Power should be cheap and reliable.
These two elements are foundational to energy policy. But they’re not complementary. In fact, they’re often at odds with each other: Charge too little and you won’t be able to make investments that maintain reliable service; charge too much and you’re going to have extremely reliable service that fewer people can reasonably afford.
The recent weather event in Texas serves as an example of the balance between electricity price and reliability and what can happen when one of those elements is prioritized over the other.
The problems in Texas stemmed not from generation failures, but from planning and investment decisions. Wind turbines and natural gas systems operate without issue in much colder conditions than those found in Texas last week. But for them to do so, operators in other parts of the country have invested in weatherizing equipment and have planned for alternate methods of operation, all of which may have increased the cost of electricity for customers.
Those investments were not made in Texas for several reasons, some of which are unique to the way the state regulates and manages its electric grid. These include a market structure that’s prioritized cheaper prices over ensuring there’s enough system capacity to absorb severe weather events. In addition, the primary focus has been on preparing the grid for more common threats, like extreme heat and hurricanes, though cold weather has impacted the state more often in recent years, exposing the fragility of the state’s electric system when faced with winter weather.
Texas Not Alone
However, this issue is also arising in states across the nation, raising questions about how states, regulators and utilities approach and manage energy resiliency—a term to describe how well energy systems absorb and recover from extreme operating conditions. The past decade was by far the most destructive in recent history for extreme weather events, both in frequency and in intensity. The cumulative costs to recover from these events was eight times higher than it was during the 1980s.
Energy infrastructure, as it exists today, is not ready for this new normal. That’s why several states have enacted grid-hardening measures—flood mitigation around substations, placing certain electric lines underground—to insulate systems from these new extremes, while also incentivizing or requiring localized backup power systems to help customers and communities ride out the destruction.
California, Connecticut, Florida, Nevada, Utah and Virginia enacted legislation in recent years to begin this process—steps lawmakers took despite facing substantial criticism over raising electricity rates to pay for the investments.
However, investments alone will not address the issue. The planning metrics and methodologies used by many utilities and grid operators may also need to change to reflect changing climate dynamics.
Norms No Longer Normal
A recent report from a leading industry research group called for the energy industry to change how it approaches these issues. Currently, historical weather data is used to predict the probability of future events. But given the changing weather patterns, “100-year storms” are no longer once-a-century events—they’re happening much more frequently. The report notes that relying on historical norms is leading the industry to understate the likelihood of future events, which in turn deemphasizes the need for the investments and planning initiatives that would otherwise be justified.
We know from buildings that mitigation investments prior to a disaster often pay for themselves several times over on the back end of a disaster.
All of this leads to a final question: What is the value of resiliency? What’s it worth paying to avoid what happened in Texas?
Policymakers, other government officials and the utility industry will spend much of this year—and very likely subsequent years—searching for solutions. However, it would be foolish to assume Texas is alone in this venture. It’s just the latest state to have these questions asked so unsparingly. The answers they come up with could help other parts of the country avoid a similar crisis in the future.
Dan Shea is a senior policy specialist in NCSL’s Energy Program.