Texas and New York: A Tale of Two Electric Grids

Few New Yorkers will forget the polar vortex of January 2014, when record cold temperatures sent demand for heat and electricity skyrocketing. This left Northeast power plants in the lurch as natural gas, their main fuel for generating electricity, was diverted to homes and businesses for heat. Natural gas prices rose along with eye-popping utility bills, but widespread blackouts were averted.

Last month, Texas wasn’t so fortunate. After losing power and heat during February's brutal winter storm, more than 4 million Texans were left pointing their freezing fingers at the Electric Reliability Council of Texas, or ERCOT, which manages the state’s deregulated electric grid. The freakish cold weather set off a nightmarish chain of events, beginning with a sharp rise in demand for electricity and natural gas… this was followed by cold-induced failures of power plants, which went offline and strained backup electricity reserves…. meanwhile, temperatures kept falling and demand kept rising, until… ultimately, ERCOT had no choice but to implement blackouts across Texas to avoid full-scale grid failure and an indefinite shut-down that could have left the state without power for months.

So what did New York do right and Texas do wrong? There are critical differences between the Northeast in 2014 and Texas in 2021. During the polar vortex, adequate electricity kept flowing despite extreme weather and high prices. After the fact, grid operators took the event as an impetus to insulate power plants, harden infrastructure and implement regulations for backup fuel sources. Texas, on the other hand, had ignored decade-old warnings that it was imperative to weatherize its natural gas infrastructure – a measure that might have rescued the state in its hour of need.

As the fallout from this fiasco ripples through America, utility customers are beginning to question whether their own electricity supply is safe. Here are the main reasons why New Yorkers should not be concerned about suffering the same fate as Texans:

New York’s grid is conditioned to handle summer and winter peaks. Many grids prepare for the months of July and August when electricity demand reaches its seasonal high. However, New York also ensures that its power plants receive regular maintenance, undergo extensive tests, and have verified operational capability in preparation for freezing temperatures.     

New York utilities maintain a sophisticated system of interruptions to manage gas demand. On the coldest days, the utilities must prioritize who gets natural gas. Some large buildings, businesses, and power plants have their gas supply interrupted and must switch to oil when mandated. This upholds a balance of gas supply and demand.

Nearly 75% of New York’s power plants have dual-fuel capabilities. This means that if a plant is unable to generate electricity via natural gas, it can switch to a secondary petroleum product such as kerosene, which is stored on-site.

New York’s capacity market helps keep extra electricity on reserve. Power plants in New York get paid to generate electricity even if customers don’t use all of it. This not only ensures adequate energy supply but also serves as a reliable financial incentive to keep power plants operating amidst volatile market conditions.

New York’s grid is under federal supervision and is interconnected with other grids. New York regularly trades power with neighboring states and Canada, and such transactions require oversight from the Federal Energy Regulatory Commission. Texas’ ERCOT, on the other hand, is famously autonomous and is hamstrung in its ability to import power. 

Even with electricity service fully restored, the fog over Texas’ energy market has not lifted. Expect investigations, lawsuits and bankruptcies over the coming months. Just as New York did in the wake of the polar vortex, ERCOT must use this as an opportunity to rededicate itself to the task it was created to fulfill: providing reliable, safe, energy for all Texans.   

Alex Zafran is a senior consultant and the business development lead at Aurora Energy Advisors. He can be reached at azafran@aeadvisorsllc.com.