The 2021 Texas Blackouts: Causes, Consequences, and Cures

In February 2021, rolling blackouts in Texas during Winter Storm Uri demonstrated the vulnerability of the State’s electric grid managed by the Electric Reliability Council of Texas (ERCOT). This article examines the technical causes of the ERCOT blackouts, financial and human consequences, and policy changes that could prevent recurrences. ERCOT planned for a winter load peak far below actual electricity demand. Further electricity shortfalls were caused by generation plants with varied energy sources becoming unavailable—natural-gas fired, coal-fired, nuclear, wind, and solar. Prior blackouts during a 2011 period of cold weather had shown the need for better resource planning and plant weatherization, but advance preparation was inadequate. The system of compensating generators in ERCOT was market-based with a $9,000 per megawatt hour cap on wholesale electricity rates—a so-called “Energy-Only market.” This regulatory system did not provide adequate incentives for generation plants to be operational during extreme weather, nor did it ensure that natural gas suppliers could deliver fuel to generators. Texas is well-situated for a return to the cost-of-service regulatory model; the State Legislature should consider this policy option.