The Texas Energy Crisis Reveals the Importance of Climate Preparedness

March 2, 2021

February’s extreme weather - which affected much of the United States and Texas in particular - had devastating humanitarian and economic consequences and once again revealed the vulnerabilities of a U.S. energy infrastructure expected to increasingly cope with extreme events and disruption.

What happened – and why?

There were a myriad of factors behind this event. The power disruption in Texas – which eventually had ramifications on many other parts of the U.S. grid –  was the result of cold weather conditions not seen in the state in more than 80 years. The cold led to heightened demand for heat and power that natural gas generators were unable to adequately respond to. As the cold front continued, natural gas production plunged, which then disrupted gas supply to all users, including electricity generators, leading to energy curtailment and reduced supply. Taken in total, the crisis left millions without adequate power or heat, which in turn affected fresh water supplies, and ultimately resulted in significant loss of life.

Over the course of the week, the factors behind the failure began to emerge. A combination of over-reliance on natural gas, power generators offline for routine maintenance, purposeful disconnection from the rest of the U.S. grid, and generation unable to run due to the extreme cold intersected to expose weaknesses in the Texas (ERCOT) system.   

This humanitarian crisis has raised significant and important questions about future-state, not only of ERCOT, but of the energy transition, climate instability, and grid reliability in general.

Why the Texas grid was vulnerable

The Texas power market typically has peak grid demand in the summertime during periods of high temperatures and is built for that purpose – not for freezing temperatures. It is also a mostly deregulated generation market, meaning that financial incentives are what prompts generation additions. This has resulted in Texans paying comparably lower energy prices than most other states. While there is still significant coal generation in Texas, the majority of generation is derived from natural gas with a growing amount of centralized renewable energy production from wind and solar.

There are similarities between Texas and California and the impacts that extreme events have had in both states, which can serve as lessons to other grid regions. Both resorted to blackouts, and both were caused by supply/demand imbalances and differences in generation sourcing. In both states, unusually extreme weather, over-reliance on certain generation types without adequate energy storage, lack of advanced planning and real-time data, and an unwillingness or inability to prepare for extreme conditions were ultimately to blame.

However, if the past 12 months have taught us anything, it’s that we face an increasingly unpredictable world and must proactively prepare for disruption. The tragic situation in Texas was yet another reminder.


Download our Special Market Update to learn more about what happened in ERCOT


How can we prepare for and prevent situations like this in the future?

Poor grid performance is not a certainty during extreme weather events or other crises. Emergencies like what took place in February are a call-to-action to take preventive action to prepare for future disruptions – which are almost certain to accompany continued planetary warming.

We recommend 4 specific actions that organizations can take today:

  1. Decarbonize quickly

While frozen wind turbines were initially blamed for some of the Texas power outage, this information has since been debunked. In truth, the faster the transition to a clean power grid, the better, as the frequency of extreme weather events is forecast to worsen as the planet continues to warm.

There have never been better, scalable renewable and clean energy and resource efficiency options than there are today – options that are increasingly affordable, with shorter payback periods, and even off-balance-sheet financing.

Take Action: Schneider Electric’s NEO Network is a free resource to all qualified organizations. Use the NEO Network to estimate what it will cost you to switch to renewables and use our AI-driven distributed energy calculator to see which of your sites are ready for onsite solar or storage. Learn more / get started at www.neonetworkexchange.com.

  1. Know your assets – and your contracts

In an urgent situation like the one presented in Texas, it’s essential to know where your physical assets are. Why? Mapping your assets against affected areas can help you make decisions about how to react. For example, when Texas energy reached its peak trading price of USD $9,000/MWh (compared to the seasonal average of USD $50/MWh) some power providers began offering significant incentives to organizational customers who were able to curtail their energy use during the worst of the rolling blackouts.

It’s also essential to know where you are exposed from a procurement perspective during such a disruptive event. Based on how your energy contracts are managed, you may have both upside and downside exposure during periods of high volatility – with few options, should you need them.

Given increasing volatility and complexity, it comes as no surprise that our 2020 research found that the role of the corporate energy manager is on the rise.

Take Action: Uncertain weather events may be less an if than a when – so now is the best time to prepare. Start by mapping your assets and their associated energy contracts. Engage a trusted energy advisor and risk management team who can prove invaluable to protecting a business’ budget. Invest in AI-driven data technology so you feel empowered to make real-time decisions in the event of an emergency is also essential.

  1. Get digital

During the Texas crisis, grid operators suffered from insufficient data about the availability of dispatchable assets and the security of the fuel supply and had to make decisions based on incomplete data sets. One solution is to transition the grid – and its assets – to digital, using smart technologies that empower operators to take action using real-time information.

Take Action: Help influence upstream decision-making about investment in smart grid technologies by pushing for it from your power providers and local policy makers. You can also help prepare your company by investing in your own smart technologies to monitor resource usage and building performance, tools like Ecostruxure Building Advisor.

  1. Think local

The COVID pandemic has showed us that more of our institutions are essential than previously thought. While it’s easy to classify hospitals as critical, what about data centers, grocery stores, and schools?

Extreme conditions can always occur, and it can be difficult to balance immediate energy needs while preparing for any possible scenario. One of the best ways to protect essential operations from crises like the ERCOT blackouts is through decentralized energy resources (DERs). This category of solutions can include everything from electric vehicles and their infrastructure to battery storage to microgrids. The solutions are typically smaller, decentralized, and local to the source of energy consumption – making them the perfect back-up alternative to a centralized energy distribution system.

Take Action: Add local resources with built-in redundancy and modularization for in increased reliability and resilience – even during extreme events. Learn how Montgomery County, Maryland is using microgrids to protect itself against natural disasters.

Watch our energy management experts debrief on the implications of the ERCOT energy crisis in the video below:

The bottom line

What happened in Texas was a horrible, preventable tragedy. Other regions must now use this example to take climate risk seriously. Organizations can be proactive through a combination of decarbonization, active energy management, digitization, and distributed energy resources – protecting energy reliability and resilience in an increasingly uncertain future.

For more information on digital and risk management solutions for your organization’s energy and resource needs, contact us.

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