Texas Grid Failure: Could it happen here? – TMT

March 1, 2021 – Could the Texas grid failure happen in other electricity markets? In this video, Senior Vice President Michael DeCaluwe, CEM explains why or why not.

Video Transcript

After the failure of Texas’ electricity market two weeks ago, the question we’re frequently getting is: Could that happen here?

We’ll answer that question in today’s Two-Minute Tuesday.

When we talk about what happened in Texas happening in “our market”, we’re talking about any of the US’ deregulated electricity markets, which primarily consists of Illinois across to Maryland and all the way up to New England.

Now there’s three main reasons why what happened in Texas likely would not happen in these markets.

Reason #1: Texas is its own standalone electricity market.

The Texas market is regulated by a company called ERCOT, which is the Electric Reliability Counsel of Texas. So whereas the Midwest and Northeast markets are connected to each other, if they ran out of power, they could call on each other for assistance.

Texas’ market is not connected to the rest of the US. So you can see what happened — when it ran out of power, it had nowhere to go. That’s one of the main reasons why what happened in Texas likely could not happen in other markets.

Reason #2: Texas has no capacity market.

Capacity markets are programs in the Midwest and the Northeast where the grid pays power generators for simply the ability to produce power. This ability to produce power creates reliability for the grid so that when the generators are called on to produce power, the grid knows that it can rely on these companies.

Now there’s big penalties if these generators are not able to provide the power that they agreed to. So these generators have financial incentive to upkeep their equipment to provide that reliability.

Texas does not have that market, so there is not that same economic incentive for these generators to provide reliable power.

Reason #3: Texas lacks a winter capacity market.

Now a third reason why what happened in Texas likely would not happen elsewhere is that beyond the capacity markets, some markets have winter capacity markets.

As an extra measure of reliability, the US’ largest electricity grid operates a winter capacity market. Prior to 2014, there were only summer capacity markets because the thought was that that was the peak time for electricity usage.

In 2014, we had the Polar Vortex that many of you might remember. And a lot of generators froze — power lines froze up, a lot of the gas lines froze. So PJM created a winter capacity market, and what that meant is these generators had to put in extra money to ensure winter reliability of their grid.

It’s a extra measure of protection that, as we’ve seen, could have helped Texas these past two weeks. So, again, the presence of a winter capacity market is another reason we probably would not see in other markets what happened in Texas two weeks ago.


So what happened in Texas two weeks ago, could this happen in our other deregulated energy markets? Likely not. There’s some structural fundamental differences between these markets, and some of our Midwest and Northeast electric markets have additional reliability through our capacity markets that make what happened in Texas extremely unlikely to happen in some of these other markets.

Hope you enjoyed our video this week, and be sure to like it and look for more continued Two-Minute Tuesday videos. Thanks for watching!

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