Disasters that you predict don’t come along every day,” Ed Hirs told me late this week. “I guess I have to count my blessings. Let’s go further and say it’s cold comfort.”
After years of toiling in semi-obscurity as an energy economics professor at the University of Houston—Hirs is also the inaugural University of Houston Energy Fellow—he has, over the last few days, become one of the major media stars of the Texas Blackout of 2021. “It’s been a zoo of a day,” he said. The university communications department had triple-booked him with reporters from the likes of CNN, CBS, Hearst newspapers, and other national outlets. He created a command center in a cranny in the dining room of his Galleria-area apartment. His Zoom-enhancing ring light is illuminated from 7 a.m. to 7 p.m. His grown daughter, a refugee from New York City’s COVID crisis now attending law school from her bedroom, was getting tired of her dad’s nonstop chatter.
Hirs’s celebrity status is less a Cinderella story than one reminiscent of Cassandra. White-haired at 64, with bushy black eyebrows shading thoughtful brown eyes, and a wide mouth often set in a laconic grin, Hirs has been predicting the failure of the Texas energy grid for more than a decade. Now here we are, attempting to recover from what some estimate will be the costliest weather event in Texas history, surpassing the $19 billion in damages left behind by Hurricane Harvey. Hirs takes no pleasure in being right. “I said the same thing about the vulnerability of the U.S. shale plays in 2012 and 2013 and no one paid much attention,” he told me.
The Peak of Texas’s Power Outages
Hirs is reliably not one to mince words, another reason he has become a favorite of reporters in Houston and beyond. When one prominent Texas politician called for a commission to study the causes of the power failures that led to the current crisis, Hirs had this to say: “No you dumb bastard. You don’t have to go any farther than the bathroom mirror to figure it out.” (Unusually circumspect on a second go-round, Hirs asked me not to name this particular pol from the upper echelons of Texas leaders. Hint: it’s not Cancún Cruz, who was probably packing that huge rollerbag for his Mexico trip at the time.)
Readers could research Hirs’s oeuvre going back to the ’80s, but a representative work appeared in the Houston Chronicle in 2013, with the catchy headline “Texas suffers from Soviet-style electricity distribution system.” This piece ran after the 2011 Texas power crisis caused by extreme cold but before the 2014 power crisis caused by extreme cold. Here is the opening salvo: “Is the Electricity Reliability Council of Texas repeating the central planning failures of the late Soviet Union?”
Hirs, who got his undergraduate, Master of Arts, and MBA degrees from Yale, and who came to U of H in 1988, compared Texas’s grid system to the linear programming models that were supposed to efficiently and equitably allocate wheat resources in the former Soviet Union, but instead, in 1975, caused crop failures. The example explains what most Texans are now learning the hard way. Our electric grid (of course, as Texans, we have our own) was built to keep prices relatively low most of the time, at the expense of reliability in extreme weather.
Texas history, and the Texas psyche, go a long way toward explaining how we got here. Our much-touted rugged individualism compelled us to avoid regulation of our power grid by the Federal Power Commission. Texas was so big we could afford to keep to ourselves. The system here was lightly regulated, with myriad small power companies dotting the state, until 1970, when the Electric Reliability Council of Texas—yes, ERCOT—was formed under Governor Preston Smith to meet federal guidelines established in the wake of a 1965 winter blackout in the Northeast.
Another boon for individuality, and for higher profit potential, came in the nineties and early aughts, as Texas moved to deregulate its power market under the governorships of George W. Bush and Rick Perry at the urging of, among others, Ken Lay and Jeffrey Skilling of Enron fame. But deregulation was something of a misnomer. As Hirs points out, “All these free-market Texans go into rapture over competition and deregulation, but the fact is the market is still heavily regulated. It’s not deregulated, it’s just regulated differently.”
Texas could have required that providers of electricity, and providers of natural gas and other fuels for their plants, winterize their equipment, as other states have done, so that it doesn’t freeze in frigid weather. The state could also have provided for extra generating capacity, as other states have done, to kick in when demand surges or when some providers crap out in bad weather. But both of those measures would have caused electric rates to rise somewhat in good times, which is unappealing to big electricity consumers (and political contributors) such as refineries, big box stores, grocery stores, skyscrapers, and cloud computing data centers. That’s a big reason why ERCOT and the Public Utility Commission and the Legislature and the governor have declined to make the system more resilient.
That reluctance could come back to haunt them. “Governor Abbott’s got to be thinking about what happened to Gray Davis of California,” Hirs said of the governor who was subject to a recall election in 2003, after that state’s energy crisis. That’s the election that put Arnold “Terminator” Schwarzenegger in the California governor’s mansion.
As is so often the case, the risks of Texas’s current setup has fallen overwhelmingly on residents and small businesses. And now we’re faced with the costs of that gamble, in the forms of business and supply chain disruption, broken pipes in millions of homes and businesses, flooding in those homes and businesses, and skyrocketing electric bills—not to mention human suffering.
We do not have what is called a “capacity market,” which means we don’t pay producers to be available in case of emergencies. Our availability is based on estimates, and when those estimates go wrong, that’s when you get companies charging $9 per kilowatt hour instead of four cents. We don’t pay for power we don’t use—ours is a scarcity market, a term that this week was never better named. Hirs used the example of the Maytag repairman to illustrate why a capacity market is better in the long run: the lonely guy gets paid to sit and wait so that he is there when needed.
“The problem with relying on scarcity pricing is that it works with normal events, but this go-round everything that could go wrong went wrong,” said Houston renewable energy entrepreneur Michael Skelly, who, like many in the last few days, noted that we were hit with a metaphorical as well as a literal perfect storm. Yes, half of the wind turbines froze because they weren’t winterized (like in northern states and in regions such as Scandinavia). These usually provide Texas with 20 percent of its power. But the far larger problem was that our whole power generation system fell apart: natural gas froze in the pipes, coal plants seized up, and one of Texas’s nuclear plants couldn’t produce. “Nothing came through,” said Skelly.
But there was also a leadership issue. Efforts by elected officials to improve the system have not been a priority. In the wake of the disastrous winter storm ten years ago, the Federal Energy Regulatory Commission and the North American Electric Reliability Corporation produced a report entitled “Outages and Curtailments During the Southwest Cold Weather Event of February 1–5, 2011.” At 357 pages, the report was a doorstopper, and it included such prescient findings as: “Generators were generally reactive as opposed to being proactive in their approach to winterization and preparedness. The single largest problem during the cold weather event was the freezing of instrumentation and equipment.” Or: “Balancing authorities, Reliability Coordinators, Transmission Operators and Generation Owner/Operators in ERCOT … should consider preparation for the winter season as critical as preparation for the summer peak season.”
Their recommendations went pretty much nowhere. The Legislature required power companies to start filing regular reports about their weatherization efforts with the Public Utility Commission of Texas, but it didn’t actually require such measures, so they didn’t get done. “A lot of lip service, but that’s all it was,” Hirs said. It’s much easier, after all, to blame our problems on the failure of wind power and to criticize California.
In the last few days, many have suggested not too gently that it’s time for Texas to join the rest of the country’s electricity grid—that way we could more easily share power with, say, Louisiana or Oklahoma or any other state in need. But that move comes with drawbacks. On our own, Texas has led the nation in energy innovation in wind and solar. Our grid allows us to move such renewable power from its sources, mainly in West Texas, to consumers in our major metropolitan areas. “That would not have been possible if Texas weren’t independent,” said Skelly. “The future trick will be to remain independent enough to innovate while strengthening our connections to our neighbors so we can share the love back and forth.”
Hirs agrees—with his usual contrarian reservations. Citing Rick Perry’s remarks that Texans would rather go four days without power than kowtow to federal interference, Hirs had this response: “Those are bold words for someone who is not on a dialysis machine.”
We need to pay up: upgrade what we have and maintain it well. And we need to elect public officials committed to doing so, especially as our changing climate continues to produce more extreme storms of all kinds, all year round. Government, Hirs noted, is supposed to ensure the health and safety of all its citizens. If Texas wants to have its own grid, then Texas needs to run it responsibly. “Charity begins at home.” Hirs said. “Let’s look after ourselves.”