By Jordan Watts
No one ever seems to think about the power until it goes out and Texans know that better than anyone. Between the dumpster fire that was Winter Storm Uri in 2021 and more frequent and intensifying weather related events, residents of the Lone Star State are forced to reckon with the power grid more than they’d like.
So, how exactly does the Texas electricity grid work? And, why does it seem to have more power outages than other states? Let’s break it down.
While most of the United States runs on two electricity grids, the Eastern Interconnection and the Western Interconnection, Texas is the only state that maintains its own power grid. “The Grids” or the three energy interconnection systems are separate from Regional Transmission Organizations, like ERCOT and PJM which serve as system operators.
In the early 2000s the US began to put regulations on electricity companies and energy pricing, so in order to avoid more federal regulation Texas opted to power itself. Since Texas is so large that it spans two timezones, peak energy usage times were spread out and the Texas energy grid was better equipped to support the power needs of residents.
Today, the Public Utilities Commission of Texas (PUCT) oversees the Texas electricity grid, ensuring safe, reliable, and affordable power for consumers. In Texas the PUCT is tasked with setting and updating TDU charges which go to utility companies in order to maintain, repair, and update power infrastructure as necessary.
The Electric Reliability Council of Texas, AKA ERCOT, is an independent nonprofit that operates 90% of the Texas grid, including balancing supply and demand to maintain reliability. ERCOT is also responsible for creating a competitive wholesale market, enabling a competitive retail market, and allowing access to transmission. Functionally ERCOT serves as an operational manager and reports to the PUCT, who has the ultimate regulatory authority.
Just like with most things in life, there are pros and cons to having an independent electricity grid in the LoneStar state. We’ll give you the bad news first.
Since the Texas electricity grid doesn’t have federal oversight, it managed to avoid winterizing infrastructure for years. This posed a huge problem in 2021 when natural gas wells and wind turbines failed during Winter Storm Uri, plunging Texas into darkness for days. Not only did it leave Texans out in the cold, it also culminated in millions of dollars in property damage across the state from burst pipes and flooded homes.
Following Uri, Texas has invested heavily in winterizing power lines and other infrastructure, investing in backup generators, and increasing generation capacity but has yet to be tested on quite the same scale.
It’s no secret that the Texas population is growing. A lot. Since 2020 more than 2.5 million people have moved to Texas, making it the fastest growing state in the country. At the same time, a number of major businesses have established headquarters in Texas, including several AI data centers looking to take advantage of energy savings.
While this influx has been great for the Texas economy, it’s also put stress on the Texas grid as it struggles to keep up with growing demand. This has left the state’s grid vulnerable to intense weather events that create demand spikes, think cranking your AC during a major heatwave or dialing up the heat when things get extra cold.
While it’s a natural reaction, with more residents and businesses than ever before all acting on the same instinct the grid gets stretched very thin. As an independent electricity grid, there are minimal resources for ERCOT to fall back on when demand surpasses capacity.
An independent electricity grid isn’t all bad though, in fact it brings a lot of innovation and savings to Texas.
Since the Texas electricity grid is independent from the rest of the country, deregulation comes a lot more naturally to the state. In a deregulated market residents have the power to choose their own energy plan and electric company. This leads to improved competition with cheaper electricity rates, unique benefits that accommodate different energy needs (such as EV chargers, AC maintenance, and smart thermostats), and improved customer service.
The vast majority of Texas has had electric choice since 2002 and today more than 85% of Texans can choose from multiple electricity providers. However, a few communities still have municipally owned utilities, including Austin and San Antonio.
Having an independent electric grid without federal oversight has allowed Texas to diversify their energy portfolio as a state, ensuring that there are always multiple power sources available. This includes a significant investment in renewable energy, where they have rapidly become a leader. ERCOT has been able to implement a number of specialized infrastructure projects focused on renewable energy, especially wind and solar, while avoiding much of the lengthy federal paperwork.
Not only do these projects help to increase grid capacity and meet demand, with nearly 40% of the state’s electricity generation being supplied by renewable sources, it has also led to more competitive pricing for green energy.
Along those same lines, the Texas grid independence allows the energy providers within the state to offer some of the most robust solar buyback plans in the country. To stay competitive, electricity providers that offer solar buyback plans are incentivized to offer good terms and the best rates in order to attract and retain customers.
Plus, energy bought back and “returned” to the grid helps to balance supply and demand, contributing in part to an overall more resilient electricity supply.
While the Texas electricity grid isn’t literally growing, it has been evolving rapidly in the past decade. Texas lawmakers and energy officials have taken notice of its shortcomings, especially after major events like Winter Storm Uri, and have been actively working to improve the grid’s reliability, resiliency, and reach. By working with major utility companies to update infrastructure through winterization and exploring strategies to increase generation capacity, state officials hope to keep up with growing demand for power.
