Today, three days after the winter storm hit Texas, electrical outages are still continuing in parts of Texas. We don’t have all the answers yet, but let me tell you what I have pieced together about what has happened. One of the issues is direct and indirect feedbacks, as outlined in the graphic below, and described further in this post.
Another issue is electricity deregulation in Texas. The competitive marketplace produces a situation not all that different from the situation in which BP operated that led to the oil spill in the Gulf of Mexico. Under Texas’ structure, there are many entities, each concerned primarily with its own bottom line. In this environment, cost cutting in the name of profitability is rewarded, but can lead to power outages. Integration with the many other units involved in electricity generation, while possible in theory, is extremely difficult in practice in times of market stress. The competitive marketplace provides price integration, but leads to a greater chance of cascading failure, since each company can be expected to look out for itself, leaving regulators with an expanded role in making certain that the system as a whole functions properly.
We are now considering adding more wind to the electric grid, as well as adding natural gas and electric vehicles. These will all have the effect of making the organization more complex. Each entity will be working to optimize its own profitability, with little focus on the overall success of the system. The failure of the Texas grid system in cold weather should act as a caution to those who expect that the integration of even more types of providers into the natural gas/electricity system can be done with few problems.