Testimony before the United States House of Representatives
Committee on Energy and Commerce
For a hearing on “Power Struggle: Examining the 2021 Texas Grid Failure”
Written statement submitted by:
Michael D. Shellenberger
Founder and President Environmental Progress
March 24, 2021
Shellenberger: California’s retail electricity prices rose eight times faster than the nationwide average in the 10 years between January 2011 and December 2020, due to its increased use of variable energy sources. This occurred despite falling prices for natural gas, which provides the biggest share of the state’s electricity production. Today, California households pay 55 percent more than the national average per kilowatt-hour of electricity. In 2020, California’s electricity prices rose 7.5 percent, compared to just 0.25 percent in the other 49 states.
None of this is unique to the U.S. Germany, which has deployed more variable renewable energy than any other nation in Europe, has used various regulatory mechanisms and subsidies to prevent utilities from going bankrupt, and its electricity prices rose 50 percent in the 15 years after 2007. In the first half of 2020, German electricity prices were 43 percent higher than the European average.
It is not the case that energy storage would have helped in Texas. Energy usage was so extreme above available capacity that even a large amount of batteries would have been drained only hours into an event lasting for four days. Instead, batteries would’ve had to be saved for weeks or even months only to dump their power in single-use discharge, a business model that cannot justify the cost of building and charging the batteries in the first place. Batteries must operate a very large number of times to pay for themselves.
Part of the problem in Texas was that wind and solar farms set the price for the rest of the system. The total number of negative price hours, whereby power plants had to pay people to take unneeded electricity, grew dramatically between 2019 and 2020, just as they did in California during the same period, and have grown since. Some analysts claim those negative prices are a good thing because they are a market signal to buy batteries. But batteries help with minutes of electricity not days and would thus not have helped prevent the outages in Texas.
The system in Texas in the end was based on the idea that a greater number of unreliable energy sources would add up to greater reliability. The idea in Texas was that electricity price spikes would somehow result in electricity generators, but there was a collective action problem. The monies and the costs were divided up into thousands of different parties, none with sufficient interest to guarantee the whole system’s reliability.
We should be grateful to Texas and California for dramatically reminding us that less reliable elements of a system make the system, all else being equal, less reliable. Adding transmission and storage to systems that rely increasingly on variable energy sources will raise electricity’s costs, and
those higher costs threaten, in turn, the grid investments we need to ensure resilience to extreme weather.