TERRY JARRETT
It’s not yet July, but the power grids in Texas and California are struggling to keep the lights on and the air conditioners running. Texas utilities have already asked residents to conserve electricity in the face of soaring demand. And California officials have issued alerts asking residents to cut usage in order to avoid blackouts.
Both states have struggled with power outages over the past year. But why do these two major energy-producing states—with the two largest economies in the nation—keep getting into serious trouble with their electric grids?
The answer increasingly appears to be a mismatch between electricity market design and an ever-growing reliance on renewable power. California and Texas have both jumped rapidly into the breach—transitioning on an accelerated timetable to new energy sources. Texas has ramped up its quotient of wind farms in recent years while shedding much of the coal-fired power that once anchored its grid. And California is phasing out nuclear power, retiring natural gas plants, and putting all of its focus on wind and solar.
The two states’ electricity markets operate differently. But both are supposed to ensure that, even as they transition away from traditional sources of power, their grid reliability isn’t jeopardized. However, with the threat of blackouts now a near-constant worry, something isn’t working.
One lesson is that increased reliance on wind turbines and solar panels must balance the output of previous, on-demand generating sources like coal and nuclear power. However, wind and solar only produce their full capacity when nature cooperates. What California and Texas are now demonstrating is that, for the foreseeable future, wind and solar power systems must come on the shoulders of traditional sources of power—not in place of them.
Unfortunately, America’s regional electricity markets lack the tools to ensure that this happens.
What both states need are energy markets that can properly value existing, “dispatchable” electricity generation—and do so to ensure their grids have the power they need in times of peak demand.
When the Texas grid nearly collapsed in February, the state spent more than $46 billion buying electricity in a single week—five times what it spent on electricity in all of 2020. And the majority of those costs were passed on directly to consumers.
The question now is whether rolling blackouts and market problems in California and Texas offer a preview of what’s to come in other states. That’s because the nation’s transition to renewable power continues apace, with traditional power sources—namely coal and nuclear—being pushed into early retirement.
The North American Electric Reliability Corporation, which oversees the reliability of the nation’s grid, recently warned that capacity shortfalls are “almost inevitable.” In particular, Texas, much of the Midwest, parts of the West, and New England face an “elevated risk.” And California faces a “high risk.”
Policymakers and electricity market regulators should take a pause. The speed of America’s energy transition is now racing ahead of practicality. Simply adding more wind and solar—and failing to value the reliability afforded by existing coal, nuclear, and natural gas generation—could be a recipe for disaster. There’s little time to lose to ensure the blackouts in Texas and California don’t become a national crisis.
Terry Jarrett is an energy attorney and consultant who has served on both the board of the National Association of Regulatory Utility Commissioners and the Missouri Public Service Commission. He contributes regularly to LeadingLightEnergy.com.