We’ve had a lot of current and former electricity-industry regulators on the GT Power Hour, as well as several current and former company CEOs and other industry leaders. But few of the interviews were quite as revealing as the conversation we had this month with Pat Wood III.
Maybe it’s his Texas-raised demeanor or his experience as the top industry regulator in both his home state and FERC, which has authority over all but his home state. Whatever it is, Pat has a way with words (and images: he even provided the accompanying picture of his hearty azaleas, the storms’ impacts on which we discuss in depth during the episode as part of the explanation on what happened) - so much so that I felt it was worth the time and energy to transcribe a few of the highlights:
On what happened during the February 2021 Texas power outages:
“We didn’t assume something that this would be the extreme case. Our extreme case assumed that we’d hit a peak-day ERCOT load of 68 GWs, which compares to 75 for our hottest-ever summer - our hot-summer peak was 75 GWs - but we were expecting the winter to be 68 [GW]. Well, before we ended up having to cut power that morning of Presidents’ Day, we were looking at a 75-GW day … which is higher than our summer peak has ever been.
We’ve got to do scenario planning for a lot more extreme conditions that we have to date. Folks can say that’s the climate changing, that’s fine, I probably would agree w/ that … I don’t care what you call it, do the damn scenarios right and assume the worst. … These “black swans” that everybody calls them are starting to look pretty gray - they’re showing up a little more often than 100 years. You know, I’ve lived through three hurricanes since I moved to Houston, and a drought and now two winter storms. My whole life growing up two hours east of here was pretty mild in comparison.”
On Texas’ position in the worldwide power-generation transition:
“Texas’ll be moving to the low-carbon power grid faster than anybody in the country, maybe even the world, just because of the wealth of resources we have here in wind and solar. We’ve got a lot blowing above the ground just like we’ve had a lot from below the ground for the last century that we took out and were able to monetize and give good jobs and keep good cheap power around here for.”
On capacity markets and whether Texas should implement one:
“The capacity market probably wouldn’t have made a difference here that day, but looking forward, I think we do have to have a different conversation about ‘ok, maybe it wouldn’t have mattered for Presidents Day of 2021, but President’s Day of 2031, what kind of resources are we going to have in Texas for what will obviously be a growing, a bigger number of users by then because we’re going to electrifying cars and we’re going to be electrifying probably more heat and more processes that now are run by natural gas, so we’re going to electrify this and that and have more people moving here because they, you know, like living here like I do. So we’re going to have to deal with that in 2031 by getting at least the resources we have today that is cost-effective and clean. That’s a big challenge, but it’s also a big opportunity for the creative people and the entrepreneurs and the innovators, which is what we created our open system to really encourage.”
On whether Texas should encourage more direct-current (DC) ties like the proposed Southern Cross and Tres Amigas projects:
“They help at the margin to be sure, but as far as a comprehensive solution that would have been the silver bullet, there is no silver bullet here. There are multiple bronze bullets, and that could have been one of them.”
On the benefits of competitive power markets:
“I believe [competitive markets] are in the best interest of this whole country. My biggest regret is that we didn’t get at least the piece that FERC could do, which is wholesale markets, over the whole country. We did get 2/3rds of the country, so that’s probably a C-. … It looks like the power plants that were owned by competitive entities performed better than power plants that were owned by municipalities and cooperatives, who do have captive-customer rate-base still here in Texas. That’s an interesting finding.”
I would say the retailers in Texas … they may not need to be told you have to have a capacity market because the incentives are pretty darn strong that those that didn’t basically went under. I’m open to that. I actually endorsed Texas doing the capacity market back in 2013 when Gov. Perry asked me about it and I said I’m not crazy about it but the tradeoff’s not that big of one ot make. I’d do it in a heartbeat to keep the rest of the gains that we’ve gotten in this market. So I’m not morally opposed to it. I do think it’s a regulatory artifice that I’d rather not have as we’re moving to what should be a simpler, more open market - but on the other hand, last month showed me that it’s too valuable of a commodity to just treat it like it’s a peanut butter or milk. It’s really core to our way of life. And Market forces can be marshaled to make that effective and innovative and efficient.”