A Look Behind The Texas Power Outage

The Texas Power Crisis, New Home Construction, and Electric Heating; No U.S. state has built as many new homes as Texas over the last decade and most of them use electric heat.

Lucas Davis, February 22, 2021 (Energy Institute at Haas/U.C. Berkeley)

“…[In the deadly Texas power outages, there were power plant outages, freezing natural gas pipelines, and] reduced wind and nuclear generation…[but] Texas demand was able to reach 69 gigawatts in the winter… Between 2010 and 2019, 1.5 million new housing units were constructed in the state. Over this time period the population of Texas grew 15%, adding almost 4 million people… In 1950, less than 1% of Texas homes used electricity as their primary heating fuel…and 61% in 2018…The single most important factor is low electricity prices. The average residential price for electricity in Texas is less than 12 cents per kilowatt hour, below the national average and way below states like California (19 cents)…

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...[A] single home can easily use 5000 watts for heating. Many Texas homes use much more…7 million homes multiplied by 5000 watts yields 35 gigawatts…[With electric water heating and the rest of residential load, plus commercial and industrial,] you get to 69 gigawatts…[T]he Texas market last week was not up to the task…While wholesale prices in the Texas market climbed last week to $9,000/MWh, the overwhelming majority of electricity customers in Texas continued to pay retail prices close to $120/MWh, barely 1/100th of the true marginal cost…Not seeing these high prices, Texas consumers had little incentive to conserve…

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Dynamic pricing allows customers to pay lower prices throughout 99% of the year, in exchange for facing much higher prices when supply is tight. Numerous studies have documented that dynamic pricing yields substantial demand reductions…With 28GW of forced outages in Texas last week, it is unlikely that dynamic prices alone could have closed the gap between demand and supply. But dynamic pricing is the fastest and cheapest way to build flexibility into the market, and can play an important role moving forward.” click here for more

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