For anyone wondering why those of us who live in Texas are freezing in the dark in our own homes, it’s because Texas has the only deregulated energy market in the country, aka Ercot. Lest anyone think it is so, this shutdown has nothing to do with ‘freezing wind turbines in North Texas.’ Ercot is set up as an energy-only market as opposed to a capacity market like PJM (Pennsylvania-Jersey-Maryland).
In theory, Ercot advocates say this system encourages competition and keeps prices down, but since they’re not required to maintain an advanced surplus capacity it was only a matter of time before the perfect storm (literally) came along where unforeseen demand outstripped capacity, driving energy prices through the roof. Their response was to shut down much of the grid and let people freeze.
Ercot’s capacity reserve margin, calculated by subtracting the projected peak demand on the grid from the total capacity generation available in Texas, failed to account for an Arctic freeze. And here we are.
This same result was narrowly avoided in the summer of 2018 as well.