Millions of residents in the state of Texas had to face rolling blackouts for days while many of its electricity consumers were left holding hefty electricity bills. The reasons for this can be attributed to three key issues, namely, the unpreparedness of the entire power system to face such weather and demand conditions, an isolated state grid, and a deregulated electricity market for some.
On the face of it, what lessons could a winter storm in faraway Texas, US, possibly have for a largely tropical country like India? However, on a closer look, it is not the winter storm Shirley per se but from its aftermath that an emerging economy like ours can draw important lessons. It is now well known that millions of residents in the state of Texas had to face rolling blackouts for days while many of its electricity consumers were left holding hefty electricity bills. The reasons for this can be attributed to three key issues, namely, unpreparedness of the entire power system to face such weather and demand conditions, an isolated state grid, and a deregulated electricity market for some.
While the generation utilities there maintain that this was a ‘black swan’ event for which no one was ready; after the 2011 snowstorm, the Federal Energy Regulatory Commission (FERC), Texas reportedly said in its investigative report that “Many generators had failed to adequately apply and institutionalize knowledge and recommendations from previous severe winter weather events, especially as to winterization of generation and plant auxiliary equipment.” So, it appears that the recommendations to make the system winter-proof were not undertaken even after a decade, ostensibly because that would have meant heavy expenditure. Irrespective of blaming renewables and green deals for this fiasco, the fact remains that about 28 GW of coal, nuclear, and particularly gas power plants, constituting about a third of the total generation capacity, went offline. Wind and solar, standing at only about 10% of the electricity demand, also got disabled because again, the standard fitments to combat such severe cold weather were not deployed on wind turbines.
The Electric Reliability Council of Texas (ERCOT)’s own statements bear out these facts. There was also no capacity available on standby to be tapped to meet demand peaks, as normally happens if there exists a ‘capacity market’. The capacity market incentivizes investments in reliable capacity to meet any level of power demand, and peak demand in particular, at all times. Such players get payments for capacities even when they are on standby mode.
The scenario that unfolded after the storm saw demand taking a quantum jump because of simultaneous use of electric heaters with drastic dip in supply simultaneously, forcing ERCOT to resort to rolling blackouts to avoid a total grid collapse. That an entity tasked to maintain the reliability of the grid did not plan for such exigencies is a telling observation.
But the sufferings of the citizens did not end here. Consumers who had opted to free market utility players like Griddy, realized that now during this period, their electricity tariff shot up 300% as it was bench-marked to wholesale electricity prices. And the bane of this market mechanism was that it is a `free’ and deregulated market in the true sense. As explained on Griddy’s website (http://bit.ly/3qRqm8A), `The wholesale price of electricity is set by the grid operator, ERCOT, and can change every five minutes depending on supply and demand. When there is excess energy on the gird, prices drop and can even go negative, which means you are getting paid to use electricity (awesome!). And when demand is high like on hot summer days or winter storms, prices can spike. The highest the price can go to is $9/kWh (which has only ever happened 0.005% of the time.)’. But as Mark Twain said, ‘Facts are stubborn things, but statistics are pliable’.
Secondly, to avoid federal regulations, Texas opted for a grid that functions within the state boundaries. Thus, just as it cannot supply power across state borders, it also cannot be supplied electricity from generating plants outside Texas; a possibility offered by an interconnected grid network. Remarkably, for a country as large as ours, India now has all the five regional grids interconnected.
So, what are the lessons for us? Firstly, there should be an immediate focus on making our electrical infrastructure, from generation to transmission to distribution, climate-resilient. According to the National Cyclone Risk Mitigation Project (NCRMP), “India is highly vulnerable to natural hazards, especially earthquakes, floods, drought, cyclones and landslides. ….. Andhra Pradesh, Odisha, Tamil Nadu, West Bengal, Pondicherry, and Gujarat are more vulnerable to cyclone disasters”. Most of these very regions also happen to be rich in solar and wind. Extreme weather events becoming more of frequent, there has to be adequate preparedness for that. But all of this would entail certain costs that need to be built in to transparent and cost-reflective tariffs. A point to ponder: does our fixation with the lowest tariffs also take such factors into account? Moreover, a paradigm shift seems imminent in the way planning is carried out. The traditional approach of looking back to plan for the future may not be valid anymore simply because of unpredictability of the future and extreme weather risks. This also means innovations in electricity market design (like capacity markets etc.) further necessitated by increasing share of variable renewable energy in the grid. And, as manifested in Texas, a free-market sans a proper regulatory oversight may lead to unintended unpleasant consequences.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house