Schwazi’s first trips was to Taiwan to thank his EEasia-Underworld alliance backers who are riding pretty in California now, as they did under Chicago Mafia Peet Wilson. Did you already cover Schwazi’s connections to Fritz Companies who puppeteered Walmart for several years, and whose HQ was in Germany and which is now tied with the Nazifying Cal Green Party along with the German CIIS professor who played Bluebird/Ultra with Timothy Leary?
Isn’t it likely that Pres Schwazi is the Hapsburg’s man in Sacto? He was at one time trying to buy the state’s new green technology from German manufacturers for a bloated price.
Ah, energy-market fraud: The Gentleman’s choice for sticker shock:
Oh no!!!! There’s a oil glut coming due to new refineries opening up around the world. No worries, though. The market is expected to ‘correct’ this problem with a series of refinery shutdowns:
Problem solved.
But, but, but they did nothing wrong!
Maybe JP Morgan felt it was justified ripping off the public using an energy trading firm that it acquired during the Bear Stearns collapse given what a rip off that whole deal was? Not that it would revenge for the deal. Quite the opposite. Just business as usual.
This is exactly the kind of bold regulatory enforcement that makes corrupt banksters everywhere shake in their boots. With glee:
Here’s an article about the ongoing drought crisis across the US Southwest that raises a very chilling possibility: The increasingly hands off nature of the private market for water sales is creating the kind of situation that is eerily reminiscent of Enron:
“The maximum volume that could change hands through the 38 transactions is 730,323 acre-feet, which is about 25 percent of what the State Water Project has delivered to farms and cities in an average year in the last decade”. 38 transactions could transfer 25 percent of what the State Water Project delivers annually. That’s a rather huge chunk of a market a for an absolutely vital natural resource to be operating with less and less oversight, especially when entire towns are competing for that resource. So are rolling ‘blueouts’ going to replace the rolling ‘blackouts’ of yesteryear in California? Maybe, although the blueouts won’t exactly be replacing the blackouts...
Here’s a story that’s so eerily familiar to past stories of this nature you have to wonder if it’s the same people writing the script:
A brutal winter weather system hitting much of the US brought a mix of crushingly low temperatures and record high spot prices for electricity jump to Texas over the weekend. Electricity spot price spiked more than 10,000% on Monday, to $11,0000 per megawatt. Yes, electricity prices jumped 100-fold on Monday in Texas, and that’s after spiking throughout the weekend, with no relief in expected until the weather system passes:
So what caused this record 10,000% price spike? Well, in addition to the low temperatures increasing demand for heating fuel, it sounds like a big part of the problem is the freezing rain forcing the shutdown of wind turbines. That wind turbine, in turn, has forced electricity suppliers to buy electricity on the spot market. And this convergence of factors has created a multi-day-long record price spike. An extended price spike that has energy traders referencing the California power crisis of 2000–2001.
Recall how the California power crisis was heavily orchestrated by the energy industry and Bush administration and designed to fleece the public. It’s that kind of history that should prompt us to ask whether or not the people of Texas are getting the ‘California treatment’ by the energy industry. After all, the alternative explanation is that the electricity sector simply didn’t foresee what kind of short-term impact freezing rain could have on the electricity markets. Is that plausible? Are we experience an unforeseeable event? Or a highly foreseeable inevitability? Because if it’s the former, a 10,000% price spike might be somewhat understandable. But if this is the latter scenario, and this kind of circumstance was something that would predictably happen periodically, we have to then ask if the preparations taken in advance of this weather system were preparations to maximally exploit a record price spike. It’s not like it would be unprecedented:
“Traders said they’ve never seen electricity trade on Texas’s grid for thousands of dollars for such a sustained amount of time. They drew comparisons between this week’s price surges to the records set on the Midwest grid in 1998, and to the California energy crisis that sent power prices skyrocketing and blacked out hundreds of thousands of homes and businesses two decades ago.”
Traders have seen Texas electricity grid price spikes. But never thousands at these prices for this period of time. It’s so unprecedented it drew comparison to the California energy crisis. A comparison that’s also a pretty big warning sign that something foul is afoot.
Also note that it sounds like prices could get even worse because around half of the wind turbines are still operating, and generating at levels above expectations. How high is the price going to get if more of those turbines shut down? We’ll find out!
Keep in mind that if around half the wind turbines were still running, that raises the question of whether or not we’re seeing more turbines shut down than necessary, creating an artificial shortage. Now, you would assume that power generators aren’t going to be interested in not running turbines when they are contractually obligated to pay record high prices to make up the difference. But that’s why understanding the relationships between the different players in this market is crucial to understanding what might have happened here.
Also note how the prediction on Sunday was that spot prices were expected to his $9,000/megawatt on both Monday and Tuesday:
And as we saw above, the spot prices actually hit $11,000/megawatt on Monday. So this record price surge is exceeding the jaded expectations of the energy traders who were watching with amazement over the weekend.
So, again, we have to ask: is this purely just bad luck associated with bad weather? Or are we looking are something more organized and malicious? Someone ended up making obscene amounts of money over the last few days at the expense of the Texas public. Who are these big winners, and what relationship do they have to people who made the decisions that created this market dynamic? And as the following Houston Chronicle article from November 2019 makes clear, we don’t get to know those details. Texas’s electricity market is designed by the industry and designed to be intentionally opaque and confusing to consumers. It’s also designed to facilitate market manipulation.
Yes, the way the wholesale electricity market works, power generators are constantly bidding to provide electricity in 5–15 second intervals. In other states, this bidding process is immediately transparent. But in Texas, the bids are kept secret for 60 days and companies that withhold power from the market are not publicly disclosed, whether the hold back in power was planned or unexpected. Finally, the Electric Reliability Council of Texas (ERCOT) that oversees this market is run by the industry itself. In other words, Texas’s consumer electricity markets were designed for legal market manipulation that remains hidden by the public:
“But in Texas, where electricity deregulation was touted as unleashing the power of free enterprise, power markets tend to be more like frosted glass than clear panes. The murkiness extends from retail plans with confusing pricing and terms to wholesale markets, where bids are kept secret, to transmission, where the biggest commercial and industrial power users can game the system to push costs onto small businesses and households.”
The deregulated market was supposed to bring transparency and lower prices. Instead it made the markets more opaque and more expensive. Surprise!
And note that Texas has been carrying out this experiment in deregulated markets for two years now, so this isn’t an issue of working the kinks out of the system. These problems are features, with perhaps the biggest feature being the ability of power generators to keep their bids secret and even withhold power from the system for any reason. It’s the perfect set up for exactly the kind of spot price spike we’ve seen:
And this potential for market manipulation isn’t a hypothetical. Texas experience that back in May of 2019, when the spot prices jumped from $40 to $9,000 per megawatt as a result of a two minute data error that show 4,000 megawatts going offline, making the power companies an $18 million. But, more importantly, making tens of millions of dollars more from futures contracts. That’s another aspect this story: the ability legally manipulate the market creates all sorts of possibilities for exploiting the financial markets tied to these prices. And this May 2019 incident only came to light because a California-based company, Griddy, saw the problem and promised to rebate customers:
So if Griddy hadn’t alerted the public to this sudden spike, would anyone have informed the public it happened at all? It raises the question of how often are these kinds of spikes happening without the public taking notice? We don’t get to know. By design. But thanks to Griddy’s public disclosure, we can confirm that the current price surge isn’t without precedent. The May 2019 price spike was a powerful precedent, that includes the precedent of all of the companies involved getting away with it and remaining anonymous to this day. The perpetrators made millions and got away with it. It had to be a pretty tempting precedent for the industry to repeat.
Also recall that this is all coming less than a year after the record spike in oil storage prices that temporarily created negative oil prices in April of 2020 as the plumeting price of oil and a storage space crunch in Cushing, Oklahoma, created a historic drop in the price of oil where people were literally being paid to access delivery of free oil. We still don’t know what actually happened during that event and whether or not market manipulation was taking place.
So we’ll see how much longer this current electricity emergency goes and how high this record price surge ultimately gets. But what we can predict with confidence at this point is that Texas is going to see a lot more price surges like this going forward. It’s a feature.
We’re getting more details on the ongoing record 10,000% electricity price surge and massive power outages inflicting Texas right as much of the US comes under the grip of a brutal cold weather front. Let’s just say the mystery of why prices surged so high and have remained that high for days is still a mystery, but it’s a different kind of mystery:
First, recall how the blame for this price surge was placed on freezing rain locking up larger numbers of wind-turbines. It was a somewhat puzzling explanation because we were told half the turbines were out of commission, but the other half were still operating and actually generating electricity at above expected levels. Also recall how Texas’s consumer electricity market was basically set up by Texas’s power industry and was built to be opaque, confusing, and open to manipulation, like the fact that power suppliers can withdraw power from the Texas power marketplace for whatever reason and not have to provide an explanation. So the big question facing Texas now isn’t whether or not it should have experienced a price surge. The brutal cold and massive size of the weather pattern ensured prices were going to surge. But is a sustained multi-day 100-fold price surge justified? If not, is this opportunistic price gouging or something worse and more organized? Those are some of the questions posed by ongoing power crisis that could go on for days.
But we are getting some answers as to the causes of the massive shortage in available power. It turns out the wind turbines were getting unfairly blamed and Texas was seeing power withdrawn from across the spectrum:
We are now told the emergency was declared shortly before 1 AM Monday after 30 gigawatts of power had been removed from the system. Now, as we’ll see, the entire Texas windfarm industry generates 30 gigawatts of power in the summer when it can operate at peak capacity, and generally produces less in the winter, so the grid clearly wasn’t relying on a full 30 gigawatts of power from wind. Plus, half the turbines are still running and producing even more power than normal. So there’s no way that 30 gigawatt drop could be attributed to wind alone. Instead, Texas experienced a pull back in electricity from natural gas (pipes were freezing), coal plant (operations were halted), and even a nuclear power generator was taken offline.
The nuclear power plant issues were notable in that you had one of the generators at the South Texas Nuclear Power Station go offline due to cold-related issues but the other reactor at the same plant stayed up. We’re told the feedwater system, a non-nuclear component of the plant, in Unit 1 was impacted by the weather but there was never any danger. Keep in mind that the South Texas Nuclear Power Station is partly owned by the cities of San Antonio and Austin, but the biggest shareholder is private energy giant NRG Energy. And NRG Energy is involved in a lot more than just nuclear energy. So when we have to ask questions about whether or not Unit 1 was taken offline for valid reasons — and not an attempt to squeeze the market — we should keep in mind that we’re talking about entities that are so large their nuclear operations are just one component of a much energy empire well positioned to exploit record high prices.
There’s another factor in all of this: Texas is unusual in that its grid isn’t widely connected to surrounding states. Keep in mind the warped nature of Texas’s consumer energy markets that were seemingly designed by the energy industry for the purpose of making the markets less transparent and more confusing. Cutting Texas off from surround states’ energy markets may have been part of the price for setting up a system seemingly designed to fleece the public.
Finally, it’s worth noting one of the other aspects of Texas’s bizarre electricity markets that’s now getting the blame for the widespread blackouts: The prices apparently haven’t been allowed to surge high enough for long enough. That was the opinion of Texas’s Public Utility Commission, which observed that Texas’s energy prices were sometimes well below the $9,000/megawatt hour state price cap even as blackouts were rolling across the state and blamed the non-capped-out prices for being the reason power was being withheld from the generators. The Public Utility Commission is ordering the Electric Reliability Council of Texas (ERCOT) to ensure that prices reflect the severe power shortage.
Yes, you read that right. The Public Utility Commission observed that the price of electricity wasn’t always at the $9,000 per megawatt hour cap as the blackouts rolled on, sometimes falling as low aw $1,200. And based on that, the Public Utility Commission is ordering ERCOT to keep the prices jacked up to the cap in order to incentive power providers to keep providing that power. In other words, the Public Utility Commission is basically coming out and admitting that Texas’s power generators are withholding available production capacity! Only if the production capacity is brought up to the maximum allowed $9,000 megawatts per hour will those power generator supply the necessary electricity to stop the blackouts.
Also recall how we already saw how ERCOT itself is basically run by the the private energy industry. So the Texas Public Utility Commission ordered its industry shill energy regulator to shill harder.
Ok, first, here’s an Ars Technica article that wind turbines can’t possibly be blamed for the blackouts. But what can be at least partially blamed is the fact that Texas is very unusual in that its electricity grid is not actually integrated with surrounding states. In other words, Texas’s resident are a captured market:
“Texas is unusual in that almost the entire state is part of a single grid that lacks extensive integration with those of the surrounding states. That grid is run by an organization called ERCOT, the Electric Reliability Council of Texas, a nonprofit controlled by the state legislature.”
Texas is an odd duck. It’s like the state is preemptively preparing to secede, starting with its energy grid. And as a result, if Texas’s energy generators have a really bad day or week, the state goes dark. And you can’t blame that on wind:
Now here’s a Houston Chronicle piece that gives us more details on what exactly took down one of the two nuclear reactors at the South Texas Nuclear Power Station. It also gives us an idea of how the state of Texas is planning on responding to the emergency: by ensuring that electricity prices state as high as possible for as long as possible in order to incentivize power generators to sell what they’re holding back:
“Andrew Barlow, a spokesman for the PUC, said the relatively low prices could have meant that available power was not making it to the grid, despite the shortages.”
In the words of the Public Utility Commission’s own spokesman, there is available power in the system but it’s not making it to the grid because prices aren’t always being maintained at the maximum $9,000 megawatt/hour price. That’s the reason for the blackout. The reason isn’t that the power capacity doesn’t exist. The companies aren’t providing it at less-than-record prices and the Public Utility Commission is going to order ERCOT to ensure those record high prices are paid:
So with that admission in mind, how are we to interpret incidents like the taking one of the two nuclear generators offline at the South Texas Nuclear Power Station:
We’re told there was never a danger. So we have to ask: did they take down the plant because prices weren’t high enough?
Granted, safety really should be a top priority at a nuclear plant, just as it should be the top priority for coal and natural gas and every other form of electricity production. And extreme weather is obviously the kind of situation that can lead to legitimate shutdowns over safety concerns. But that’s simultaneously what makes an extreme weather event like this a remarkable opportunity for the energy industry in Texas. Because weather events are some of the few things potentially large enough to impact the entire power generating market in Texas at the same time and we already know that Texas’s electricity market has been criticized for being vulnerable to manipulation from power generators withhold energy from the system and squeezing the market. That makes extreme weather a real opportunity for Texas’s energy industry. All they need to pull it off is cooperation. As long as everyone pulls back supplies from the market at the same time, the prices go wild and everyone wins. Think about it: the production capacity dropped by about 1/3 and prices spikes 100-fold. Texas built for itself the kind of energy markets that actually strongly incentivize the entire industry to collude.
So we’re going to see who ultimately ends up taking the blame for this unfolding disaster in Texas. Wind took the brunt of the initial blame, but that story isn’t holding up. Someone else is going to take the blame and, based on the statements from the Public Utility Commission, it looks like ERCOT might take the blame...for not jacking prices up enough. But if we’re looking at an instance of seriously widespread industry collusion to withhold power from the grid, keep in mind that it would be the kind of mega-scandal that America has routinely proven utterly incapable of seriously dealing with. So if this really is a case of a massive widespread and deadly industry-wide act of collusion, definitely expect wind take the blame in the end. That’s really the best we can do.
With the massive winter storm continuing to inflict massive and deadly blackouts across Texas at the same time the state electrical grid experiences record high price surges, here’s another look at the how the Texas electrical grid was specifically designed to allow the power generators to create massive price surges with legal impunity. The article is about the May 2019 price surge where, in a matter of minutes, the price for a megawatt hour of electricity jumped from $40 to $9,000. The price surge only lasted a few minutes but that was long enough for the power providers to make an extra $18,000,000 in direct profits and tens of millions of dollars more from futures contracts. The incident turned out to be a perfect example of how Texas’s energy markets were designed to be delicate. In this case, the incident was triggered when a power provider from California, Calpine, accidentally sent information into the state’s grid manager that erroneously showed around 4,000 megawatts of generation capacity coming offline. That erroneous data, sent by an out-of-state provider, broke Texas’s electricity marketplace. That’s all that was required.
So how to what were the consequences of this market breakdown that was induced by a single out-of-state operator? Well, within a few hours of the incident, the Electric Reliability Council of Texas (ERCOT) announced that it was NOT going to retroactively correct the prices and the operators could keep their millions of ill-gotten gains. It’s pretty scandalous, but not as scandalous ERCOT’s justification for the decision: ERCOT reasoned that because it receives erroneous information from power generators so frequently, once a day on average, there’s no way it can correct the prices paid whenever these kinds of incidents happen because that would cause market instability and price uncertainty. Yes, ERCOT reasoned that it can’t do anything to correct market manipulation from incorrect data because this ‘accidental’ manipulation is so frequent that addressing it would cause market instability. Take a moment and think about that.
We also learn that that $9,000/megawatt hour maximum price cap is actually 9‑times what it was when Texas started this deregulated electricity marketplace 20 years ago. Originally, the cap was $1000/megawatt hour, but the Texas public utility commission raised the cap to $3,000 in 2012, $5,000 1n 2013 and $7,000 in 2014. The most recent adjustment in 2015 took the cap to $9,000. So over the last 8 years, Texas raised the maximum cap on the electricity prices by 900%. It’s a fun fact worth keeping in mind when reading about the 10,000% price surge that just took place a couple days ago and a reminder that, again, Texas designed its system to allow for massive price surges. When the head of the Texas Public Utility Commission just blamed the blackouts on the fact that ERCOT wasn’t always allowing the prices to spike all the way up to the $9,000/megawatt hour cap, that’s a big clue of how the system is intended to work. It was designed to have a 100-fold price surge when put under stress. What’s happening in Texas today is what was supposed to happen.
But it gets worse. They even have a “small fish” rule that says power generators who control less than 5% of the market share are free to suddenly withhold power from the marketplace for any reason at all, the idea being that if they have less than 5% of the market they can’t impact the prices in any meaningful way. But as that May 2019 incident makes clear, the market is actually wildly fragile and a player with as little as 5% of the market share can induce wild price spikes at will. In 2019, there were 400 operators who fell under this exemption. 400 operators legally free to do whatever they want to manipulate prices.
So small operators can legally work to manipulate the markets, but what about the big operators? Well, they are basically absolved of responsibility too, albeit on a case-by-case basis. This was a result of Texas discovering shortly after they set up the marketplace 20 years ago that, yes, manipulation was rampant and large operators were jacking up prices by withholding power from the markets. in 20017, TXU, a subsidiary of Vistra Energy, was fined $210 million in penalties for these practices (later reduced to $15 million, the maximum allowed in Texas). As part of its settlement, TXU got new protections from future allegations of market manipulation. After that, other companies soon sought similar deals and now some of the biggest power generators in the state are legally protected from allegations of market manipulation. You read that correctly: Texas responded to rampant manipulation by giving the largest offenders legal protections against future charges for doing exactly the same thing.
Oh, and it also turns out that Texas is the only state with a deregulated electricity market in which generators are not paid for keeping generation capacity in reserve to meet peak demand. The Public Utility Commission also increased the amount producers could charge on high-demand days in 2019. Plus, under a state law passed in 2011, consumers, industrial users and retail electricity providers have no standing to intervene in negotiations involving potential market manipulation. Only the generator, the independent market monitor and the Public Utility Commission can get involved in these disputes.
So between the “small fish” rule and the “big fish” legal arrangements, Texas basically gave its power industry the power to withhold power from the markets in order to jack up prices with legal impunity...at the same time it raised the maximum cap in the prices Texas consumers could pay by 900% while doing nothing to ensure adequate capacity is there for high-demand days. Texas literally incentivized its power industry to withhold power during emergencies:
“The Calpine incident is far from isolated and unusual only in that the details have become public. Power companies have exploited weaknesses in the design of Texas’ deregulated market almost from the day it began operating in 2002 and often done so with few consequences, reaping windfalls that have cost consumers, traders, industrial customers and retail power companies hundreds of millions of dollars, according to court records, regulatory filings, market reports and interviews with analysts, commodity traders and other experts.”
That’s the big takeaway message from this May 2019 Calpine incident: it was unusual only in that the details have become public. What transpired was entirely typical and routinely done without consequence. Seemingly with the blessing of ERCOT and the Public Utility Commission. When Calpine’s erroneous data brake the market, ERCOT said won’t rectify the situation because such incidents happen once a day on average:
And yes, the information that the electricity marketplace relies on is exclusively provided by the generators themselves. In 5–15 second intervals. So withholding power for just a few seconds can have a dramatic impact on the prices. It’s brittle by design:
And then there’s the legal protections. Protections against future accusations of market manipulations given as part of the settlements for large offenders. It’s like Texas was asking them to please offend in the future:
And the “small fry” can do whatever they want to manipulate prices, under the premise that they can’t actually impact the market...despite empirical evidence that a single small operator, GDF Suez, appeared to single-handedly cause the prices to spice to $4,900 per megawatt hour in 2013:
And yet the smallest of the “small fry” in this situation — the consumers, legally have no standing to intervene in these price negotiations thanks to a state law passed in 2011:
And one year after that state law was passed, Texas began ratcheting up the maximum prices generators could charge, going from $1000 per megawatt hour in 2011 to $9000 today:
Finally, it turns out that Texas is the ONLY deregulated state in which generators are not paid for keeping generation capacity in reserve to meet peak demand AND they passed a rule in 2019 that allows generators to earn even more on high demand days. Again, this system was designed to break:
So when we look at Texas’s clusterf*ck of electrical grid, those early accusations that frozen windmills caused the blackouts do sort of hold water. One really can kind of blame the relatively small loss of power from the frozen windmills on the price spikes and blackouts. Just as one could blame gas, coal, nuclear, or any other component of the Texas electricity marketplace that wasn’t fully operational when this storm hit because that’s how fragile the Texas energy markets really are. Any ‘small fish’ (or ‘big fish’) can break it. With legal impunity. By design. The system is working as intended.
lots of moving parts as the commons are dismantled/demolished on purpose and replaced with monopolies.The governator in Kalifornia let ENRON off the hook....The largest nuclear facility in the US was in Waterford Connecticut...20 years ago two boilers were shut down due to waterside corrosion....no water testing...on steamships the engineers test the water daily...Texas nuke plant was taking untreated water out of the Colorado river and dumping it in the boilers with pumps and lines not insulated at all! Fragile? oh yes fragile on the regulatory as well as physical structure end...I built off the grid 20 years ago , solar/propane/firewood. cost more to set up but it paid off faster every time the prices of water or power went up!
The light at the end of the tunnel has yet to be turned on for the people of Texas suffering in the dark as the freezing blackouts roiling the state continue with no clear end in site. But we are getting a better idea of how Texas is going to move forward from this disaster by looking back at how Texas dealt with the last time this happened.
Yes, for all the attempts to spin this as an unprecedented event, this kind of vicious winter storm is actually a highly precedented and predictable event for Texas. That was take from Ed Hirs, an energy fellow at the University of Houston, who points out in the article below that Texas is known for having a really nasty winter every 8 to 10 years. It’s not exactly clockwork, but it’s predictable. And it was exactly 10 years ago when we saw Texas suffer from the exact same cascade of systemic failures. Quite simply, Texas in 2011 was like Texas today: completely unprepared for a nastier-than-average winter resulting in days of blackouts.
So what did Texas recommend after that 2011 winter weather disaster? All of the things they’re recommending once against today that never happened like weatherizing the infrastructure and incentivizing producers to have extra reserve capacity. A long list of recommendations were made but they were only recommendations. Nothing was mandated so nothing changed.
But that’s not to saying nothing changed between 2011 and 2021. Don’t forget that when Texas created this deregulated marketplace 20 years ago, it had a $1,000/megawatt hour cap on the prices generators could charge. But in 2012, they raised the cap to $3,000, $5,000 in 2013, $7,000 in 2015 and $9,000 in 2015. So the Texas ‘regulators’ did actually take steps to prepare for the next disaster. They prepared for the same blackout disaster to predictably happen again when the next nasty winter storm hits but with a much higher price to consumers.
And what about concerns that Texas set up their system to give power generators the ability to withhold power from the marketplace during times of high demand in order to generate price spike with legal impunity and the obvious possibility that generators have been withholding power during the current crisis in order to keep rates high? Recall how the head of the Texas Public Utility Commission actually blamed the initial rolling blackouts on the Electric Reliability Council of Texas (ERCOT) NOT allowing prices to stay near the $9,000 cap for sustained periods, resulting in generators holding back power from the market, which is an implicitly admission that generators were withholding power to jack up prices. Will any of that be investigated?
Well, here’s a hint: ERCOT CEO Bill Magness was asked about the possibility that power generators who purchase natural gas on the wholesale market had a profit motive to stop buying natural gas and instead just shut down after the price of natural gas kept climbing. Keep in mind that Texas’s electricity market is run on bids for just 5–15 seconds of power generation so prices are extremely short-term and highly volatile during times of stress, which could make buying expensive natural gas a dicey proposition if the plan is to resell it while retail prices are still elevated. Magness responded to the question by asserting that, “We can’t speculate on people’s motivations in that way.” In other words, the idea that power generators were intentionally withholding supplies from the market is officially an unthinkable idea for the regulatory body that’s going to be investigating this mess, despite Texas designing their system specifically to allow generators to withhold supplies with legal impunity and despite a long history of power generators engaging in exactly that behavior. Also keep in mind that when the Texas Public Utility Commission blamed the blackouts on ERCOT NOT allowing prices to stay at the $9,000 cap for sustained periods in order to incentivize generators to sell into the system, power generators shutting down natural gas-powered electrical plants would be consistent with that scenario, which also raises the question of whether or not natural gas price manipulation could be playing a role here. But, of course, that’s not actually going to be investigated because nothing is going to be investigated:
““Every one of our sources of power supply underperformed,” Daniel Cohan, an associate professor of civil and environmental engineering at Rice University in Houston, tweeted. “Every one of them is vulnerable to extreme weather and climate events in different ways. None of them were adequately weatherized or prepared for a full realm of weather and conditions.””
Every single one of Texas’s sources of power underperformed. A true system-wide failure. During the summer, the grid has 86,000 megawatts capacity, dropping to 67,000 in the winter as solar and wind become less efficient. So 21,000 megawatts are normally missing during the winter, mostly coming from solar and wind going offline. But for this event, 46,000 megawatts was missing meaning an extra 25,000 megawatts went away. And when we look at the composition of the missing megawatts, we find only 18,000 missing from solar and wind but 28,000 missing from natural gas, coal, and nuclear plants, Based on those numbers, it seems like solar and wind are the least culpable factors here:
And we can’t say the state wasn’t warned. This exact disaster happened 10 years ago. Utilities even had a warning about this week’s nasty weather last week. The current disaster is right on schedule:
But when faced with the question of whether or not power generators may have actually pulled out of the market right in the middle of these rolling blackouts, we’re told that it’s unthinkable. ERCOT can’t bring itself to speculate that the profit motive may have been the driving factor here:
And that refusal by ERCOT to speculate on the motivations of power generators raises the obvious question: so what motivation do the members of ERCOT actually have to keep Texas’s electrical grid up and running? It’s a rather crucial question given that disasters of this nature have proven to be wildly profitable disasters for the energy industry. Here’s a partial answer: 5 of the 15 ERCOT board members don’t actually live in Texas. So for at least a third of the ERCOT board, the Texas grid can go down forever and they’ll be largely fine. Oh, and it turns out three of those 15 members were also members back in 2011 when ERCOT studied the last winter disaster. Also, current CEO Bill Magness, who refuses to speculate on the motives of the power generators, just happened to be ERCOT’s Vice President, General Counsel and Corporate Secretary in 2011. So 5 of the ERCOT board members don’t actually live in Texas and another 3, plus CEO Bill Magness, were in charge the last time this happened and did nothing about it. It not exactly a model of leadership:
“A KXAN analysis of ERCOT’s board revealed a total of five members do not live in Texas. Along with Telberg and Cramton, board members Vanessa Anesetti-Parra, Terry Bulger and Raymond Hepper do not appear to live in the Lone Star State.”
A third of the ERCOT doesn’t actually live in the state. It’s the kind of set up one might expect from a system designed by and for the industry. So at least those 5 out-of-state members are presumably comfy in well-heated residents right now.
And three of the ERCOT members, plus the CEO Bill Magness, were part of the 2011 ERCOT team that dealt with the last time this happened. It doesn’t bode well for the integrity of any upcoming investigation into what preparations did or didn’t happen:
In the plus side, at least we can say those long-standing 4 board members are going to have experience with these kinds of investigations. Of course, that is going to be experience doing nothing other than making recommendations that the industry just ignores. Recommendations like actually preparing the infrastructure for these highly predictable weather patterns. About once a decade this is going to happen. It’s not a mystery:
Also keep in mind that with climate change, we can also predict with confidence that future winter weather disasters will be predictably even worse than what Texas has experienced in the past. In other words, we can reasonably predict that Texas is probably going to have increasingly unpredictable winter weather that still predictably hits even more frequently. Oh, and don’t forget that the growing intensity of Texas’s summers from climate change make the prospects of the grid being overloaded that much more likely, even with the higher summer generating capacity. This isn’t just a prelude to more lethal winters.
And just as periodic weather disasters are something we can reasonably predict for Texas, joke investigations and cover-ups of the resulting weather disaster is something we can empirically predict too. We don’t know how exactly this investigation will be undermined and ignored. But this is Texas. The recommendations will ultimately be undermined by the industry and largely ignored one way or another.
So what does the future hold for Texas’s electrical grid? We can’t predict that exactly. Except that it will be disastrous. And incredibly profitable. We can be pretty confident of that.
The lights are steadily coming back on and staying on in Texas as the state’s electrical grid belatedly picks itself back up after collapsing during the extreme cold of the last week. And as we probably should have expected, the more we learn about the cause of the system-wide failures the more it looks like the initial blame thrown at frozen wind turbines was not just unfairly mischaracterizing the performance of wind during the storm — wind did just fine — but it was also obscuring the biggest culprit the blackouts: natural gas, by far the largest component of Texas’s energy reliance that provides nearly half of Texas’s energy needs. Natural gas production ground to a halt as wells froze up. Natural gas transportation broke down as the pipes proved unable to sustain the pressures required for natural gas-based electricity plants. And the natural gas storage system proved to be slow to respond and inadequate in capacity. The full spectrum of the natural gas industry failed.
But as we’ll see in the second article below, it sounds like there was potentially a far more disastrous self-reinforcing dynamic that could have been at work here: the natural gas systems rely on a steady stream of newly produced gas from the natural gas wells, but those wells are powered by electricity. So if the electrical grid comes under enough strain to trigger rolling blackouts, it’s possible the electricity was cut off from the natural gas-producing wells, cutting off supply to the natural-gas powered electricity plants. It sounds like that may be part of what happened here, which is utter madness. We can’t confirm that yet, because so little is actually known about what precisely happened. But these are important questions to ask at this point because, if it really is the case that the natural gas shortage was exacerbated by wells losing electricity, we can be confident that the industry and Texas regulators will do everything in their power to cover this up.
So given that we aren’t just dealing with a system-wide failure but also an obscenely profitable market-failure that triggered record price spikes, if we were to search for bad actors in this mess who may have been actively working to create a massive energy supply shortage in order to induce those price spikes, we should probably take a very close look at the sector that failed in the biggest manner and that was unambiguously natural gas:
“But ERCOT’s biggest miss came in preparing for outages at what it thought were “firm” resources — gas, coal, and nuclear. Those outages topped 30 GW, more than double ERCOT’s worst-case scenario. Just one of those gigawatts came from a temporary outage at a nuclear unit. Most of the rest came from gas.”
Yes, for all the blame placed on wind and solar, ERCOT actually did a good job of predicting how much to expect from those energy sources heading into this winter weather event. Where ERCOT failed was in predicting the failures of the “firm” sources of gas, coal, and nuclear. And of those “firm” sources, it was natural gas that was least firm. But it wasn’t because natural gas-powered electricity generators broke down. The natural gas power plants shut down because they lost their supply of natural gas and that steady supply is crucial to how Texas’s power grid operates:
So if a loss of natural gas supplies as at the core of the loss of gas-powered electricity, what caused the drop in supplies? Part of it undoubtedly had to do with the equipment at wells freezing up in some cases. But the following
article raises another wild scenario that, in the wake of the current disaster, actually sounds plausible: when the wells lost electrical power from the grid they stopped producing the gas needed to supply the gas-powered electrical plants, forcing even more blackouts and more shut down wells. Did that actually happen?:
“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.”
Texas’s electrical grid is overwhelmingly reliant on real-time natural gas and that gas production requires electricity from the state grid. Texas built itself an energy Catch-22. At least it did if those rolling blackouts were hitting gas producers. And that’s why one of the big questions investigators need to be asking is whether or not those blackouts were hitting gas producers and whether or not the power operators controlling those blackouts realized this and did anything to mitigate this situation. In other words, if Texas really did create a self-induced massive electricity shortage by cutting off power to its real-time natural gas sources, did it even realize it was doing this? Is this a new stupid dynamic in Texas’s energy infrastructure that we’re only seemingly learning about now? Or was this a known potential cascading disaster that operators would only induce at the last minute? And did they realize they were cutting off natural gas production when they triggered these blackouts?
And there’s still the question of stored gas. Was that available when the gas producers shut down? Not really, because Texas doesn’t have much natural gas storage capacity. Why? Because it has so much real-time production capacity. So Texas simply doesn’t have an option other than to keep those gas production wells running. There’s no back up:
“Production of natural gas in the state has plunged, making it difficult for power plants to get the fuel necessary to run the plants. Natural gas power plants usually don’t have very much fuel storage on site, experts said. Instead, the plants rely on the constant flow of natural gas from pipelines that run across the state from areas like the Permian Basin in West Texas to major demand centers like Houston and Dallas.”
Texas run on flow. The non-stop flow of natural gas from the wells to the plants. And if that flow stops, the whole system stops because they didn’t build the storage capacity. The flow was assumed to be never-ending. Before then it ended.
And note how Parker Fawcett, a natural gas analyst for S&P Global Platts, also pointed out that these natural gas pumps run on electricity, so if electricity gets cut off from the pumps, the gas stops flowing. And if the gas stops flowing, the electricity stops flowing. It’s not exactly a well thought out system:
Think about how incredibly brittle this system is. Even a temporary disruption in the electrical grid — which might arise from a different sector of the energy supply like nuclear or coal — could potentially set off a self-reinforcing cycle of failing gas wells if those wells’ pumps lose electricity. A self-reinforcing cycle of failure that will cause record price surges and a giant windfall for any producers still able to operate.
So as we can see, Texas built its electrical grid for full spectrum failure. Regulatory and physical failure. Beyond the massive regulatory failures, where lawmakers seemingly built a marketplace intended to be manipulated by the power generators, Texas built an electrical grid so reliant on the endless real-time flow of natural gas that if that flow was ever seriously disrupted the grid basically collapses. It’s like a socioeconomic Rube Goldberg machine of corruption and negligence. A wildly profitable socioeconomic Rube Goldberg machine of corruption and negligence currently fulfilling its purpose.
Welp, we just got some confirmation on one of the biggest, and dumbest, questions, facing Texans as they continue to thaw themselves out of the historic freeze. That would be the question of whether or not the Texas electrical grid operators realized they were cutting off power to the natural gas pumps that were supply the real-time natural gas supply Texas’s electrical grid was overwhelmingly relying on. The answer appears to be no, the grid operators did not realize they were cutting off power to the natural gas wells in the Permian Basin when they cut off power there. It’s that dumb.
At least that’s what we can infer from the answers the Electric Reliability Council of Texas (ERCOT) gave to journalists who asked a very similar question. A very similar question that threatens to make this whole scandal all the more avoidable and absurd. Because it turns out there’s another part of Texas’s natural gas system that went down due to the blackouts. A component arguably more vital than the pumps powering the wells: the compressor stations that pressurize the natural gas pipelines.
Yes, the grid operators literally cut power to the stations that power the flow of natural gas that supplies well over half of Texas’s electrical supply in the winter. Recall how we’ve seen that Texas’s natural gas power plants rarely have much onsite storage and rely on a constant flow of gas from the gas grid. More importantly recall what Daniel Cohan wrote about the system-wide failure of Texas’s natural gas sector: the problem with gas wells losing power wasn’t as big as the problem of the gas pipeline losing pressure and the constant flow speeds these plants need to operate:
So knocking out power to the compressor station was actually a far more severe and immediate death blow to the grid than knocking out power to the well pumps. Again, it’s bigger and dumber than we thought.
And it gets worse because of course it does: when ERCOT was asked by journalists if utility operators realized they were cutting off power to the compressor stations ERCOT said no, they did not realize they were cutting off power to these compressor stations. It’s based on that answer that we can infer that the grid operators didn’t realize they were were cutting off electricity to the natural gas well pumps too.
So it’s increasingly sounding like the Texas power grid’s initial ‘rolling’ blackouts stopped rolling after they blacked out both the gas wells and compressor stations, inducing a self-reinforcing death spiral, apparently without realizing it. Texas’s grid blindly strangled itself. Or at least that’s the prevailing excuse at the moment:
“But leaving shale fields like the Permian Basin dark had an unintended consequence. Producers who depend on electricity to power their operations were left with no way to pump natural gas. And that gas was needed more than ever to generate electricity.”
Yes, cutting off electricity to the Permian Basin, the heart of Texas’s oil and gas drilling, had the unintended consequence of cutting off the crucial real-tome supply to natural gas needed to generate electricity. It was a death spiral that industry officials seem to be characterizing as something they didn’t see coming. Like this was a new lesson the industry just learned now. Is that plausible?
But even worse was the cutting of power to the compressor stations that maintained the required flow in the pipelines feeding the electricity plants. You knock those out and entire utilities go offline from a lack of fuel. This, in turn, prompted some Permian well operators to shut off gas production entirely. It was an act of critical self-sabotage that we are told was merely an accident:
And yet we are told by ERCOT that the grid operator didn’t realize it was cutting power to these compressor stations because it didn’t have that information:
Is this remotely plausible? It’s like imagine an exhausted body deciding to shut down the heart to conserve energy. It’s that insane. Could Texas’s electrical grid have plausibly made these kinds of mistakes without realizing it? And based on everything we’ve seen so far with disaster, the answer appears to be, yes, it’s entirely plausible Texas’s electricity grid could have been operated in an insane manner because it was designed to be operated in an insane manner. The system didn’t just break down spectacularly. It broke down in a spectacularly profitable way, where the more it broke down the more profitable it became. That’s how the system was designed. To be manipulated. Whether the market manipulation is direct, like when power generators intentionally withhold supplies to jack up the prices, or indirect manipulation — like winter weather locking up unprepared physical infrastructure creating a supply/demand imbalance — the system designed to break down spectacularly. We’re just enjoying the show. Some are clearly enjoying it more than others.
It sounds like we may have received an answer to one of the big questions looming over the Texas winter blackout disaster. That would be the question of whether or not the Texas utility operators were aware of the fact that they were cutting off power to the natural gas generators as well as the compressor stations running the natural gas pipelines feeding Texas’s power plants:
The answer, according to the testimonies of energy executives, is that yes, the utility operator realized they were cutting off power to natural gas generators and told the gas generators that they weren’t a priority. At least that was the testimony of Curtis Morgan, the CEO of Vistra Corp., who told Texas’s lawmakers that when officials from his company called the utility after the blackouts were impose they were told they weren’t a priority. It’s a pretty shocking detail.
But Morgan went on to provide an additional explanation for why the utility operators were willing to hit power plants with blackouts: outdated lists of critical infrastructure in Texas. Could something that mind-numbingly stupid have played a role in this? It seems plausible. But still, outdated lists of critical infrastructure wouldn’t explain why operators were apparently telling the power generators that they weren’t a priority after those companies called the utility over the blackouts.
Morgan added an additional potentially very disturbing detail: power at one of his company’s nuclear plants was within three minutes of going offline. You have to wonder what kind of safety implications that kind of scenario could have had.
Finally, the article notes that Bill Magness, CEO of the Electric Reliability Council of Texas (ERCOT), gave a few more details on the source of the power outages last week. The freeze was responsible for only 42% of the failures. A lack of fuel and equipment damage unrelated to the weather contributed, but around around 38% of the plant outages happened for reasons that remain unclear..
So 42% of the damage was from the cold, 38% of from mystery reasons, leaving 20% from a lack of fuel and equipment damage unrelated to the weather. Keep in mind that the lack of fuel could have been due to the utility cutting off power to the gas generators and pipeline compressor stations, but it would be interesting to learn about the rest of that equipment damage that wasn’t caused by the weather. So overall, well over half of the power failures appear to be caused reasons unrelated to the cold weather.
And note a source of failure that Magness didn’t list: the utility cutting off power to the gas generators and compressor stations. So we know the cut off of power to gas generators and pipelines played a major role in the blackouts, and we have the CEO ERCOT announcing a huge mystery cause for the power failures that have yet to be discovered. Hmmm....what could that mystery cause be...:
“Of Texas’ power generators that were not operational during the storm, Magness said the freeze was responsible 42% of the failures. A lack of fuel and equipment damage unrelated to the weather also contributed, but Magness said that for 38% of the plant outages, the problem remains unclear.”
Over a third of the causes for the plant outages have yet to be understood, according to ERCOT. It’s pretty remarkable for a state-wide failure that seemingly has a very obvious cause of record cold weather. But that 38% mystery category only gets more mysterious when we hear from energy executives that they were explicitly told by the utility officials that supply power to their plants wasn’t a priority:
And then there’s the accusation by Vista Corp CEO Curtis Morgan that the lists of critical infrastructure are out of date:
So was the power to the gas generators cut off knowingly because they were deemed a lower priority? Or were they cut off because the utility operator didn’t realize they were cutting off power to critical infrastructure because their critical infrastructure lists were out of date? All of that still remains a mystery.
But ERCOT officials appear to be largely sticking with the narrative that they had to cut off power to gas generators and other critical infrastructure because power was falling off the grid so quickly the entire electrical grid was minutes away from a physical meltdown. It’s a scenario Vista Corp CEO Curtis Morgan appeared to back up, when he also noted that his company’s nuclear power plant was minutes away from losing power:
Overall, the picture that’s emerging from the various sources is that the Texas grid really was minutes away from being overwhelmed when utility operators first implemented their rolling blackouts. Then the blackouts couldn’t actually be ‘rolled’ because the power supply continued to fall after the blackouts were imposed, in part because they were literally cutting off power to the gas generators and compressor stations. At that point, the grid death-spiral was in place.
So the question of why the grid operators cut off power to the gas generators and compressor stations remains an open question, with utility operators intimating that it was the urgency of the moment that forced them to cut power to gas generators. The urgency created by a precipitous drop in power supply at the same time demand was surging. But that explanation raises another significant question: what was the exact cause of the precipitous power supply drop that triggered the initial blackouts and threatened to take down the entire grid? We’ve now learned that ALL of Texas’s power systems failed to some extent over the course of this crisis. So which of those systems failed first? Was it the wind turbines that went down first? Or was it something else, like goal or gas power plants shutting down unexpectedly? We still have no answer on that.
But as we’ll see in the following article from last week, when Texas was still in the grip of the blackouts, the initial answer utility operators gave for why they had to impose those blackouts was a loss of power due to the cold weather. Of course, as we just saw from the more recent article above, ERCOT is now only estimating that 42% of the power loss was due to cold weather. And that raises the potentially scandalous question: was the initial drop in power supplies that triggered the blackouts primarily due to the cold weather or something else?:
“Usually, those outages are limited to less than 45 minutes. But this week, the outages lasted days. That’s likely because after ERCOT ordered companies to stop providing power to customers, even more power generation tripped offline, and it was not able to “roll” the outages effectively, Johnson explained.”
The rolling blackouts couldn’t be rolled after more power generation tripped offline following the blackouts. It’s been the consistent story of ERCOT throughout this mess but ERCOT has never really explained why power generation continued to trip offline, although we now know it was likely due to the power being cut to the gas generators and compressor stations. The point is that ERCOT has been giving the public a highly incomplete story this entire time. And a big part of that incomplete picture is why exactly was the power dropping so precipitously in the lead up to the blackouts. Because, sure it was extremely cold and that would impose a limit on the system. But as we saw, this weather system wasn’t unexpected and ERCOT projected in advance that it would have the required power supplies. So was it purely the extreme cold that knocked power out in the lead up to blackouts or was there another cause? That is still an open question:
Yes, previously appear there was more than enough supply to meet demand. Then that suddenly changed Sunday night and the system was thrown into such an extreme supply-demand imbalance that blackouts were imposed on the energy generators, setting off the death-spiral.
And as we’re seeing, when faced with the question of why the utility operators were willing to cut off supplies to energy generators, the answer we are given is that the energy demands were so extreme at that moment on Sunday night that they had no choice. It was a choice between cutting off power to the gas generators or let the whole system collapse. And yet we are also now told from ERCOT that 38% of the power failures had nothing to do with the weather, which raises the question of now much of that non-weather-induced power failure took place when the power was perilously dropping in the lead up to the blackouts. If the situation Sunday night really was that suddenly severe, we have to ask: was the sudden drop in power supplies purely due to the cold weather? Or was it merely the latest instance of legalized price manipulation in system designed to allow power suppliers to withhold supplies in order to jack up prices? Price manipulation that exceeded beyond their wildest dreams. Or was maybe roughly in line with their wildest dreams.
Oh look at that: Beth Garza, the former director of the Electric Reliability Council of Texas (ERCOT) Independent Market Monitor until 2019, testified before Congress about the cause of Texas’s historic power blackouts. Garza testified that she’d heard that “maybe half the outages at gas plants were due to the lack of fuel.”
This is interesting for a number of reasons, the most obvious being that it appears the blackouts may have been a self-induced catastrophe created by the energy system itself when power was cut off from the natural gas pumps and compressor stations, creating a power-capacity death-spiral. But as the following article notes, another part of what makes Garza’s testimony interesting is that ERCOT itself has only attributed about a 37 percent of the power loss to the loss of natural gas fuel. And when you’re trying to solve the mystery of why the mega-blackout happened, determining whether or not natural gas fuel shortages contribute to a 37% or 50% of the outages is a crucial detail for understanding what exactly happened.
What’s ERCOT’s answer for why it’s saying natural gas shortages were only the cause of 37% of the capacity shortage while Garza says it was half the problem: ERCOT spokeswoman simply stated that “our facts haven’t changed, so I can’t speculate on how (Garza) is characterizing the information.”
So who should we believe here? Well, keep in mind that if the blackout was indeed a partially self-induced catastrophe caused by the power regulators and/or power suppliers rigging the marketplace by withholding supplies, that’s the kind of situation ERCOT probably isn’t going to be enthusiastic about revealing. In other words, based on the available evidence, ERCOT has a much clearer reason to mislead investigators than Beth Garza does.
And if Beth Garza’s testimony is indeed true, that doesn’t just suggest ERCOT gave investigators the wrong numbers. It also suggests a conscious cover-up. After all, how would Garza have heard that maybe half to the power outages were causes by natural gas fuel shortages if the people ‘in the know’ weren’t privately talking about this:
“Officials at Electric Reliability Council of Texas, which manages the state’s power grid, have blamed frozen wellheads and pipelines and power outages at compressor stations for 37 percent of lost natural gas capacity, or about 9,300 of the 25,000 megawatts lost during the crisis.”
The official number is 37 percent. That’s what ERCOT is currently officially blaming on frozen natural gas operations at the same time they admit to officials they can’t account for all of the power outages. And yet Garza testified that she heard natural gas losses were the causes of up to half of the power loss. That sure sounds like the kind of situation where ERCOT knows more than it’s revealing:
Keep in mind that one of the potential complicating factors in this kind of retrospective analysis is that, as we’ve seen, Texas has structured its power marketplace to basically incentivize power generators, large and small, to try to game the market and jack up prices by strategically withholding power capacity from the marketplace. So if power suppliers were engaged in that kind of activity in the lead up to the blackout, ERCOT isn’t necessarily going to have that information because it relies on the private generators to provide their own capacity information.
So in defense of ERCOT, the regulator probably can’t entirely account for the extent of the role natural gas shortages played in the blackout because ERCOT systematically doesn’t have information on how much power is being withheld by the private generators from moment to moment and answer the question requires that information. It’s not a great defense.
Oh look at that: New analysis of the events that played out during Texas’s historic winter energy disaster found the Texas energy grid came much closer to an ever greater disaster than previously recognized. Because it turns out even the black start units — backup systems for the emergency restarting of power plants — were highly inadequate and allowed to fall into a state of disrepair. So when the electrical grid ended up within minutes of having to fall back on that broken backup system at one point during the blackout, the system was effectively flirting with a giant disaster that would have dwarfed the disaster that actually played out. Why? Because if those black start units had failed and the grid was allowed to go down completely it could have taken weeks or even months to bring it back up:
“If grid operators had completely lost control of the situation—they didn’t, although they came close—the spotty performance of the black start units could have left Texans without power for much longer than a few days. How long is impossible to say, though by the grid operators’ own estimate, a total collapse could have caused weeks or even months of outages.”
Parts of Texas could have been left in the cold and dark for months if the worst case scenario happened and the black start backup units themselves failed. Which almost happened. Texas was about 10 minutes away from that kind of disaster situation. And yet energy companies are telling us they don’t actually have much of an incentive to maintain these black start units and many of the units themselves failed. It’s another example of how Texas literally designed system built to fail:
But it’s the fact that this exact disaster scenario was also narrowly missed in 2011 that makes this all the more egregious. Again, Texas planned on this giant failure. It was just a matter of when, not if, another 2011-style disaster happened. That was the plan:
So now that Texas has emerged from its latest planned catastrophe, what are Texas lawmakers going to do this time to inadequately address the problems? We just got our answer, with the passage of an energy reform bill last week in the Texas legislature. A bill that experts point out does nothing to really prepare for a repeat the winter disaster and represents what amounts to a giant gamble. True to form, the bill also basically defers to the wishes of the natural gas industry and gives gas producers broad leeway in how they’ll prepare for the next disaster. It also managed to politicize the ERCOT regulatory body. Previously, ERCOT’s board was basically chosen by the industry. Not ideal, obviously. Now, the board is going to be selected by the governor, liutenant governor, and House speaker. All three of those positions are currently held by Republicans. So ERCOT is going to be a completely Republican-controlled body for the foreseeable future. Of course, given that the GOP basically exists to sell itself out to special interests, that effectively means ERCOT will remain under industry control, so nothing really changed.
And what about all the exorbitant fees charged to consumers during the height of the crisis? Well, there was debate over whether or not to compensate the hardest hit consumers, but that was dropped from the bill. They did, however, keep a provision that will pay back energy distributors that where driven into bankruptcy during the blackout. A special fee is going to be added to rate-payers for the next 20–30 years to pay these companies the billions of dollars they lost. So the consumers not only don’t get any help, but they’re all going to be charged extra for the next generation to pay the energy distributors. Because Texas’s GOP apparently has zero fear of the political repercussions for anything they do:
“The proposals address several longstanding weaknesses, though still amount to a gamble in the wake of one of the state’s deadliest natural disasters, leaving its already isolated power grid vulnerable to similar disruptions for the coming winter, before key weatherization requirements would take effect.”
Hoping there isn’t another giant winter storm. That’s the official plan in the fact of experts calling for immediate urgent structural improvements to the entire Teas energy infrastructure:
But the reform bill does actually do some things. Like paying the energy distributors billions of dollars, raised from rate-payers for the next 20 to 30 years. Help for consumers was somehow left out of the final draft. And calls for Public Utility Commission (PUC) to get at least one member who represents consumers were ignored. Imagine that:
Oh, and the bill also manages to effectively give the GOP complete control over the membership of the ERCOT board:
But there was one genuinely useful part of this reform bill. Although the fact that it needed to be included at all is a wild scandal that, alone, should prompt new investigations of gross negligence at best and intentional sabotage at worse: The bill mandates that that key gas facilities be registered as critical so their power isn’t unintentionally shut off during power shortages. Recall how gas supplies being cut off from energy producers was found to be one of the key factors driving the grid collapse. As we’ll see, it also turns out that the bulk of Texas’s gas suppliers had their electricity cut off as power levels dropped. Why? Because they didn’t register as critical facilities. The collapse was that stupid:
So why was it that so many gas suppliers weren’t registered as critical facilities and ended up with their power getting cut off right when Texas’s energy grid needed that gas more than ever? Because a 2‑page form that needs to be filled out annually wasn’t filled out by the bulk of the industry. Despite this exact problem being at the heart of the 2011 freeze and regulators calling on the gas industry to voluntarily fix the problem so it doesn’t happen again. And, of course, the industry completely ignore those calls and it happened again:
“A full assessment of how big a role electric power cut to gas facilities played in the grid outages is likely months away. Yet how some of Texas’s largest and most sophisticated energy companies, depended upon by nearly every resident and business, failed to complete a two-minute paperwork chore remains one of the most baffling mysteries of last month’s deadly outages.”
Yes, it’s quite a baffling mystery. One of many in this mess. How did almost the entire gas sector neglect to fill out a two-page form:
And like virtually everything else that went wrong for Texas this year, it all a repeat of 2011. Somehow everyone just kind of forgot to fill out these forms. Apparently:
Will the new reform bill that mandates key gas suppliers to fill out that two-page form manage to avert the next disaster? Let’s hope so, because that appears to be the only real improvement mandated by the reform bill. So as we can see, Texas is on track to effectively repeat the 2011 winter disaster experience nearly in its entirety. Including the part where all the reform efforts fell apart and nothing meaningful was done to prevent the next catastrophe.
There’s a new trend in Bitcoin that should be interesting to watch. Interesting in a slow-motion trainwreck kind of way. Or maybe a rapid trainwreck:
The government of China appears to be in the midst of a serious purge of bitcoin mining, with overall mining down 90% in the country. From coal-powered to hydro-powered mining, it’s all getting shut down. It’s a pretty massive shift for the cryptocurrency given that China was the home of ~65% of all global bitcoin mining activity.
So where is all this mining activity heading? As we’ll see, Texas is apparently set to becoming the new global mining-hub. Why Texas? Cheap electricity prices with a growing solar and wind component.
But, of course, we’re talking about the Texas energy markets. The very same deregulated electricity marketplace that not only allow the electricity producers to charge up to $9,000/megawatt hour but also seems to be designed in a manner that encourages such price spikes. That’s apparently the new bitcoin mining hub-to-be: a state with an electricity market seemingly designed to facilitate wild price spikes.
It raises questions of not just how bitcoin miners are going react to those wild price swings but how will all of this new energy demand impact electricity prices for everyone else in the state. Is this the perfect recipe to make Texas’s energy markets even more fragile?
And that’s all why this crackdown in China could end up shaking up not just the Bitcoin mining sector but the entire Texas energy marketplace. And not in a good way. But at least China should have a lot more energy available for actually useful things:
“Many bitcoin mines in Sichuan were shuttered Sunday after authorities in the southwestern Chinese province ordered a halt to crypto mining, according to a report from the Communist Party-backed newspaper Global Times. More than 90% of China’s bitcoin mining capacity is estimated to be shut down, the paper said.”
A 90% drop in China’s bitcoin mining capacity. Coupled with the fact that China had 65% of the bitcoin global mining capacity and we’re looking at a situation where over half of the global mining capacity either disappeared or moved out of China:
And that brings us to Texas, which is looking like the next bitcoin mining destination of choice. Not only does it have cheap electricity, but a governor, Gregg Abbott, who is keen on promoting Texas as the next bitcoin hub. Some are even speculating we could see subsidized electricity for bitcoin miners as states and countries compete for this business. Will Texas end up subsidizing bitcoin mining? We’ll see, but if its energy grid continues to be as wildly unreliable as it’s been so far it’s not hard to imagine the bitcoin mining industry eventually demanding those subsidies as a price of staying:
“Despite a lack of reserves that caused dayslong blackouts last winter, Texas often has some of the world’s lowest energy prices, and its share of renewables is growing over time, with 20% of its power coming from wind as of 2019. It has a deregulated power grid that lets customers choose between power providers, and crucially, its political leaders are very pro-crypto – dream conditions for a miner looking for a kind welcome and cheap energy sources.”
Deregulated cheap electricity and a pro-crypto governor. What more could bitcoin miners ask for? Reliability. And that gets at the heart of the big question surrounding this move from China to Texas: is Texas’s deregulated energy market capable of taking on this additional demand without breaking. Again:
But who knows, if Texas’s electricity markets do end up being to unreliable for the bitcoin mining industry, we shouldn’t be too surprised if Texas, and perhaps other states, decide to try to lure miners there with subsidies. And yes, subsidizing bitcoin miners would probably make Texas’s energy markets even more unreliable and prone to price surges for everyone else in the state, but this is Texas’s energy markets we’re talking about. Instability and price spikes are feature, not a bug:
Also note one of the more ominous aspects of this move out of China: Bitcoin is probably going to become even more polluting after losing access to that Chinese hydropower:
Keep in mind that China’s bitcoin mining was an odd mix of clean renewables and ultra-polluting coal. So while the share of renewables behind bitcoin mining might end up declining, hopefully the share of coal-powered mining will fall too.
So if this bitcoin shift to Texas does end up happening, don’t be super shocked if the transaction time of the blockchain suddenly become inversely correlated with the temperature in Texas. The colder it gets in Texas the more expensive it’s going to be to mine those bitcoins, and that means longer transaction times. Well, the colder it gets and the hotter it gets. Don’t forget that Texas’s electricity grid isn’t just vulnerable to extreme cold.
The Great Texas Blackout of 2021 is starting to look like one of those disaster stories that’s just Chapter 1 in a much longer, dumber avoidable disaster story:
The Texas grid is once again on the verge of buckling. Any day now. We don’t know which day it will be, but the warning signs are there, with the state’s energy officials already being forced to ask residents to minimize power consumption during a heat wave last week. And as we’ve already seen, the ‘reform’ bill passed by the Texas legislature a few weeks ago was basically a joke that doesn’t actually require energy producers to take the necessary steps to avoid a repeat of February’s catastrophe. And that’s why so many experts are warning that Texas remains very much in danger for future blackouts, whether its due to extreme cold, or the extreme heat that the state is already experiencing:
“On top of seasonal adjustments, Texas lawmakers recently capped their biennial legislative session by passing several bills aimed at their stated priority of fixing the conditions during the deadly February winter storm. Since the session wrapped May 31, however, lawmakers and analysts have been split on the merits of what reached Gov. Greg Abbott’s desk during the 87th legislative session and whether the changes are enough to help Texans in the long run.”
It’s a pretty big warning when experts warn that their prior warnings went unheard. But that’s the warning we’re getting. Nothing in the bill mandates the kind of immediate fixes experts are calling for. Texas’s strategy for avoiding future blackouts is to just continue with the same gamble it already lost in February:
But there was one ‘fix’ in the bill: it established the precedent that price gouging during emergencies will not only go unpunished but will be further rewarded with special industry bailouts paid for by Texas’s electricity consumers. Price gouging producers get to keep their historic profits and the energy distributors driven to bankruptcy get bailed out by the consumers. Everyone wins. Everyone but the Texas consumers, of course:
And note the warnings that it really just takes one bad day to potentially induce a giant extended blackout. a bad day that could come from there simply not being as much solar or wind as ERCOT is predicting:
But let’s also not forget that one of the scandals of the February blackout was the early attempts to blame it all on solar and wind when it turns out that fossil fuel energy sources were the prime culprits. So we probably shouldn’t be surprised to learn that the recent heat-induced near collapse of the energy grid in mid-June was primarily due to the failure of four large fossil fuel plants, with ERCOT over-estimating how much wind power it could get playing a minor role:
“Citing an analysis by Wood Mackenzie, Bloomberg reports that the biggest factor behind the grid’s latest travails was the failure of four big power stations, along with another example of ERCOT over-estimating how much wind it could rely on to be generated during several hot days in June.”
You can’t really blame the wind for not meeting ERCOT’s over-estimation when four giant fossil fuel plants are taken offline:
How long before Texas experiences a summer grid meltdown? The kind of meltdown that leaves millions in danger of dying from heatstroke? It’s looking like just a matter of time. As experts warned when Texas passed its joke ‘reform’ at the end of May, Texas was basically just gambling on not seeing a repeat of extreme weather. And literally two weeks later the state was already experience the kind of extreme heat that was straining the grid. That tells us something about the quality of gamble Texas’s lawmakers made. It’s a gamble the state is already losing. The big question at this point is how expensive will the next blackout be both in terms of long-term costs and lives. And that brings us to this interesting story from back in March that highlights a rather significant fun-fact about how Texas regulates itself: There are no regulations in place that mandate utilities to consider human and business interruption costs from effectively being shut down for extended periods due to power outages. In other words, the state’s energy industry is designed to operate in a manner that is blind to the broader social costs of extended blackouts:
“Texas, and many other states, don’t have regulations in place that mandate utilities to consider human and business interruption costs from effectively being shut down for extended periods due to power outages. According to the report, these costs don’t have a direct impact to the utilities themselves, so there’s no incentive to take them into account.”
Yes, not only is Texas’s energy grid effectively designed to flirt with failure — and the highly profitable price spikes as a result of supply/demand crunches — in order to incentivize producers to invest in greater generation capacities, but it’s also set up so the industry doesn’t have to consider the broader social costs of what happens when that failure inevitably happens. It’s a system designed to fail profitably:
It’s the kind of regulatory policy that’s a reminder that Texas’s utilities aren’t the only force in the state that isn’t considering the human and societal implications of major outages. The GOP-controlled state government designed this system, after all. Granted, they largely did it at the behest of the their energy-industry donors. It was a group effort between Texas’s GOP-dominated state government and the energy industry to design this broken system and remains a group effort at keeping that broken system in place. And despite that group GOP/energy industry effort that leaves Texans in danger of another major deadly blackout, Texas remains locked in the GOP’s grip and that grip doesn’t appear to be weakening any time soon. It’s the core reason we can predict with confidence that the next major blackout is just one nasty weather pattern away. And yes, we can’t predict when exactly those extreme heat/cold days will transpire, but we can predict with confidence that they are getting more and more frequent. Texas is effectively planning for disaster. Not planning to deal with the disaster. Just planning on having periodic, highly profitable energy disasters. That’s the plan. Which means it’s just a matter of time before the next planned disaster. Less and less time.
Just a quick follow up on Texas’s recent heat-induced electricity grid woes and future implications for those woes:
First recall how the Texas’s regulators were forced to call for the public to restrict electricity consumption to avoid another blackout due to an unexpected large capacity shortfall. A 12 GW shortfall that was blamed on wind source but was ultimately overwhelmingly due to four large fossil fuel plant shutdowns. Four large fossil fuel plant shutdowns that remain unexplained. At least to the public. So here’s an article that gives us a better idea of what is known about those four mysterious shutdowns. It turns out ERCOT doesn’t actually get to know what caused the shutdowns. By design. Texas only mandates that ERCOT know which plants fail, not why they fail:
“Were there damages to the power grid infrastructure stemming from February’s deadly winter storm? Were there nefarious actors looking to manipulate the electricity market? What does this mean for power generation during the rest of the hot Texas summer?”
Where there nefarious actors looking to manipulate the electricity market? It’s the obvious question that needs to be asked. So of course Texas set up its system to make it extra difficult to get those answers:
Adding to the urgency is the fact that the explanations we’re getting from the private industry for the power outages are demonstrably garbage so far. Industry’s claims of equipment issues simply does not account for the scale of the outage:
And note that while Beth Garza assures us that ERCOT will investigate the cause and this is all standard procedure after an event like this, keep in mind that the standard procedure also appears to be that no one ever faces consequences. Anything goes is standard procedure:
It’s all a reminder that Texas didn’t just fail a single stress test this year. The February blackout was certainly the failure of the physical stress test of the grid (albeit with some self-inflicted sabotage). But that was just the first failed stress test, only to be followed by the political stress test of what is to be done in the wake of that historic catastrophe. It’s the kind of stress test you can just keep failing indefinitely.