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On the Brink of Collapse

From time to time, events occur that redefine and reshape an industry. Oftentimes, these events prompt a reevaluation of the basic premises of an industry by stakeholders, lawmakers, and customers. One of these events took place across the state of Texas during the week of February 15, 2021. Arctic temperatures caused power outages and sent shockwaves through the Texas energy markets. The personal toll was equally, if not more, devastating. Millions of Texans found themselves without electricity, heat, and water for days. However, as is often the case, tragedy brings out the best in us, as neighbors aided neighbors in weathering the storm. While this article will focus mainly on electricity and economy, the amount of human pain and suffering caused by this event is impossible to ignore. 

It is imperative to examine the factors that pushed the state of Texas into the biggest forced power outage in US history. Energy markets are intricate systems that mix both finance and engineering. The root-cause and corrective actions will only be determined with time and careful examination from public and private entities. However, upon initial analysis, several factors jump out that likely contributed to the blackouts. Arctic temperatures, incredibly high demand from residential electricity customers, compromised gas suppliers, and a lack of winterized generating assets collectively brought the electricity grid to the brink of collapse. Even more alarming than these factors is that quick decisions made by ERCOT actually prevented the entire state of Texas from going dark. 

Bill Magness, CEO of the Energy Reliability Council of Texas (ERCOT), stated that Texas’ power grid was within “seconds and minutes” of catastrophic failure. 2.6GW of generating capacity (enough to power 500,000 homes) went offline in a 30 minute span on the evening of Sunday, February 14th. Power was cut to another 10GW by 2:30 AM on Monday, February 15th. While nuclear, coal, and natural gas power plants began to trip offline due to grid frequencies falling below the 60 hertz necessary for stability, demand for electricity continued to rise. If one more thermal plant had tripped offline before ERCOT introduced rotating outages, it is possible that the entire grid would have experienced cascading power plant failures leading to a complete blackout for the state of Texas. 

When power supply struggles to keep up with demand, the ERCOT electricity market sets a real-time price cap of $9,000 per MWh. Figure 1 displays the real-time price of electricity in North Texas during February. Note that during the week of the winter storm, the market price of electricity hit and remained at the $9,000 per MWh price cap. Real-time prices have hit that cap several times in the past, but this was the first time in ERCOT’s history when prices remained at the cap for an extended period of time. 

Figure 1: Spot Electricity ERCOT Load Zone North Real Time from 5 

Figure 2 displays the monthly average real-time price, by month, in North Texas for 2011, 2014, 2019 and 2021 (notable years when prices were also at, or near, the price cap). This chart demonstrates that nothing has ever approached the magnitude of the unprecedented events that occurred in Texas during the week of February 15th.

Figure 2: Spot Electricity ERCOT Load Zone North Real Time LMP from 5 

It is all but certain that energy markets will be in the spotlight for some time to come due to these events. Regulators, stakeholders, and policy makers will undoubtedly do everything in their power to establish the root causes and corrective actions. These events will also cause many clients to rethink how they use and conserve energy and reevaluate continuity plans. Commercial and industrial clients will primarily focus on microgrids, storage systems, backup generation, and demand response. This unparalleled moment in Texas history is the perfect opportunity for clients to adjust their decision-making processes and begin to deploy a Whole Health Energy Plan. 

Energy Rates for Commercial Businesses 

To find the best energy rate for your commercial business Texas Energy Savings will send your information to all of the top electricity providers in Texas to gather the most competitive rates for your business. Electricity providers will be competing for your business so you can be certain that you will receive their most competitive rates. To get started, either give us a call at  (855) 981-4402  or fill out this form. 

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